Business

LONDON — Vodafone has agreed to buy Spain’s largest cable operator Ono for 7.2 billion euros ($10 billion), the latest hefty deal in a European telecoms sector starting to rebuild as the region recovers from a recession.

The British group said on Monday it would use some of the $130 billion proceeds from the sale of its US arm to acquire Ono, with a superfast cable network and 1.9 million customers, to create a stronger challenger to market leader Telefonica.

The deal for private equity-owned Ono is Vodafone’s third purchase of a European fixed-broadband asset in two years, following similar moves in Britain and Germany, enabling it to offer fixed-line and mobile services, pay-TV and broadband, while saving money on building and operating its networks.

The agreement, which comes as the French market undergoes a similar transformation, could also spark more consolidation within Spain as players such as France’s Orange seek out acquisitions to avoid falling behind.

Orange has been linked with Jazztel, Spain’s fourth biggest telecoms operator, while Yoigo, owned by Sweden’s Teliasonera, is also seen as a likely target, analysts say.

Shares in Vodafone were up 1.4 per cent in midday trading, outperforming the FTSE 100 index, and shareholders have generally been supportive.

“Historically, Vodafone has been a pure mobile operator,”  Henri Tcheng, a partner at consultants BearingPoint said. “But the future of telecoms includes convergence between very high-speed broadband, mobile and fixed so I would describe this as a compulsory move for Vodafone.

“It is quite a high valuation, but in any given country the cable operator is in a unique place for mobile operators. So even if it is expensive, it is not a bad deal,” he added.

Ono, which had been in the process of preparing for a stock market flotation, has 1.9 million customers on its network that covers 70 per cent of Spain, or 7.2 million households out of a total of around 16 million.

Having built the network later than other cable and telecom companies, Ono can achieve broadband speeds of up to 200 megabits per second, or up to 20 times the average of rival networks.

And its footprint in more rural areas fits well with the superfast network Vodafone is currently co-building with Orange in major cities including Barcelona and Madrid. Vodafone said on Monday it would not commit to a second stage of the roll-out with Orange.

The British group, which is ramping up spending on its European networks to boost speeds, said the deal would enable it to save around 240 million euros per year, before integration costs, by the fourth full year after completion.

It also expects to generate revenue of around 1 billion euros as it seeks to cross-sell its mobile offering to Ono’s cable customers, and vice versa.

Stabilise the market 

The planned savings and the appeal of the superfast network, which will also enable the British group to offload some of its mobile traffic and stop paying so much to rent lines from Telefonica, helped soften the blow of the hefty multiple the group is paying compared with typical telecoms valuations.

A 7.2-billion-euro price tag implies a multiple of 10.4 times the target’s operating free cash flow, broadly in line with recent deals in the European cable sector.

But it is almost double the 4-billion-euro value assigned by bankers to Vodafone’s current mobile business in Spain, which with almost 14 million customers at the end of December dwarfs its new acquisition.

“Vodafone has seen revenues and core earnings from its Spanish operation decline by an aggregate of 38 per cent and 60 per cent between 2010 and 2014 estimations,” Jefferies analyst Jerry Dellis said in a note to clients.

“Securing a more credible fixed to mobile convergent offering on a faster timescale than a self-build could deliver is vital to stabilising that momentum,” he added.

According to the Spanish regulator, Vodafone had almost 25 per cent of the mobile market, and the deal which includes Ono’s 1.1 million mobile customers is likely to increase that by almost 2 percentage points. Orange has around 23 per cent of the market.

In the provision of fibre, Vodafone would now be number one.

Analysts said they expected regulators to approve the deal without requiring Vodafone to make any concessions.

The deal for Ono will be financed from existing cash resources and committed but undrawn bank facilities. Morgan Stanley advised Vodafone on the deal while Deutsche Bank acted as the lead financial adviser to the shareholders of Ono.

Ono is 54 per cent owned by investment funds Providence Equity Partners, Thomas H. Lee Partners, CCMP Capital Advisors and Quadrangle Capital.

BOSTON — Big US companies appear to have handed out smaller increases in compensation to their chief executives in 2013 than in 2012, mainly as a result of reduced grants of stock options, according to an early review of annual regulatory filings.

Based on disclosures from 46 companies in the Standard & Poor’s 500 (S&P) Index that had filed annual compensation reports by March 11, the median compensation increase for a chief executive officer (CEO) was 1 per cent to $8.64 million.

That was a slower rate of increase than this group of 46 received for 2012 when its median CEO pay rose 15 per cent to $8.53 million. The median compensation for CEOs in S&P 500 companies overall increased about 5.5 per cent for 2012.

The review, conducted for Reuters by proxy adviser and corporate governance consulting firm Institutional Shareholder Services (ISS), provides an early peek at compensation trends but ISS cautioned that there could be significant changes once all companies have reported and that the 46 companies may not be  representative of trends for companies in the entire index. Most companies will file their executive compensation data over the next few weeks.

