Vodafone to Proceed with Kabel Takeover

Vodafone has announced that it will proceed with its planned €7.7bn takeover of Kabel Deutschland, Germany’s largest cable provider, after the terms it offered the company’s shareholders were accepted by a large majority.

Vodafone’s offer to buy up shareholders’ stock at a price of €87-a-share received the backing of 75% of voters, the minimum percentage it needed to proceed with an all-out takeover.

“The 75% minimum acceptance condition has been met,” the Berkshire-based company said. “Vodafone will publish a final announcement with the definitive tender ratio of September 16.”

The company added that it will allow shareholders who chose not to accept Vodafone’s offer until September 30 to change their minds.

The move marks a significant pivot towards Europe for Vodafone, which earlier this month agreed to sell its stake in US phone company Verizon for $130m. It will allow the company to join the likes of Deutsche Telekom and Unitymedia – owned by Liberty Global, which also run the UPC brand in Ireland – in offering “Quadplay” services to consumers, bundles which allow customers to draw their internet, television, landline and mobile services from one provider.

The announcement caps a long week for Vodafone in Germany. Earlier this week three hedge funds declared that they intend to sue the company to get a better price for their shares, and it conceded that a hacker had made off with the names, addresses and bank account details of around two million of its German customers.

Among the hedge funds that intend to sue Vodafone is Elliot Management, Kabel’s largest shareholder and a significant backer of the company’s approach early on.

The deal is still subject to the approval of EU regulators. The European Commission expected to undertake a review in the coming weeks.

Dell committee accepts founder’s increased offer to take the tech giant private

Michael Dell’s hopes of being allowed to take the company he founded private received a significant boost on Friday after a special committee of Dell’s board agreed to accept an increased offer that would see the tech mogul tack a dividend to his original offer.

Michael Dell, along with partner firm Silver Lake, last week offered to buy the company at a price of $13.75 per share. The revised offer will see an extra 13c paid out to shareholders for each share owned.

As part of the augmented deal, Michael Dell will be allowed to avail of new, more favourable voting rules. Before, ballots which had not been marked because their holders abstained counted as votes against; the new rules will see abstainers not counted. Experts believe that the new paradigm will force those in the middle to climb down from the fence or withdraw their vote, conditions which are expected to benefit Michael Dell’s bid.

The offer will also see the prospective new owners guarantee that the company’s 8c-per-share third-quarter dividend is paid promptly.

“The committee is pleased to have negotiated this transaction, which provides as much as $470 million of increased value, including the next quarterly dividend that will now be paid regardless of when the transaction closes,” commented Alex Mandl, Chairman of the Special Committee.

Mandl also expressed his delight at the new voting system proposed by Michael Dell, saying that it provides a “level playing field” for shareholders. He explained that the original system was designed to facilitate a vote on whether to accept a bid or to maintain the status quo, and that it was not suitable for a straight yes/no ballot.

The new offer was approved just 30 minutes before shareholders were due to meet, most likely to reject the offer. Since, several angry shareholders have voiced criticism of the board’s handling of the offer, claiming that some of its members openly displayed favouritism for Michael Dell, ignoring other options.

Among the shareholders to voice their anger was Carl Icahn, who had tabled an alternative offer in conjunction with property firm Southeastern Asset Management. Icahn, who announced his intention to sue Dell on Thursday in an attempt to prevent the company from changing the recorded date of Michael Dell’s first offer, criticised the offer for falling short of what investors should have been offered.

The vote had already been delayed twice as Michael Dell could not rally enough support to make a count worthwhile.

The ballot on whether or not Michael Dell will be allowed to take the company he founded as a teen private will take place on September 12.

After the announcement was made by Dell’s board, shares in the company rose by more than 5 per cent – or 64c – to $13.65, a three-month high.

