Orascom had it all mapped out. Pay Hutchison Whampoa US$1.3bn for a 19.3 per cent stake in Hutchison Telecommunications International -- complete with a right of first refusal on Hutch's other shares in HTIL -- and then sit back and wait for the emerging markets operator to fall into its lap.
For Orascom, the real jewel in HTIL's crown was Hutchison Essar, India's fourth largest mobile phone company and a natural complement to its existing operations in Pakistan and Bangladesh.
What Orascom did not foresee was HTIL's best asset ending up on the block, rather than HTIL itself. From Orascom's point of view, the bidding war for Hutchison Essar -- which quickly became too rich for its taste -- was a violation of the spirit, if not the letter, of its original agreement.
Hutchison had a neat riposte at the ready. Hawking HTIL to the highest bidder was in the immediate interest of all HTIL shareholders, who pocketed a HK$6.75-per-share special dividend after Hutchison Essar was sold to Vodafone.
That special dividend will at least take some of the sting out of Orascom's unrequited two-year dalliance with HTIL, which has formally ended with the sale of its remaining 14 per cent stake back to Hutchison. Orascom may not have found a passage to India, but the company will book a tidy US$600m for its troubles.
Bumpy ride ahead
For the past months, Lufthansa's corporate pilots have been circling at high altitude over Italy. In recent weeks they descended at much lower altitude to have a good look at the risks and opportunities of bidding for Alitalia. On Thursday they decided they did not like what they saw and flew back home.
Air France-KLM -- its big European rival had been conducting a similar exercise and indeed for much longer. Back in 2004, when Air France and KLM merged, the idea was for Alitalia to join the new combination. But the Italian flag carrier was in such a state that the French preferred to suspend the invitation until Alitalia was restructured and in better shape.
Since then, the situation at the Italian carrier has gone from bad to awful. In July, the government, which owns 49.9 per cent, tried to auction the airline but received no offers. The government was largely to blame because it attached absurdly stringent conditions to the sale.
Air France, which has long had a 2 per cent cross-shareholding with Alitalia, continued to huff and puff over whether to commit itself to rescuing the Italian carrier. Unlike its German rival, it has finally decided to take the plunge and table a non-biding offer.
It will be competing against Air One, a smaller, privately held Italian airline, whose bid is backed by Intesa, Italy's largest bank, as well as Nomura. Although Air One has the advantage of offering an Italian solution, Air France is probably in a stronger position given its international scale and financial resources.
That said, if Air France does ultimately take control, its boss, Jean-Cyril Spinetta, will have to brush up his legendary negotiating skills to deal with the Italian unions, which have financially grounded Alitalia.
Northern Rock response risks undermining London
"Business leaders call for less red tape" is one of those "dog bites man" stories that would not normally make the headlines. The surprise in the latest survey of bosses by the CBI, the British business association, and KPMG is that increasing regulation is not considered the biggest threat to London's competitiveness. (Business leaders grant that accolade to under-investment in the British capital's infrastructure.)
A further surprise is that the serious regulatory fumble that led to the run on the Northern Rock bank does not get a mention. That must be due to the timing of the poll, which was carried out both before and after the September 14 announcement of government support for the mortgage lender pushed the crisis into the news.
Since then, the anecdotal evidence has grown that the Northern Rock debacle could pose as big a threat to London's reputation as any of those mentioned in the CBI's survey. Lord Jones, former head of the CBI and now a trade minister, mentioned it in New York on Wednesday. Sir David Walker, a former regulator and City grandee, cited the negative Rock effect in a Financial Times interview last week.
The disaster poses a double threat to London. One is the knock to its reputation. There, the damage is already done. The other menace is that, in attempting to prevent a repeat, government and regulators may wrap an extra layer of red tape around UK-based business, just at the point when financial centres, from Shanghai to New York, are mounting a counter-attack on London's recent pre-eminence.
Copyright The Financial Times Limited 2007
