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MasterCard Forced to Reduce International Fees; Harmony Mining Creates New Holding Company; First Reserve Proposes a $1.8 Billion Takeover of Abbot Group; Sports Direct Retailer Balks on First-Half Profits
- The European Commission ruled yesterday (Wednesday) that MasterCard Inc. (MA) must reduce the fees it charges for cross-border credit card transactions. The fees, which range from 0.4% to 1.2%, are charged every time customers use a MasterCard or Mosaic Card outside their home country. European regulators have given MasterCard six months to reduce the fees or face fines of 3.5% of global revenue. The two cards are used approximately 23 billion times annually in the European Union with total charges reaching more than $1.94 trillion dollars. Consumers and retailers welcomed the decision saying it would greatly reduce their expenses. "We are disappointed that after years of review the commission failed to appreciate that without a mechanism to fairly share the costs among all the participants in a payment system that functions across Europe and around the globe, consumers will be hurt," MasterCard Europe President Javier Perez said following the decision. MasterCard officials said they would appeal the decision in the European Union Courts.
- Harmony Gold Mining Ltd. (PINK:HGMCF) announced yesterday (Wednesday) that it was forming a new company to hold its uranium assets and is immediately selling 60% of the company to Pamodzi Resources Funds. Pamodzi, the largest private equity firm in Africa, will pay $252 million for a controlling stake in the new venture. The new company will own three mines and three waste dumps for excess traces of gold and uranium. The new venture is expected to produce 185,000 pounds of uranium per month. Current market prices are over $90 a pound for the metal. Harmony Gold officials said the cash infusion would be used to pay down debt and provide for necessary capital expenditures. Harmony is currently the fifth-largest mining company in the world.
- First Reserve Corp., the largest private equity firm focused on energy-related deals, announced it wants to buy Abbot Group PLC (ABG), a U.K.-based oil services firm. Alasdair J. Locke, Abbot’s executive chairman, has recommended shareholders accept the $1.8 billion proposal, which would mark the first European oil services buyout by a private equity firm. He said that the unique combination of First Reserve’s capital and industry knowledge would help the long-term development of Abbot’s plans. Abbot is the largest offshore-drilling platform in the North Sea and one of the largest international drilling contractors outside the United States, with operations in 20 countries. The deal is expected to close in the first quarter of 2008, pending shareholder approval.
- U.K. retailer Sports Direct International PLC (PINK:SDIPF) reported yesterday (Wednesday) that first-half profits fell 73% to $25.2 million compared to $96.73 million for the first half of 2006. The Manchester-based company blamed the shortfall on England’s wettest summer on record, as well as the English soccer teams early exit from the 2008 European Championship Tournament. According to Bloomberg, the tournament has a contract for 65% of the English soccer teams T-shirt sales, and the national teams elimination from the tournament may cost as much as $102 million in missed profits in 2007 and 2008. Revenue for the first six months of 2007 were down as well, falling 7.1 % to $1.36 billion. The retailer’s share price has dropped more than 70% since its initial public offering in February. The company has also missed earnings estimates three quarters in a row since the IPO. Controlling shareholder Mike Ashley, who also owns the Newcastle United Football Club, has filed with regulators to purchase an additional 5% of outstanding shares, but said that he has no plans to take the company private.