TransCanada to proceed with $12 billion cross-country pipeline

North American energy firm TransCanada Corp has revealed that it has decided to proceed with a $12 billion plan to begin transporting large quantities of oil from the west of Canada to the country’s east coast. The project, which involves constructing a lengthy new conduit, dubbed the Energy East pipeline, is the largest ever undertaken by the company and has been lauded by politicians, interest groups and industry professionals throughout the country.

TransCanada, based in Calgary, hopes to deliver 1.1 million barrels per day through its new pipeline. It hopes to begin supplying terminals in Quebec in 2017 and New Brunswick a year after. The oil will be pumped from receipt points in Alberta and Saskatchewan. Of the 1.1 million bpd that will be produced, 900 million are secured by long-term, binding commitments the company has already entered into with shippers.

Although 3,000km of the pipeline to be used is already underground, a further 1,400km of new pipes will need to be laid through Quebec, Alberta, Saskatchewan, and Manitoba. The 3,000km already underground is currently used for gas transportation and will need to be converted.

Although the project is yet to receive full regulatory approval, it has been given the thumbs up by two provincial governments – New Brunswick and Alberta – and is hoping to secure the blessing of a third – Quebec – in the near future. It will also be subject to an environmental review.

TransCanada chief executive Russ Girling likened the project to the Canadian Pacific Railway and the Trans-Canada Highway, ambitious ventures which in their time delivered new economic opportunities to millions of Canadians. “This is a historic day for TransCanada and a historic day for our country,” he said.

“Each of these enterprises demanded innovative thinking and a strong belief that building critical infrastructure ties our country together, making us stronger and more in control of our own destiny.”

TransCanada’s announcement was welcomed by Canadian Natural Resources Minister Joe Oliver, who said that the new pipeline will mean a better deal for refiners and will provide a way for the country to reduce its reliance on foreign imports.

Alberta finance minister Doug Horner also commented on the news, saying that the pipeline will have a “huge” impact throughout his province. “The impact is going to be huge because obviously if you can move a million barrels per day to the eastern seaboard and get additional markets that perhaps we weren’t looking at getting into as quickly as this, that’s going to have a pretty significant impact on investment decisions for Alberta,” he explained.

The pipeline also has its detractors. Despite receiving ringing endorsements from public officials, some critics are sceptical about whether the project can deliver the energy security and job creation its backers promise. Similar worries have already led to the delay of another project, linking pipelines in Canada with one further south in the United States. The Keystone pipeline, which could pipe 300,000 bpd between the two markets, has been awaiting US State Department clearance for several years. President Obama is expected to make a definitive decision sometime later this year.

As well as announcing that it’s green lighting the development of the pipeline, TransCanada also announced that will partner with Irving Oil in building a new export terminal near Saint John, New Brunswick. The company announced that the new terminal’s capacity will be 30 per cent greater than it had originally planned after receiving greater-than-expected interest from shippers.

Nintendo Returns to Profit Despite Weak Sales

Japanese games giant Nintendo has posted a return to profit for the second quarter of the year despite being unable to reverse declining across the board sales. Nintendo, which is battling hard against larger rivals Microsoft and Sony, benefited from a weaker yen and more favourable trading conditions in the three months to the end of June, the company said in a statement.

Nintendo reported a net profit of $88 million, a significant gain on the $17.2 billion loss it recorded for the same quarter last year. The company’s loss in 2012, it said, was also significantly influenced by currency valuation fluctuations, with the yen much stronger at this time last year.

Sales, the company said, suffered as more consumers turn to cheaper games options, including mobile gaming. Nintendo managed to generate sales of $832 million over the period, a fall of nearly 4% on the same time last year. The company said it hopes the release of a number of new titles including The Legend of Zelda: The Wind Waker HD and Donkey Kong Country: Tropical Freeze will help to revive sales ahead of the holiday season.

Tough economic conditions in Europe and the United States – two of its largest markets – remains one of the company’s largest concerns, it said in its statement, along with the competition posed by smartphone app manufacturers, whose products are continuing to erode console makers’ profits.