Some pay experts have been expecting to see slower growth in compensation for 2013 — despite the bull market in stocks — as S&P 500 corporate profits only increased 6.2 per cent amid a stuttering US economic performance, and due to the increasing use of performance measures to decide on levels of compensation.

In the kinds of incentive plans becoming more popular, executives do not receive higher compensation just because a company’s share price rises, but rather must perform well on a series of measures — not just profit, but often including revenue, margins, cash flow, and in some cases even a company’s safety and environment records.

“They’re not going to get monster rewards,” said Alan Johnson, managing director of pay consulting firm Johnson Associates in New York. “The indications are that companies continue to do a better job of matching up pay with performance.”

However, the figures are unlikely to assuage concerns that CEOs are reaping bigger increases than those received by many Americans further down the food chain, exacerbating inequality. President Barack Obama has been stressing policies intended to reduce inequality, such as a push for a higher minimum wage.

The study looks at what was granted to CEOs for 2013 and does not include all the compensation CEOs actually pocketed in 2013 after stock and option awards granted to them in previous years were exercised or vested. With the S&P 500 surging 32.4 per cent last year, including dividends, and almost tripling from the lows it hit in the financial crisis, some of those awards from 2009-2012 have proven very lucrative.

A separate review by executive compensation data firm Equilar of 44 companies in the Fortune 1,000 that filed their statements in January or February shows that the median value executives gained from exercising stock options or stock vesting was $2.1 million in 2013, up 18 per cent from 2012.

Radical changes 

Investor activists and proxy advisers, including ISS, have pressed companies for years to align pay with shareholder interests. In recent weeks, a handful of companies have made radical changes in the way they reward their CEOs, including semiconductor maker Intel Corp and mining group Freeport-McMoRan Copper & Gold Inc.

Among the 46 S&P 500 companies surveyed, the median cash salary rose $27,584, or 2.6 per cent, to $1,079,327. But the median stock award rose $337,493, or 9.5 per cent, to $3,887,008, and the median cash incentive award rose $63,799, or 3.3 per cent, to $1,998,102.

Restraining the overall increase, though, were less generous stock options awards. Of the 46 companies, only 32 of them awarded stock options to their CEOs in 2013, down from 35 in 2012. For those 35 companies (including those who did not grant options in 2013), the average award fell by $548,543, or 23 per cent, to $1,880,476 in 2013.

Some companies said they reduced their option awards as they wanted to reduce the incentive to take certain risks. At financial services company Comerica Inc., total compensation for CEO Ralph Babb fell 10 per cent to $6.46 million, as the value of his option awards fell to $314,729 from $1,047,682 in 2012. 

Comerica said in a filing it cut the weighting of stock option awards during the year to “discourage inappropriate risk taking and better align with regulatory expectations”.

At paint maker Sherwin-Williams, total compensation for CEO Christopher Connor fell 1.5 per cent to $10.8 million, as the value of stock option awards fell to $3 million from $3.3 million in 2012. 

The company said in a filing that it has de-emphasised stock options in favour of stock awards related to performance to provide more focus on operating performance.

“Most CEOs get it, an increase in stock price is going to be their greatest opportunity for compensation,” said David Dorman, an investor and board member at a series of companies, including  network technology company Motorola Solutions Inc., pharmacy group CVS Caremark Corp and KFC and Pizza Hut owner Yum! Brands Inc.

He added that generally compensation for executives in corporate America “will be in a pretty tight range”.

A few caveats apply to the ISS figures. They do not include set-asides for executive pensions and other deferred obligations, which are often established by formula. At some companies these set-asides fell in 2013 as interest rates rose.

John Roe, ISS’s executive director of corporate services, said companies have embraced new forms of pay. “For the companies in this sample, it was a year of compensation adjustments rather than increases,” he said. 

Reforms spread 

The ISS review focused mainly on median figures as a way to exclude results from companies at the top and bottom of the pay scale that could distort the conclusions.

On an average basis, CEOs among the early S&P 500 filers received $9.34 million in compensation in 2013 — an increase of 2 per cent from the average in 2012.

Since 2011, most US companies have submitted their pay plans for non-binding shareholder votes amid concerns about excessive executive compensation.

While investors have largely supported management, the contests have given some leverage to reformers, particularly as activist investors press companies to make pay depend on relative measures like share price versus peers.

The pressure has made a difference at some companies.

For example, Freeport got only 29 per cent support from shareholders for its executive compensation plan last year. Citing shareholder views, the company on March 3 filed a plan that would cut in half the salaries of its three top executives to $1.25 million from $2.5 million.

The company also said it gave them an annual compensation goal of $7.5 million, with the final figures to be based on the company’s operating cash flow, copper and oil production volumes, and performance on safety and environmental scores. Executives could still earn more than that if the company outperforms peers.

All of the elements, except for the base salary, are “at risk” and could be worth nothing in a bad year, Freeport spokesman Eric Kinneberg said via e-mail.  There is “real potential downside if performance is not good”.

