At the intersection of technology, finance and the Pacific Rim.

Saturday, July 26, 2008

BP in Russia

The IHT reports on the latest of the BP's travails in Russia:

The British energy giant BP moved closer to losing control of its joint venture
in Russia after the operation's chief executive was forced to leave the country
Thursday because he could not get a work visa.

The development is the
latest twist in a rising nationalism that is shutting Western oil companies out
of energy-rich regions and has wide implications for BP, which pumps about a
quarter of its worldwide oil output in Russia.

While BP retains
ownership of 50 percent of the TNK-BP venture, the departure of the executive,
Robert Dudley, an American, will probably lead to the passing of greater
operational control to the Russian partners.

And for a look at how time passes and changes, go here.

Thursday, July 17, 2008

SK Telecom and Sprint

I am a few days late on this. Strange how a few days seems so old when it comes to news as stories are like a movie these days, shifting from scene to scene--except with different contexts and actors. For some background on how US writers are looking at the potential deal, here are some comments:

From Engadget:

Some particularly juicy rumors die hard, and this one certainly qualifies:
CNBC is reporting that SK Telecom is looking to hook up with some private equity
firms to buy out Sprint Nextel, though a deal is "not imminent." This one's been making
the rounds since last year
, though it's possible that SKT sees some new
impetus for making a break into the US market now that it's sold
off its share in Helio
-- and buying the third largest carrier in the
country would certainly qualify as "making a break." It's claimed that SKT's
only interested in completing a friendly deal -- no crazy hostile takeovers here
-- and some of Sprint's board members aren't keen on the idea at this point, so
it's definitely a hit-or-miss proposition. If this all means we can get even
half of Korea's domestic hardware on US airwaves, then hey, no complaints on
this end.Update: The Wall Street Journal is
now suggesting
that Sprint and SKT are investigating some sort of joint
venture -- not a full-on acquisition -- that would see the lovebirds work
together on handsets and services. Possible, but we're curious to know what
exactly Sprint brings to the table in that equation.


Market negative on Sprint-SK Telecom talks

Wall Street Journal Blog:

SK Telecom Should Hang Up on Sprint
Posted by Deal Journal
Surely, there are better places for SK Telecom to put its money than a troubled American wireless company.
Sprint Nextel isn’t just operating in a saturated and highly competitive market. It is struggling in that market.
And SK doesn’t bring much to the table that can help Sprint, other than a pile of cash. The Korean company doesn’t have any particular restructuring know-how, and while it could help develop new services and handsets, Sprint already has a wide range of partners that can do the same.

FT Alphaville (part of Financial Times)

SK Telecom is in talks with Sprint Nextel, the struggling US mobile network operator, over potential deals that could range from SK taking an equity stake in the company to an all-out, private equity-backed acquisition. The
talks are highly preliminary, people close to the situation said. However, any full-scale takeover by a foreign buyer would likely face close scrutiny by regulators over concerns about national security. A more probable scenario, therefore, could be a deal through which a foreign buyer would take a minority equity stake in Sprint.

Wednesday, July 16, 2008

InBev and Budweiser

I have emphasized that when making a foreign investment, there should be a tangible sense of "synergy"--specific implementation plans on how to increase revenue or reduce costs. The Herald Tribune reports:

On Monday, hours after Anheuser-Busch accepted a sweetened, $52 billion
takeover offer by InBev, ending a month-long standoff, the Belgian company's
chief executive, Carlos Brito, laid out ambitious plans to expand Budweiser into
Europe, Asia and Latin America.
But InBev also seems to have other
matters on its mind. Most analysts focused on the cost savings that InBev will
wring out of St. Louis-based Anheuser-Busch rather than on the opportunities to
expand Budweiser or its sister beer, Bud Lite, overseas.


Details, details.

"BP’s holding in its TNK-BP joint venture looked to be under renewed threat on Tuesday after Russia’s migration authorities declared that Robert Dudley, the oil venture’s chief executive, may not be able to remain in Russia after his visa expires at the end of July"

And the reason? It states at the end of the article:

a spokesperson for the migration authorities on Tuesday said it would be impossible to issue a visa for Mr Dudley because his contract had expired. TNK-BP said it had received no request for a new contract. It said migration authorities had stamped Mr Dudley’s application and said he would receive a visa by July 28. It said Mr Dudley’s contract was still valid because he had not been informed it was being terminated. AAR said Viktor Vekselberg, one of the Russian billionaire shareholders, was the only person authorised to extend Mr Dudley’s Russian employment contract because he was chairman of TNK-BP Management, the management unit of the company.

