Latest: More steel alliances, mergers accounting basis changes, Lucent $US1b loss and restructure to follow, Lone Star to buy Tokyo Sowa bank, Greenspan supports tax cuts.
28 January 2001
Japan’s second largest steelmaker, NKK, is talking to ThyssenKrupp of Germany about expanding their alliance. Japan’s biggest, Nippon Steel, has formed a technology link with Usinor of France. Both agreements so far are focused on the car industry.
26 January 2001
The US Financial Accounting Standards Board has dumped the pooling method of accounting for mergers, and adopted a revised purchase accounting method. Under pooling, balance sheets were combined, but this didn’t reflect the value of stock exchanged in a takeover. Under purchase accounting, companies had to write off goodwill over 20 years but now they will only have to write it off when they see an asset value decline, which means they can continue reporting larger profits until it suits not to.
Lucent Technologies, spun off from AT&T five years ago, will take a restructuring charge of $US1.2-1.6 billion and eliminate 10,000 jobs. It will lose 25% of its 123,000 workforce by that cut, selling the divisions that employ another 6000 and spinning off a components business employing 16,500. It turned a $US1 billion profit on continuing operations in the December 1999 quarter into a $US1 billion loss, and a bottom-line loss of $US395 million, compared to a $1.25 billion profit a year earlier.
Private Texan equity funder Lone Star Group will take over bankrupt Japanese bank Tokyo Sowa for a 27% discount on the face value of its loans, two months after a sale to WL Ross fell through. The Japanese Government will pump the bank up with Â¥702 billion ($NZ13.8 billion) in new capital for the deal to proceed.
Federal Reserve chairman Alan Greenspan has told the US Senate’s budget committee the country’s economy is close to standstill, and that both debt reduction and tax cuts could be employed. That goes some way to supporting the new Republican president’s desire to bring $US1.6 trillion of tax cuts over the next decade.