Other companies that reworked pay after facing vigourous opposition to its executive compensation policies from some shareholders include Intel, which won 68 per cent support last year, and Walt Disney Co. with 58 per cent. (Intel and Disney were not among the 46 companies in the study as Intel has yet to file its proxy statement and Disney has a fiscal year ending in September)

Disney said in a filing that it reduced the bonus paid to Chief Executive Robert Iger by almost $3 million to $13.6 million for fiscal 2013 after the company’s results did not beat certain goals.

Intel last month outlined changes for its new CEO Brian Krzanich such as allowing equity awards to fall in value if returns for shareholders don’t meet targets. 

Although Krzanich was promoted to the CEO job last May his compensation was less in 2013, $9.1 million, than the $15.7 million he got in 2012 when he was chief operating officer. It is also less than half the $18.3 million his predecessor as CEO — Paul Otellini — got in 2012.

Brit Wittman, Intel’s director of executive compensation, said the changes were made because shareholders wanted pay to be more closely tied to performance, especially after the financial crisis soured many on pay models that once were widely used.

“Pay for failure really seems to alienate investors,” he remarked.

ERBIL, Iraq — Rizgar pulled one of his wife’s bracelets from his pocket and laid it on a gold merchant’s counter in Iraq’s Kurdistan region at the weekend, reluctantly selling it to cover his bills.

The electricity ministry in Kurdistan had not paid Rizgar for two months because the Baghdad government has withheld funds to punish the Kurds for trying to export oil via a new pipeline.

“I have to sell it, or else I’ll go into debt,” said Rizgar, 39. “If my salary doesn’t come soon, I don’t know what I’ll do.”

A day after he sold the gold bangle, his ministry was among several that finally met the February payroll after the federal government belatedly sent some money at the weekend, but officials in Baghdad insist they will pay no more.

The region says it will pay its own way in March, but the financial squeeze shows how reliant Kurdistan remains on Baghdad for a slice of the OPEC (Organisation of Petroleum Exporting Countries) producer’s multibillion-dollar budget, so long as it cannot export oil in large volumes itself.

Kurdish officials often hint they could file for divorce from Iraq — and their differences with the central government in Baghdad seem more irreconcilable than ever.

However this confrontation ends, the region is likely to push even harder for economic independence, raising the stakes in a dangerous game of political brinkmanship.

The funding crunch hitting the Kurdish economy, which has boomed since the 2003 US-led Iraq war, has been felt acutely in the gold bazaar, which serves as an informal banking system.

“If I can’t sell, I can’t buy,” said a gold trader in the regional capital Erbil, opening an empty cash register after turning away yet another customer who wanted to sell. “How can you talk about an independent state when you can’t pay your own employees?”  

Bloated payroll

More than a fifth of Kurdistan’s five million people are on a government payroll that has swollen to 840 billion dinars ($722 million) a month — 70 per cent of public spending in 2013.

Formally, Baghdad is supposed to give Kurdistan 17 per cent of the national budget after sovereign expenses, flown in cash from the central bank to Erbil, though how much is actually paid is disputed.

Now the Iraqi government says payment should be contingent on the region exporting oil solely under state auspices, which Kurdistan objects to.

In January, it paid 566 billion dinars, less than half last year’s monthly payments. It transferred another 548 billion for February at the weekend.

“The equation is simple: You take 17 per cent of the wealth, you hand over the oil you have,” Prime Minister Nouri Al Maliki told France-24 television last week, summarising the dispute.

Political brinkmanship has in the past brought Iraqi troops face to face with Kurdish “peshmerga” forces in the oil-rich band of territory along their contested internal frontier.

The Kurds have strengthened their hand by signing contracts with oil majors and building a pipeline to Turkey in defiance of Baghdad. One million barrels of oil have already flowed along it into storage tanks at a Turkish port, but Ankara wants Baghdad’s blessing before exports go ahead. No compromise is yet in sight.

“We’ve been working on this for some time and it’s come a long way,” said a US diplomat of the quest for a deal between Baghdad and Erbil. “Election season makes it harder, however.”

Parliamentary elections are set for April 30 and neither side wants be seen as weak for making concessions. But with his own Shiite constituency divided and minority Sunnis hostile, Maliki might need Kurdish backing to form a new government.

Trump card

“Maliki may be creating bargaining chips to play with the Kurds if he aims to gain their support for his third term,” said Ramzy Mardini, a non-resident fellow at the Atlantic Council. “All this is pre-election jockeying. Once the dust settles and the government formation dynamics are under way, it will be clearer who has the advantage.”

Ayham Kamel, director of Middle East and North Africa at political risk consultancy Eurasia Group, said the Kurdistan government was not without leverage, but was still dependent on funds from the centre. 

“Baghdad’s ability to cut or curtail such financing is a trump card in the relationship,” he remarked.

Wrong-footed by the budget cut, the Kurds are weighing their options. A cartoon in the Iraqi press shows a fiendish-looking Kurdish President Masoud Barzani standing astride a dam, illustrating fears the Kurds could cut off water to the rest of Iraq.