To counter the appeal of cheap, or sometimes free, app offerings, Nintendo has released two new high-tech games machines – the 3DS and Wii U. Despite lower-than-expected initial sales figures for the 3DS, the world’s first gaming device with a 3D screen, and the Wii U, the successor to the popular Wii console, the company says it is still confident the devices can appeal to the mass market. The company said that it sold 1.4 million 3DS units in the quarter, way below expectations.

Nintendo says that it will be concentrating on promoting the Wii U through the next few quarters. “For the Wii U system we will attempt to concentrate on proactively releasing key titles from the second half of the year through next year to regain momentum for the platform,” Nintendo explained in its statement.

The comments came after the company posted disappointing console sales figures for the Wii U, revealing that it shifted just 160,000 units between April and June, a drop of 50% on the first quarter of the year. The company blames a series of delays in the console’s release for its slow start. It chose not to alter its prediction of sales of up to nine million units by March next year.

The company refused to be drawn to calls for it to enter the apps market, saying that its consoles aren’t phones, and are part of an altogether different gaming category. It did however take the opportunity to reveal the release of a new black version of the 3DS, which the company says will be available to buy from August 11.

US Regulators Ready to Engage Virtual Currency Operators

A top US regulator has provided the strongest indication yet that Washington is ready to engage virtual currency operators for the first time.

The decision was prompted by the recent fall of high profile digital currency service Liberty Reserve, which operated as a black market bank according to prosecutors, since its incorporation in Costa Rica in 2006.

Bart Chilton, a commissioner at the Commodities Futures Trading Commission, suggested that transactions facilitated by digital currency operators may fall under the remit of US tax collectors in an interview with the FT, mentioning transactions completed through the popular – and as of yet unregulated – digital currency Bitcoin.

The news is a positive development both digital currency users, who until now have had to conduct business in an environment with no discernible regulation, and for payment facilitators, who will be welcomed in from the cold by panicked Washington, where Liberty Reserve’s fall, viewed in some quarters as the largest black market operation of all time, has prompted calls for action.

Leading the charge for the integration of virtual currencies to the US tax system is the Internal Revenue Service (IRS), which is losing out on billions of dollars in tax: Liberty Reserve alone is estimated to have helped its customers hide up to $6 billion.

Bitcoin and virtual currencies like it, known in the investment community as fiat money – tender unrecognised by any government but widely accepted as currency – can sometimes – by intent or inadvertently – result in transactions where no tax is paid.

The IRS began looking at the impact virtual currencies could have on the body’s ability to properly ensure tax compliance in 2007. Though since then has it not kept up with these currencies’ rate of development and could have done more to prevent virtual currency operators from slipping through the cracks, or so says the Government Accountability Office (GAO), which recently published a report on the subject.

As well as providing a critique of the IRS’ handling of virtual currency operators, the office also suggested that integrating virtual currencies and doing business through virtual economies is possible, and can produce taxable income. It also included a caveat however, warning of the dangers posed by “closed flow” transactions: a closed flow is where a buyer purchases an online-based product or service – a film or television streaming subscription or social media game tokens for example – and no real world money or products or services change hands.

Although Bitcoin is viewed by many online spenders as a new and exciting online payment option, and is lauded by its pioneers as a currency of the future, it also has its detractors, and is vulnerable to the ebb and flow of global money markets – another reason regulators are keen to bring the phenomenon under their umbrella. Bitcoin’s valuation hit a sharp incline around March, when the global financial crisis, particularly developments in Europe, saw the value of a Bitcoin – priced at around $19 in January, jump to $190 in April. At present (June 10), one Bitcoin is valued at $121.

The episode attracted a wide range of attention from authorities, including the Federal Reserve, which at the beginning of June announced that it is investigating the risks virtual currencies and online payment facilitators – including Bitcoin and PayPal – could have on global financial markets.

