Eskom's buyback plan in motion

(Fin24) - State-owned power utility Eskom is negotiating to buy electricity from local industrial firms in a bid to solve an energy crisis, Public Enterprises Minister Alec Erwin said on Monday.

Eskom is under pressure to come up with a plan to increase power generation after weeks of rolling blackouts that have darkened millions of homes and forced businesses to shut. Large mining operations ground to a halt for five days last month.

"Large producers who would not normally want to be in electricity are now considering that there may be merit in them going into electricity production and selling to Eskom," Erwin told a media briefing in Cape Town.

Erwin told Reuters government was talking with Sasol, BHP Billiton and Anglo as it sought to boost power capacity.

"Clearly we are interested in that ... given the strictures on energy and the difficulties we have ... This opens an interesting possibility. We are in intensive negotiations now," Erwin said.

President Thabo Mbeki expressed confidence on Friday that the crisis would be solved quickly but did not give details of the
government's plan. There have been calls from media and opposition parties for him to sack several ministers.

Mbeki and other senior officials have blamed the country's booming economy for increasing demand for electricity, while acknowledging that warnings of such a problem went unheeded for years.
 

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BNP Paribas not planning SocGen bid: source

(Reuters) - French bank BNP Paribas (BNPP.PA: Quote, Profile, Research) is not preparing a hostile takeover bid for embattled rival Societe Generale (SOGN.PA: Quote, Profile, Research) but could be interested in a friendly deal, a source familiar with the bank's thinking said on Monday.

 

A French financial newsletter report on Monday that BNP was preparing a 93-euros-a-share offer for SocGen was "total rubbish", the source said.

 

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Yahoo rejects Microsoft's bid

 (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research) on Monday rejected Microsoft Corp's (MSFT.O: Quote, Profile, Research) unsolicited takeover bid, currently valued at $42 billion, as too low, saying its board had unanimously concluded it was not in the best interests of shareholders.

In a statement, Yahoo said the offer "substantially undervalues" the company.

Microsoft made the half-stock, half-cash offer on February 1. It was originally worth $44.6 billion or $31 per share -- a 62 percent premium to Yahoo's stock price. Since then, Microsoft shares have fallen and the deal is now worth $41.8 billion.

 

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Yang's $2 Blackjack Limit, EBay Failure Leave Yahoo Unprepared

(Bloomberg) -- Fourteen years after publishing his first guide to the Internet from a Stanford University trailer, Jerry Yang isn't ready to see his creation absorbed by the world's largest software company.

Yahoo! Inc.'s 39-year-old co-founder survived the dot-com bust and weathered failed efforts to challenge EBay Inc. in online auctions and Google Inc. in Web searches. He and the board plan to reject Microsoft Corp.'s $44.6 billion bid today, a person familiar with the decision said, leaving Yang to battle to keep his Sunnyvale, California-based company independent.

While the offer lifted Yang's net worth by more than a half-billion dollars, money means little to Yang, former executives say. He spent his career building the most-visited U.S. Web site. Yang took his first crack at being chief executive officer in June, aiming to reclaim the company's dominance on the Internet.

``It's his baby,'' said Steve Mitgang, a Yahoo senior vice president who left last year to run Web TV company Veoh Networks Inc. in San Diego. ``He wants to win, and he wants to fight to win.''

The board spent a week reviewing the $31-per-share offer before deciding it was too low, said the person, who declined to be identified because the discussions aren't public. Yahoo wants at least $40, the Wall Street Journal reported this weekend.

Yahoo spokeswoman Diana Wong said over the weekend the company doesn't comment on rumors or speculation. Microsoft spokesman Bill Cox declined to comment.

In rejecting the offer, Yang confronts Microsoft CEO Steve Ballmer and Yahoo investors whose stock tumbled by half in the past two years. Redmond, Washington-based Microsoft's $31-a- share offer on Feb. 1 was 62 percent higher than Yahoo's price before.

`Uncouth' Name

In an e-mail to his 14,000 employees last week, Yang said Yahoo was weighing its options. Analysts including Gartner Inc.'s Andrew Frank in New York said alternatives like linking up with Google or News Corp. won't work. Investors like Firsthand Capital Management's Kevin Landis said Microsoft made a ``fair offer.''

Born in Taiwan, Yang was brought to the U.S. when he was 10. He worked in the Stanford library to help fund his undergraduate education.

Yang and David Filo cooked up what became Yahoo in 1994 as graduate students. ``Jerry and David's Guide to the World Wide Web,'' used to keep track of their interests on the Internet, became a popular Web page in Silicon Valley. By the end of 1994, the site got more than 1 million hits a day.

Venture capital firm Sequoia Capital invested $2 million to help the duo build Yahoo, a name they picked because of its definition: ``rude, unsophisticated, uncouth.''

``He cares deeply about the thing he created in that trailer with Filo,'' said Rob Solomon, who worked at Yahoo for six years and is now CEO of the travel site SideStep Inc. in Santa Clara, California. ``They thought they could build a really big, new type of company, and they did.''

Too Rich

Yang wasn't available to comment, said spokeswoman Tracy Schmaler. Filo, responsible for the technical aspects of Yahoo's biggest sites, also wasn't available.

After Yahoo's initial public offering in 1996, sales jumped from $20 million to more than $1 billion in 2000 as advertisers rushed to tap the Internet's popularity. Yang and Filo were each worth more than $4 billion, according to Forbes magazine.

Wealth didn't turn Yang into a big spender, said John Cecil, a former Yahoo salesman. At a Las Vegas conference in 1998, the two were playing blackjack with Yahoo employees. Yang refused to bet more than $2 a hand, Cecil said.