“We are still hoping Baghdad will act responsibly,” the Kurdish Regional Government’s (KRG) Planning Minister Ali Sindi told Reuters. “Definitely there are cards that the KRG can also play, but we don’t want to talk about them now.”

For now, the battle is unfolding in parliament, which mustered a narrow quorum for the first reading of Iraq’s draft 2014 budget on Sunday, despite a boycott by Kurdish lawmakers.

If it passes, the budget will make Kurdistan’s allocation conditional on its exporting 400,000 barrels per day of crude via Iraq’s State Oil Marketing Organisation. Any shortfall would be deducted from the region’s 17 per cent entitlement.

“This is punishment,” said Abdulkhaliq Rafiq, a KRG finance ministry adviser, brandishing a copy of the draft budget with the offending articles highlighted in pink.

It is not clear how much income Kurdistan generates itself,  but Sindi said it does not cover government salaries, let alone other operational costs and some 2,900 investment projects in progress.

The region is seeking ways to raise more revenue and cut spending, as well as alternative sources of financing abroad.

“We have started looking at different finance models such as loans and public private partnerships,” said Sindi, adding that the KRG had been in talks with foreign banks even before Baghdad slashed the budget.

Saving or stealing? 

In the meanwhile, Kurdish tycoons have chipped in to help improve liquidity. Among others, the founder of mobile operator Asiacell lent 15 billion dinars to banks in Suleimaniyah city.

Some hope the crisis will spur the KRG to change its spending habits and reform employment practices.

Barzani’s Kurdish Democratic Party and its rival, the Patriotic Union of Kurdistan, have dominated power since the region won autonomy in 1991, hiring thousands of people into an increasingly bloated public sector to tighten their grip.

Bilal Wahab, research fellow at the American University of Iraq, Sulaimani, described the status quo as unsustainable. 

“Unless the KRG diversifies its economy and employment, it could face economic instability and public unrest,” he said.

Kurdish nationalism fuelled by past mass killings under Saddam Hussein remains a potent rallying cry, as was evident at the reburial this month of 93 Kurds unearthed in a mass grave in the desert in southern Iraq last year. Most had been killed by firing squad as part of Saddam’s campaign to quell the Kurds.

“The Kurdish people did not make all these sacrifices in order to be subjected to oppression and despotic rule once again,” Barzani said at the ceremony, declaring that the time had come to reconsider relations with Iraq.

“If the authorities in Baghdad continue to treat us in this way... we will take a stance no one can anticipate,” he added.

A small crowd gathered outside the Kurdish region’s parliament last week shouting “Maliki is a dictator”.

But many Kurds say their own leaders are partly to blame for the budget crisis, which has re-focused attention on opaque dealings and corruption in Kurdistan, described as “widespread and pervasive” in a recent US State Department report.

“Where is the money? Nobody knows,” said a gold trader in Erbil, who asked not to be named. “Either they are saving it for independence day, or they are stealing it.”

AMMAN — Amman Chamber  of Commerce (ACC) President Issa Muard  on Sunday discussed with newly appointed Saudi Ambassador  to Jordan Sami Bin Abdullah Al Saleh bilateral cooperation and ways to boost commercial exchange between the two countries, according to an ACC statement sent to The Jordan Times. The two sides also stressed the importance of increasing visits of businesspeople from the two countries, activating the decisions taken by the joint Jordanian-Saudi committee as well as removing all obstacles hindering trade exchange. Murad expresssed the Jordanian businessmen’s keenness on building strong economic relations with their Saudi counterparts and attracting more Saudi investments to Jordan. Al Saleh voiced his country’s willingness to enhance relations with Jordan, and to work on increasing the Saudi investments in Jordan, the statement said. 

DUBAI — Oil-rich Abu Dhabi and the United Arab Emirates (UAE) central bank agreed Sunday to roll over $20 billion in loans to neighbouring debt-laden Dubai after it was hit by the 2009 global financial crisis.

The government of Abu Dhabi agreed to roll over a loan of $10 billion for a renewable five years, the state news agency WAM reported.

The Abu Dhabi-based central bank of the UAE federation at the same time renewed subscription to Dubai bonds worth $10 billion for five years, it said.

The loans, that were due this year, will have an interest rate of 1 per cent, WAM said.

“These agreements are made within the context of its parties’ continued efforts to boost the competitiveness of the UAE economy on both regional and international levels, and to reflect the upturns Dubai’s domestic economy has witnessed over the past few years,” WAM added.

“This is positive for Dubai, but it was largely expected,” said Monica Malik, chief economist at EFG-Hermes investment bank in Dubai.

“It is very positive for Dubai in terms of meeting its debt obligations for 2014, which was a heavy year, mainly due to the maturing debt owed to the central bank and Abu Dhabi,” she told AFP.

Dubai had $36.5 billion of debt maturing this year, including the debt just rolled over by Abu Dhabi and the central bank, according to figures published last year.

Malik described the reduction in the loans’ interest rate to 1 per cent, from 4 per cent earlier, as “particularly notable”, saying it will be “supportive of Dubai refocusing on investment”.