“We have been taking with banking organisations over the last year or two, trying to more carefully understand what the concerns are with these new payment mechanisms,” Agence-France Presse quotes Federal Reserve vice chair Janet Yellen as saying.

Lawmakers are expected to reveal more about their plans to engage virtual currency operators in the weeks ahead.

Is Cash Making a Comeback?

It has long been accepted that cashless payments are the future; and that before long currency will be superfluous, an archaic notion rendered obsolete by ways of paying viewed as safer and more convenient.

Since the century began cash usage has been on the decline as customers opted to pay for goods and services with plastic with greater frequency. Banks and other financial institutions anticipated the change in attitude in advance, and have been prepared for the switch to business conducted exclusively through electronic media for more than 20 years. Virtually any new bank account a customer opens today comes with a complimentary debit card – a provision that contributed greatly to the prevalence of digital payments over the last decade or so.

The switch to world where business is conducted solely through machines gathered pace at the turn of the millennium, but since, the showed signs of slowing, and last year reversed as more than half of all purchases in the UK were made by cash – a development that ended 10 years of gains by plastic. Last year, 54% of all transactions were conducted using cash, new research has revealed.

Although the reasons why more consumers are choosing to pay by cash have not yet been studied, the organisation that compiled the figures, the Payments Council, speculates that it may be partly because paying with cash allows us to keep a closer eye on our spending, while reports in the media suggest that wide ranging mistrust of banks – in particular their ability to handle our funds – may also have contributed, as a staggering £6,139 was withdrawn from bank machines around the UK every second last year.

The Payments Council, an independent organisation set up by the UK government in 2007 to monitor payment trends and consumer habits, says that the cash machine remains the most popular way for account holders to access their funds, and that last year the number of cash machines in the UK reached 66,000 – an all-time high.

“Cash is still a vital part of our day-to-day lives, and more than half of all our payments are in cash, reflecting its easy use and wide acceptance,” commented David Hensley, Head of Cash at the Payments Council. More than 20.8 billion transactions were carried out with currency in the UK last year, compared to 20.6 billion the year before, the newly published research has found.

The report comes shortly after a number of banks decided to reintroduce £5 to their cash machines – a move aimed at boosting the numbers of visitors to ATMs, and increasing the amount of money they withdraw. The idea was welcomed by customers across the board, and has led to calls from consumers outside the UK for similar steps to be taken in their countries.

“The UK is one of the few European countries whose cash machine network is still growing. We are currently seeing an increase in cash withdrawals, but the challenge is to make sure the UK’s cash machine network still provides a service that customers want in 10 and 20 years’ time,” explained John Howells, chief executive at Link ATM Network, the company that accommodates virtually all of the transactions between bank and building societies in the UK and their customers.

The resurgence of traditional cash payments comes despite new, more advanced payment technologies being rolled out by card makers and banks every year.  Most recently, a new “wave” contactless payment system was touted as the next big thing, however its release has fallen largely on deaf ears as consumers remain wary of new developments to technologies that can put their funds at risk. Conducting transactions by smartphone, a payment method introduced by many US retailers eager to cash in on young, tech savvy consumers, is a practice which has been gaining momentum in across the pond, but even as Barclays and other UK banks roll out their equivalent, it’s far from a foregone conclusion that the trend will catch on here.

Although the financial crisis, and perhaps more specifically the failure of Northern Rock — and the footage of customers queuing to rescue their money from the doomed bank — may have had an impact on consumers’ collective decision to move away from card dependency, events like last year’s Sony credit card fraud scandal, which left potentially millions of users’ personal and financial details exposed to online fraudsters, may also have made customers more wary of pulling out their card for every purchase.

Even though their customers have made their trepidations about digital payments clear, it is likely that banks will push back with more electronic options, largely because cash is expensive too for them to handle, and a switch to an exclusively digital set up would save them on millions of pounds on costs like transport, security and storage, expenses which many financial institutions regard as a nuisance.