Saturday, July 12, 2008

Sinosteel, a Chinese state owned enterprise is nearing the acquisition of Midwest, an iron ore producer. The deal was marked as perhaps the first Chinese hostile deal.

Sinosteel, controlled by the Chinese government, originally started a hostile bid for Midwest in March. That provoked an Australian company, Murchison Metals, which had failed in an earlier bid for the company, to re-enter the fray with an all-share offer.
After Sinosteel raised its bid to 6.38 Australian dollars, or $6.15, a share from 5.60 dollars, the Midwest board took the unusual step of recommending both bids.
Murchison, which owns 10 percent of Midwest, pulled out of the battle after its share price plunged and Sinosteel's holding passed the 45 percent mark.

Friday, July 11, 2008

Latest in AB & InBev

You get in the ring, knock each other around, and then you embrace. The NY Times reported:

In a reversal of its previous hostility to the idea, Anheuser-Busch
is in active talks to sell itself to the Belgian brewer InBev
in a friendly deal, people briefed on the matter said Thursday night.

Exact terms of the potential deal could not be
learned, but one person said that InBev had indicated that it would be willing
to pay more than the $65 a share it had originally offered. People briefed on
the deal cautioned that the talks might still break down

Thursday, July 10, 2008

Jaime Dimon

Jaime Dimon is the Chairman and CEO of JP Morgan. He is interviewed on the Charlie Rose show, a program I had referred to earlier as being a great teacher of how to become. In the interview there are many fascinating insights on the weekend deal that he made for acquiring bankrupt Bear Stearns, how he runs JP Morgan, his personal career track, leadership and what he looks for in people (straight talk, action, integrity). Very rare to get this kind of lesson and encourage you to spend some time to view it at this link: It is posted there for only a few days.

Wednesday, July 09, 2008

Japanese Banks and AB

Deal Book, the blog of the NY Times, writes of Japanese financial institutions:

"With Japan’s economy looking healthier than it has in years, and asset prices falling in the West, the Japanese could become aggressive deal makers after nearly two decades of more muted activity.

That’s because “it is difficult for Japanese banks to expect much in terms of growth for their domestic operations,” Shinichi Ina, an analyst at Credit Suisse, wrote in a recent note to investors. “So the situation could present attractive opportunities to lift non-organic growth by tapping overseas markets likely to support expansion.”

And in other action, Anheuser Busch is suing InBev. For details, the court document is here. It makes for interesting reading.

Tuesday, July 08, 2008

Catching up on the News

The latest on the BP travails in Russia come compliments of the NY Times:

The Russian partners in BP’s joint venture tried to fire the chief executive at a board meeting on Monday, but they were outvoted by directors nominated from the British side.
Beyond proving an adage in Russian investing — do not turn your back on your Russian partner — the vote highlighted the continuing struggle of BP to maintain control over a pumping asset that is exceptionally important for its global business.

Also, on the on-going saga of InBev vs. Anheuser Busch, the battle is turning hostile. InBev, through filings with the SEC made clear its intent of removing the AB Board of Directors and in a public statement declared:

"InBev believes it is time to take action to ensure Anheuser-Busch shareholders are provided the opportunity to have a direct voice in the process and a say in the future direction of the company,” the company said.

Thursday, July 03, 2008

A new way to learn English as practiced in Saudi Arabia is cited below. It struck a chord with me as often I have felt that I have so much to teach but so little to offer each student. The reason is that while I have a breadth of experience to bring to the table, each student has their own interest or specific reason for enrolling in the course--some because they are interested in inbound investment; others because they want to invest outside the country; and still more because FDI just sounds interesting. The overlap of each student in class is much smaller than the combined interests of the students with the result that maybe 10-20% of the class time is spent for each individual in an area that is relevant to him/her.