Dubai sent jitters through global financial markets in autumn 2009 when it signalled problems in servicing mountains of debt owed by government-related entities (GREs).

Dubai World group was the first to expose the emirate’s debt problem, saying it was facing difficulty in repaying debt amounting to $26 billion. 

Other GREs followed suit.

Growth follows crisis 

The once rapidly booming economy of Dubai was hit hard by the world financial crisis, which turned off the tap on easily available foreign finance, leaving many of its companies high and dry and with a heavy debt burden.

Dubai and its government-related firms piled up some $113 billion in debt.

But with the help of deep-pocketed Abu Dhabi, and following long talks with lenders, Dubai managed to restructure most of its debt.

The economy of the glitzy emirate, home to the world’s tallest tower and large man-made islands, has since bounced back strongly, banking on its core sectors of trade, tourism and transport.

The economy contracted 2.4 per cent in 2009, but growth hit 3.4 per cent in 2011, and was just under 4 per cent in 2012. It exceeded 4 per cent in 2013.

And Dubai’s property market, which nosedived in 2010 after five years of rapid growth, is recovering strongly, with reports of a 35 per cent rise in prices in 2013.

The sector received a major boost after Dubai in November won the right to host the World Expo 2020.

The rise in prices has triggered some warnings that they might not be sustainable, however.

Dubai is one of seven emirates forming the UAE federation, which has been spared during the wave of Arab Spring uprisings that hit most Arab countries.

The emirate has been largely seen as a safe haven for capital fleeing troubled countries in the region.

FRANKFURT — German top-of-the-range carmaker BMW said on Friday it achieved record sales and earnings and plans to pay an increased dividend to shareholders.

“With its fourth straight record year, the BMW group’s strong performance continued during the past year despite a challenging economic environment worldwide,” said Chief Executive Norbert Reithofer.

“In 2013, we achieved new highs for sales volume and profit and have thereby reached the targets we set ourselves for the full year,” he boasted. 

BMW indicated that its net profit rose by 4.5 per cent to 5.34 billion euros ($7.5 billion) in 2013.

Pre-tax profit was up 1.4 per cent at 7.913 billion euros.

Revenues slipped by 1 per cent to 76.058 billion euros, but unit sales jumped by 6.4 per cent to a record 1.964 million vehicles, with all three brands — BMW, Mini and Rolls-Royce — “registering all-time highs”.

BMW said it would increase its dividend payment so as to “share its success with shareholders”.

The management board would propose raising the payout on common shares to 2.60 euros apiece from 2.50 euros last year, and 2.62 euros on preference shares. 

Looking ahead, BMW said it was “striving to increase worldwide sales volume further in 2014”.

“We forecast further sales volume growth in the current year which will again bring us a new all-time high. In doing so, we should exceed the threshold of two million vehicles,” Reithofer said.

Separately, Volkswagen, Europe’s biggest carmaker, is set to sell more than 10-million vehicles this year, Chief Executive Martin Winterkorn said on Friday.

“There is a good chance that we will already exceed the 10 million deliveries mark this year — four years earlier than originally planned,” Winterkorn told the group’s annual earnings news conference.

VW “made a healthy start to 2014”, Winterkorn said.

In the first two months, about 1.5 million passenger cars and light commercial vehicles were delivered worldwide, a year-on-year increase of 4.7 per cent.

This year and next year, VW — with a wide range of brands including Volkswagen, Audi, SEAT, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Scania and MAN — would launch more than 100 new models, successors and product enhancements, he continued.

In 2013, worldwide deliveries rose by 4.9 per cent to 9.7 million vehicles.

Revenues were up 2.2 per cent at 197 billion euros and operating profit reached a record 11.7 billion euros.

Bottom-line profit, on the other hand, fell to 9.1 billion euros in 2013 from 21.9 billion euros a year earlier, largely because the 2012 figure had been positively impacted by measures in connection with the integration of sports car maker Porsche.

“2013 was an extremely challenging year for European automakers in particular. We weren’t helped either by our home market or by exchange rates. Nevertheless, the Volkswagen group put up a strong showing despite the difficult conditions,” Winterkorn said. 

And “in light of the company’s continued success, the management board will propose an increased dividend of 4 euros per ordinary share and 4.06 euros per preference share”, he added. 

“Despite the persistently challenging market environment,” Winterkorn said he was “guardedly confident” about business development in the rest of 2014. “We are expecting a moderate increase in deliveries.” 

Challenges would come from the difficult market environment and fierce competition, as well as interest rate and exchange rate volatility and fluctuations in raw materials prices, Winterkorn added.

LONDON/ANKARA — Despite a diplomatic thaw, Western banks are steering clear of attempts by Iran to get them involved in financing humanitarian transactions, fearing they could be penalised under US sanctions, bankers and government officials told Reuters.

Iran was never barred from buying food or other humanitarian goods under sanctions imposed because of its disputed nuclear programme, but measures by the European Union (EU) and the United States have made trade generally more difficult over the past two years by hindering payments and shipping.