``He said, `It's too rich for my blood,''' said Cecil, now president of the online ad company Innovate Media in Costa Mesa, California.

EBay Wins

Three years of surging sales lifted Yahoo's value past $100 billion, then the technology market crashed, wiping out 97 percent of Yahoo's worth. While the collapse sent Pets.com Inc. and Webvan Group Inc. into bankruptcy, Yahoo survived and began growing again in 2002.

Bigger competitors were emerging, crimping Yahoo's ability to expand beyond selling banner ads on Web pages. San Jose, California-based EBay became the dominant auction site. Google's search engine was pulling ad spending to a business that Yahoo lacked.

Solomon, 41, who ran the auction business, told Yang that Yahoo would be better suited investing elsewhere.

``The auction wars were won, and he didn't want to give up,'' Solomon said. ``That's not him being obstinate. It's him pushing us to come back with creative solutions and being tough.'' Yahoo closed the auction site last year.

 

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Europe's Economy May Stay Sick Longer After Catching U.S. Cold

(Bloomberg) -- Europe's economy has caught the U.S.'s cold, and may be sick longer.

Persistent inflation and budget deficits may prevent policy makers in the 15 nations that share the euro from moving as aggressively as their U.S. counterparts to cut interest rates and taxes. Meanwhile, Europe's labor laws will make it harder for companies to speed a recovery in profits by reducing payrolls.

``A European downturn will take noticeably longer to run its course than the U.S. one,'' Nobel laureate Edmund Phelps, an economics professor at Columbia University in New York, said in an interview.

Next year ``might be a period of `reverse decoupling,' with the U.S. economy enjoying a sharp recovery and the euro-area economy stagnating,'' says Dario Perkins, senior European economist for ABN Amro Holding NV in London. ``A relatively inflexible economy and `sticky' inflation'' will hold Europe back, he says.

European Central Bank President Jean-Claude Trichet said twice last week that there is ``unusually high uncertainty'' about growth amid signs that Europe's resistance to the U.S. slowdown is finally wearing off.

``Risks are on the downside,'' he told reporters in Tokyo on Feb. 9 after a meeting of central bankers and finance ministers from the Group of Seven industrialized nations. The G- 7 officials said the U.S. economy may slow further, eroding global growth, and forecast no end to financial-market turmoil.

``Europe cannot go unscathed from the U.S.'s credit crisis,'' says Phelps.

Slower Growth

December retail sales in the euro region fell the most since 1995 and service industries grew in January at the slowest pace in more than four years. The European Union's statistics office will report Feb. 14 that the economy expanded 0.4 percent in the fourth quarter, half the pace of the previous three months, according to the median forecast of economists surveyed by Bloomberg News.

``Euro-zone growth is in trouble, and the risk of recession at some stage should not be underplayed,'' says David Brown, chief European economist at Bear Stearns International in London. He says the region will be ``very lucky'' to expand 1.5 percent this year, which would be the weakest since 2003.

Much of what ails Europe has its origins across the Atlantic. Borrowing costs for consumers and companies jumped as BNP Paribas SA and other European banks ran up losses on investments tied to U.S. mortgages. Exporters such as Heidelberg, Germany-based Heidelberger Druckmaschinen AG, the world's largest maker of printing machines, blame declines in the dollar and U.S. demand for hurting profits.

Short, Shallow Recession

Economists Jan Hatzius at Goldman Sachs Group Inc. and Richard Berner of Morgan Stanley say the U.S. economy is already in a recession, and they predict that action by policy makers will ensure it is short and shallow.

Federal Reserve Chairman Ben S. Bernanke and his colleagues have cut interest rates five times in less than five months by a total of 2.25 percentage points. Congress last week passed an economic-stimulus package worth about $168 billion.

European policy makers have been slower to administer medicine. The ECB has left its benchmark unchanged at 4 percent for eight months as inflation accelerated to the highest level in 14 years and workers sought more pay in response.

While Trichet last week signaled that he's open to cutting interest rates for the first time in almost five years, he also said he doesn't anticipate inflation will moderate until the second half of the year. Consequently, while investors increased bets on rate cuts last week, they don't expect the ECB to start easing credit before the second quarter.

Delayed Response

Trichet's ``somewhat delayed and gradual policy response'' means the euro-area economy will lag behind the U.S., growing just 1.4 percent this year and 1.6 percent in 2009, compared with 1.9 percent and 3 percent for the U.S., says Janet Henry, chief European economist at HSBC Holdings Plc in London.

Few economists yet anticipate a recession in Europe. Potential housing busts are limited to a few countries, unemployment is at a record low and demand from emerging markets offsets a decline in trade with the U.S.

Inflation still may not retreat fast enough for the ECB to continue cutting as the Fed has. Price pressures persist longer in Europe than in the U.S. for several reasons. Competition among businesses is weaker, and employers have less flexibility on wages because of regulations that set minimum levels or tie worker pay to past inflation rates. German unions are still seeking above-inflation pay agreements.

 

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GM Proves Demise to No. 2 Premature on Topping Toyota Overseas

(Bloomberg) -- Investors doubting General Motors Corp.'s comeback after a third straight annual loss should count the 2,500 crates of partially built Chevrolets leaving South Korea every day for plants in Poland and China.

With about six of every 10 new GM vehicles now sold overseas as U.S. production shrinks, the Detroit-based company fended off Toyota Motor Corp. last year and preserved its 77- year reign as the world's biggest automaker. Rising output abroad and a cost-saving labor contract may push profit to $12.75 a share by 2010, said Burnham Securities Inc. analyst David Healy.

 

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