Just as management is moving away from a "Boss" to a "coach" so must the learning business. And the teacher must move from "the center of Knowledge" to a Coach for gaining knowledge and insight. This is quite radically new, I think, for the way colleges and universities do it. But with the internet where information is instantly available, too much time is spent in the classroom on conveying information that is not relevant or instantly available. Some will say that the purpose of the class is to teach a framework for viewing the topic at hand--yes, absolutely true. And the application of that framework is the difference between book knowledge and real knowledge.

I encourage you to take your learning matters into your own hands. One theme of this course is that investment very much depends on the value add by the investor (especially private direct investments) and so what you invest in depends entirely on your skills and your ability to marshall the skills of your organization. A second is that there are no "red lights" or "green lights" in investments--it very much depends on you, your risk appetitie and your ability to price. A high return/low risk investment is usually too good to be true--and what is too good to be true usually isn't.

There are very few excuses these days for "not knowing"--that is the double edged sword brought to us by the internet and instant communications globally. It means that investment decisions can be done more quickly and perhaps at less risk. It also means the competition is more fierce, with a premium placed on speed and the ability to act. There is a fine line between speed and haste--be quick, but don't hurry is the advice and this means that you need to fill the map of your investment framework before pushing ahead and releasing the funds. The era of instant information also means that investors, if they know the basics, can move from one investment terrain to another, quickly.

LETTERS to the editor]A novel way to teach English (from Joong Ang Daily)
July 03, 2008
I have read with interest several letters and columns about the need to change the methods of teaching English in Korea. One issue that keeps cropping up is the need for new textbooks, especially in the universities.I wish to relate my experience while teaching English to university-level students.I have taught English in Korea for 12 years, but took a break and decided to do a year in Saudi Arabia. The system employed there is unique and takes time to implement, but once understood and embraced, produces incredible results.Let me begin by saying what is not done in the classroom. There are no textbooks, no tests, no lectures and grammar is not allowed to be taught.The linguistics theorist S.P. Corder talks about a language learner’s built-in syllabus. This refers to the language that the learner is interested in and ready for. Usually this is in conflict with the teacher’s syllabus or the school syllabus.In my Saudi class I had no syllabus. The first week was spent having each student write his own syllabus. It was submitted and approved by the teacher. The student was then responsible to keep to his syllabus.The course was divided into two sections, reading/writing and speaking/listening. Each section was two hours per day, five days a week, for a total of 20 hours of English per week.Let’s examine an example of one section: reading/writing. A student decides he needs academic writing so decides to write eight essays of 1,500 words. In addition, he chooses to read two short stories and one novel as pleasure reading. The teacher agrees to this syllabus and sets the rules regarding references, in-line citations and bibliography styles. The teacher also refers the student to Web sites or online materials about outlines, styles, etc. The student submits his work. The teacher highlights problem areas but does not correct errors. The student must discover what the problems are and correct them. When the teacher enters the classroom, students are all working on different things. One may be reading a book, another editing an outline, another writing poetry. At the end of the semester a student is either passed onto the next level or has to repeat the level until the teacher is satisfied with his progress.I ran the course as a paperless classroom. Each student brought a laptop computer to class. All their work was “blue-toothed” to me or given on a flash memory stick. There is constant interaction between teacher and student as well as student to student, who would send their work to a classmate for proofreading or help. Proofreaders got credit for their work as well. Students love the high-tech approach to English learning and threw themselves into the paperless classroom.The final result: Students were exceptional in their English writing growth. I would love to see a pilot project like this in Korea. This is a big change and will take time for teachers and students to adjust to, but the fruits of the effort will be sweet.The bottom line is that we have to get away from teacher- and book-centered teaching and focus on a student-centered approach. We need to help students discover English in a heuristic and natural manner. David Woelke, Youngsan University, Busan

Wednesday, July 02, 2008

The Deal from Helio

A tale of two points of time in an investment:

In May 2006, with the launch of Helio, a noted industry blogger wrote:

Today is the launch date for Helio, a new mobile service geared toward young adults deemed in the twenty-something demographic -- though the company is targeting those aged 18 to 34.

and later in the same blog that the investment made by SK Telecom and Earthlink looked like a "coin flip" to him.

This week it was announced that Virgin Mobile is purchasing Helio at around 10 cents on the original investment, or USD 39 Million.