As part of talks in Geneva over the nuclear question, Tehran is pressing world powers to speed up trade finance arrangements on humanitarian deals involving both Western and Iranian banks, according to an Iranian government document seen by Reuters and sources familiar with the initiative.

Iranian government officials and international trade sources say Tehran wants to simplify complex trade finance arrangements potentially worth billions of dollars, which would alleviate pressure on the country’s sanctioned banking system.

According to a joint plan of action agreed in November in Geneva, world powers would “establish a financial channel to facilitate humanitarian trade for Iran’s domestic needs using Iranian oil revenues held abroad”.

“This channel would involve specified foreign banks and non-designated Iranian banks to be defined when establishing the channel,” the action plan said.

Iran, with its economy under severe pressure, is keen to push this process forward.

“We have been informed that according to the negotiations and agreements done in Geneva, the possibility to exchange direct LCs (letters of credit) between seven European banks and eight Iranian banks for food, medication and humanitarian goods has been provided,” the Iranian government document says, although it made clear this was not final.

“Please note, that we can accept no legal liability regarding this information as it remains to be officially confirmed by the responsible authorities,” it added.

Big banks 

The US Treasury Department and EU officials declined to comment on specific banks.

A US Treasury official said the United States is working with banks and governments in Asia and Europe to establish mechanisms for humanitarian trade with Iran, and multiple channels were ready for Iran to purchase humanitarian goods.

A different US official told Reuters separately that Washington was having trouble persuading some big banks to work on the issue.

“Some banks are willing to play a part here. But not all of them. There are a lot of big banks that have been subject to fines for engaging in transactions that were in violation of US sanctions that aren’t willing to do anything - even humanitarian,” the official said.

“They just are not willing to do business with Iran. And we are not in a position to say, you have to,” he added.

Banks may well feel the need for caution in this area.

Regulators in New York and Washington are looking at potential violations by France’s Credit Agricole and Societe Generale of US sanctions imposed against countries like Iran, a person familiar with the investigation said.

In 2012, New York regulators threatened to revoke Standard Chartered’s banking licence after it broke sanctions on Iran. HSBC was fined $1.92 billion by US regulators for various violations including doing business with Iran. In February, BNP Paribas set aside $1.1 billion for a possible fine for breaching US sanctions on countries including Iran.

Several banking sources, speaking on condition of anonymity due to the sensitivity of the subject, said Western banks were wary of getting involved in the latest initiative. One said banks would need cast-iron assurances that they would not face exposure before even considering it.

“It is only natural that banks will be cautious to what the political world offers. It changes so quickly, as events in Ukraine can attest,” the banker said.

“What we could be looking at is very short-term financings or involvements and structures, so you will have optionalities to exit should anything go wrong,” he added. “Banks will need more clarity.”

Interim agreement

Iran and Western governments reached an interim agreement in November last year over Tehran’s atomic work in exchange for limited sanctions relief for six months.

By late July, Western governments hope to hammer out an accord that would lay to rest their suspicions that Iran is seeking the capability to make a nuclear bomb, an aim it denies, while Tehran wants sanctions lifted.

Iranian government officials said the document, which has been sent to Iran’s Supreme National Security Council, tasked with safeguarding Tehran’s interests, listed the following banks as “available for further actions”: Standard Chartered Bank (London), Societe Generale (Paris), Banque de Commerce et de Placements (BCP) (Geneva), UniCredit Bank (Munich), Commerzbank (Frankfurt), United Bank (Zurich) and BHF Bank (Frankfurt).

It was not clear whether these banks had been approached to provide finance. Two business executives familiar with the initiative said they were aware that Standard Chartered, Societe Generale, Commerzbank were among those on the wish list.

Commerzbank, Societe Generale, United Bank and BCP all declined to comment. A spokeswoman for Standard Chartered said the bank was not involved and would not get involved in any transaction with any party from Iran.

Unicredit said the group was “not aware of, and hence is not participating in any international initiative involving financial institutions related to Iran subsequent to the P5+1 (major powers) accord”. BHF Bank said it was “not offering or providing any financial services with links to Iran”.

Swiss and German banking regulators declined to comment, although officials in Germany said if German banks were still rigidly adhering to prohibitions on doing business with Iran, the government was ready to explain that some of those restrictions were eased in November.

“If banks in Germany apply the restrictions too rigidly and cautiously in financial transactions with Iran, the government would encourage them to clarify the possibilities that can be done under the agreement, not in order to relax or change these thresholds, but to help the banks keep in compliance with the action plan,” a German finance ministry official said.

Iran eager for deal

The document also named the following Iranian banks: Eghtesad Novin Bank, Parsian Bank, Bank Pasargad, Karafarin Bank, Sarmaye Bank, Saman Bank, Bank Maskan and Bank Keshavarzi.

“Iranians are very eager to have this as soon as possible and teams are working on it and all reports go to the Supreme Leader (Ayatollah Ali) Khamenei,” one senior Iranian government official familiar with the nuclear talks said.

“It was an Iranian initiative but the other party (Western powers) also agreed on that, though they had some internal dispute on the list of Western banks,” the official added.

