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Global Cash Taps Gambling Market; Goldman Sachs China Deal Denied; Ballard Power Unloads Fuel Cell Business; Miners' Strike Falters in Peru; Munich RE Sees 69% Profit Jump
- Global Cash Access Holdings, Inc. (GCA) said yesterday (Monday) that it has completed an agreement with one of Africa's largest banks, Absa Bank Ltd. The agreement allows the Las Vegas-based Global Cash Access to process Visa and MasterCard cash advances within South African casinos, one of the fastest-growing gambling markets in the world. Revenue from gaming in South Africa increased 17% in 2006 and PriceWaterhouseCoopers, the international consulting firm, estimates that market revenue will reach $2.17 billion by 2011. Global Cash Access has a plan to install QuickCash terminals and kiosks in casinos to offer debit-card services and credit-card advances and it has already received approval from many of South Africa's provincial gaming commissions. The company will also offer Quickcash Plus Web, a proprietary web-based system that processes transactions and provides a database of gamblers' credit histories maintained by subsidiary Central Credit. Absa is one of South Africa's largest banks and is a division of Barclays Bank PLC (GBB).
- Chinese Security regulators announced Friday that they were denying the bid by Goldman Sachs Group Inc. (GS) to invest $120 million in a 10% stake of Fuyao Group Glass Industries Co. Ltd. This is the latest deal that has fallen apart due to a Chinese securities law originally designed to protect smaller investors. The rule states that no private equity investment can be made in a publicly traded company at less than 90% of the current market price over the prior 20 trading days. The key issue is that many of China's listed companies have seen their share prices skyrocket. Goldman Sachs originally agreed to buy the stake in Fuyao at $1.08 a share. At the time, the offer easily met the regulation. Today, a year later after it went to obtain final approval and close the deal, shares of Fuyao Group are trading at $4.12 in Shanghai – more than 300% over the original offer. Goldman had the same problem earlier this year with a proposed $100 million investment in Shanghai-listed Guandong Midea Electric Appliances Co. Fuyao Group shareholders had overwhelmingly supported the denied transaction with over 90% of shareholders voting in favor of the transaction back in December.
- Analysts and investors cheered Ballard Power Systems Inc.'s (BLDP) decision to finally sell its automotive fuel cell business to Daimler AG (DAI) and Ford Motor Co. (F). Ballard confirmed that negotiations with the two automakers were under way, but refused to release details at this time. Ballard has invested large amounts of time and cash in its efforts to perfect hydrogen fuel cells – with almost nothing to show for those efforts. "We would generally view this as being strongly positive in that they discontinue their efforts with this notion of a hydrogen economy. It ain't never going to happen," analyst Brian Piccioni of BMO Capital Markets said yesterday. Ballard's efforts at developing hydrogen fuel cells were not thought to be viable until 2015, and would have required substantial new financing as soon as 2010, according to Jeff Osborne of Thomas Weisel Partners Group, Inc. (TWPG) The news sent Ballard's shares up 11.55% to $5.60. Ballard is now expected to focus on its core product lines: Backup power and cogeneration. Any proceeds from the automotive division sale will be added to the already-hefty $150 million in cash they have on their balance sheet.
- For the second time this year, the call for a general strike by Peru's Federation of Mining Workers was largely ignored. The federation had called the strike in another attempt to force the Peruvian government to pass legislation giving greater protection to miners. Among the demands being made by the Federation are an increase in profit sharing and larger staffs. According to Peru Labor Minister Susana Pinilla, only 6% of miners answered the call to walk off the job and strike. Operations at BHP Billiton Ltd (BHP) and its subsidiary Minera Antamina SRL were reported to be unaffected as well as Newmont Mining Corp.'s (NEM) Peruvian subsidiary Minera Yanacocha. While some workers did strike at Southern Copper Corp. (PCU), it was reported that operations were normal and that the company was using non-union workers to fill in for any striking miners. Peru is the world's second-largest producer of silver, third largest of copper and zinc, and fifth largest of gold.
- Munich Re AG, the second largest re-insurer in the world, reported yesterday that third-quarter profits were up 69%, thanks in part to the relatively mild hurricane season in the United States and to a tax gain. Total profits for the quarter were $1.74 billion, up from $1.03 billion for the same period a year ago. This figure included a gain of $580 million from changes in the German tax laws. Operating profits for the quarter actually fell 13% to $1.66 billion for the period, resulting from Munich Re's high exposure to natural disasters worldwide, including flooding in the United Kingdom – as well as earthquakes in both Japan and Peru. Like many other European financial institutions, Munich Re also reported it had $169 million of write-downs in its investment portfolio, which it attributed to its exposure to the U.S. subprime mortgage market. The firm's remaining exposure to this market is less than 0.2%, according to Chief Executive Officer Joerg Schneider. Because of the write-downs, net investment income for the quarter fell 12% to $2.92 billion. Munich Re reiterated that it expected to exceed its full year target of a return on risk-adjusted capital of 15%, and may earn more than its original estimates of profits in the $5.14 billion to $5.58 billion range.