“There have been some direct contacts between Iranians and various bank officials in Europe since November (the Geneva deal) but the final agreement needs more work and meetings,” he continued.

The Iranian banks named in the document referred the issue to Iran’s central bank, which declined to comment.

A Western diplomatic source confirmed the initiative was under discussion and Western powers saw such an arrangement as increasing the transparency of trade deals.

“If you have Western banks, many of whom with US operations, potentially involved in such an initiative it is a better situation than having hundreds of middle men in such trades where you cannot track where the money is going. It also allows much stricter governance on the part of those banks. This is the idea at least,” the diplomatic source said.

LONDON — European retailers are flocking to list in 2014 but traditional high-street chains are notable by their absence, replaced instead by the online, discount and convenience players that are shaking up shopping.

The flood of retail initial public offerings (IPOs) after a long drought is partly driven by recovering consumer confidence, but also by the fundamental changes wrought on the industry by the advent of e-commerce and shifting shopping habits.

“There is definitely a degree of optimism that hasn’t been seen for some time,” said Kate Ball-Dodd, a partner at law firm Mayer Brown who advises companies listing in London. “The IPOs also reflect expectations of what the retail market will look like in coming years.”

Appetite for new listings — particularly of British firms — is supported by hopes of a return to growth in retail sales in western Europe in 2014 after years of decline.

Robert Foster, co-head of European consumer and retail at investment bank Jefferies, said there had been as many British retail offerings in the past six months as there were in the previous 10 years, noting there were many more to come.

“For the first time in a long time, public investors are getting real access to all this innovation, entrepreneurship and growth,” he told the Retail Week Live conference.

Foster advised one of the highest-profile recent listings, that of online domestic appliances retailer AO World, which jumped about 40 per cent on its debut last month as investors bet it could mimic the success of fashion e-commerce site ASOS. It is still up about 30 per cent.

ASOS shares have more than doubled in the last year, helped by the fact that there are few listed online retailers for investors looking for exposure to booming e-commerce, seen doubling in Europe between 2012 and 2018.

While e-commerce expands, most high-street stores, apart from discounters and high-end retailers, have stagnant sales. 

Limited liquidity

ASOS trades on 84 times expected earnings, compared to a fashion sector average of just 19 times. Meanwhile, AO World is trading at a rich value of 140 times enterprise value (EV) to earnings before interest, taxes, depreciation, and amortisation (EBITDA), almost double ASOS on 78.5, according to Eikon data. In comparison UK high street stalwart Marks & Spencer trades at an EV/EBITDA of 7.6.

Part of the online valuation boom is down to a lack of supply. The listings of Indian e-commerce venture Koovs on Monday and fashion retailer boohoo.com on Friday will add to only a small number of listed online retailers.

But Foster said UK retail “growth” companies expected to list this year would probably only add about £4 billion ($6.6 billion) of additional liquidity to a market of less than £20 billion.

“This remains a very small opportunity set,” he added, noting that pure online stocks were up 150 per cent since last January, outperforming a retail sector rise of about 15 per cent. “As seen in the US market, we expect growth companies to continue to be rewarded for a long time to come.”

Those dynamics would likely drive investor appetite if Europe’s biggest online fashion retailer Zalando decides to proceed with a multibillion-euro float this year in what could be the continent’s biggest technology offering since 2000.

Another potential IPO candidate is the Cdiscount online business of French retailer Casino.

However, some observers urge caution given lofty valuations for e-commerce, particularly as established chains fight back with their own online sales, leveraging store networks to provide more flexible delivery options than pure players.

“People forget it is difficult to make money selling online,” said Sophie Albizua, a former investment banker who co-founded eNova Partnership, a consultancy that advises traditional retailers on e-commerce.

“Just like in the early 2000s, you have to wonder if it is sound investment if you can’t make money out of it,” she added, referring to the bursting of a bubble in listed Internet companies that ultimately failed to turn a profit.

ASOS made a pre-tax profit last year of £55 million. According to their listing documents, boohoo made pre-tax profit of £3.2 million while AO made 8.7 million.

Cautious consumers 

Those nervous about e-commerce might choose to seek exposure to a more down-to-earth retail trend which has its roots in the recession — the growth of discount stores.

Poundland, which sells items for a pound, rose by a third when it listed on Wednesday. Another discounter expected to come to market this year is B&M, chaired by former Tesco boss Terry Leahy.

“Six years after the downturn started, consumers are still quite cautious,” said Euromonitor retail expert Daniel Latev. “Poundland is not as international as some online retailers but it has quite a lot of opportunity for development in countries like Ireland and Spain.”

Another trend of shopping more frequently at local stores has helped shares in McColl’s, the British convenience and newsagent retailer, hold up since floating last month, outperforming the European retail index.

Another recent expansion focus for European retailers — emerging markets — has been looking less attractive for listings in recent months as expectations of tightening US monetary policy has triggered capital outflows.

German retailer Metro’s plan for an imminent stock market listing of a stake in its Russian wholesale business is under threat because of market turmoil over the crisis in Ukraine, sources told Reuters last week.

The Ukraine crisis overshadowed last month’s debut of Russian hypermarket chain Lenta, which is down 8 per cent since listing.

Carrefour has said it would decide by the end of the year whether it would sell a stake in its business in Brazil, its largest market after France, or proceed with an initial public offer of shares in 2015.

DUBAI, United Arab Emirates — The global industry for halal food and lifestyle products — ones that meet Islamic law standards of manufacture — is estimated to be worth hundreds of billions of dollars and is multiplying as Muslim populations grow. Producers outside the Muslim world, from Brazil to the US and Australia, are eager to tap into the market.

The United Arab Emirates (UAE) is positioning itself to be their gateway, part of its push to become a global centre of Islamic business and finance.

UAE officials announced last month that the city of Dubai has dedicated around 6.7 million square feet of land in Dubai Industrial City for a “Halal Cluster” for manufacturing and logistic companies that deal in halal food, cosmetics and personal care items.

Dubai Industrial City Chief Executive Officer Abdullah Belhoul said the idea to create a zone just for halal manufacturers was driven by the increased demand locally and internationally for such products.

“This industry itself, we know it is growing,” Belhoul told The Associated Press. He said the industry is expected to double in terms of value within five years. “So we think there is a lot of opportunity... and we need to capitalise on this.”

The world’s Muslim population is estimated at around 1.6 billiion, and the majority is believed to adhere to or prefer to adhere to halal products when possible. The general understanding is that halal products should not be contaminated with pork or alcohol and that livestock is slaughtered in accordance with Islamic Shariah law. 

Similar to kosher practices, Islam requires the animal is killed with single slash to the throat while alive. It is intended as a way for animals to die swiftly and minimise their pain.

However, as with most issues in religion, opinions vary greatly over what is permissible and what is not. Despite attempts by international Islamic bodies, such as the World Halal Food Council, to achieve worldwide guidelines, there are no global standards for halal certifications.

Stricter interpreters of Shariah say chicken must be slaughtered by hand to be considered halal. Others say it is acceptable if the chicken is slaughtered by machine, as is the case in much of the fast-paced food industry around the world. To accommodate various Muslim consumers, several companies even specify on their packaging how the chicken was slaughtered.

Belhoul said that if halal products are manufactured in the UAE, they will need to be certified halal by the government body that oversees this. But, as with most countries, if the halal products, such as livestock or raw material, are being imported from abroad for processing in the UAE, then the stamp of approval comes from Islamic organisations in the exporting country.

This is where organisations such as Halal Control in Germany have an important role to play, said General Manager Mahmoud Tatari. 

He added that when the company started 14 years ago in Europe, there was little awareness or demand for halal products. Today, Halal Control has 12 Islamic scholars who offer guidance on certifications to international companies such as Nestle and Unilever who want to do business in the Muslim world.

Halal Control, which concentrates on products made in Europe, does not certify meat and poultry, but almost everything else from dairy products to food ingredients. Tatari said Muslims around the world may think they are eating halal-certified food, but that often raw materials may include alcohol or pork gelatin in candies and soups, or may have been cross-contaminated during production.

“It is a process and this will take maybe now 5 — 10 years [until] we can more safely eat halal,” he indicated.

Malaysia is the global leader in developing the halal industry and putting forth the highest standards, according to Tatari and others in the industry.

Malaysia exported $9.8 billion worth of halal products in 2013, the Oxford Business Group (OBG) indicated. That makes it one of the largest suppliers in the Organisation of Islamic Cooperation, an international group with 57 members.

US manufacturers, such as Kelloggs and Hershey, plan to build halal-compliant plants in Malaysia. 

The OBG says Indonesia, with the world’s largest Muslim population, plans to establish a centre for the halal industry in 2015. In Thailand, more than a quarter of food factories are already making halal products.

But it is in the Gulf, where countries almost entirely rely on food imports, where the halal industry seems to have the biggest potential for growth in the coming years.

Brazil is the world’s second top exporter of meat and poultry to Muslim-majority countries after the US. 

The Brasil Food Company (BRF), which is among the world’s largest food companies, plans to open its first manufacturing site in the Middle East in UAE’s capital, Abu Dhabi, in June. The factory will process poultry from Brazil for repackaging and shipping to other countries.

“Having the factory will allow us to be closer to the market and will allow us go to different markets that today we cannot export to from Brazil,” BRF Quality Assurance Supervisor Tiago Brilhante said. The company already exports 70,000 tonnes of chicken to the Middle East each month, making the region its biggest export market.

Datamonitor, a company that provides market and data analysis, says halal food already accounts for about a fifth of world food trade, and the Muslim market is growing substantially. 

According to a Global Futures and Foresights Study, 70 per cent of the world’s population increase from 7 billion today to 9 billion people by 2050 will be born in Muslim countries.

Already in Muslim-majority countries, outlets like McDonald’s, Subway and Papa John’s pizza serve halal to their customers.

In the US, the family-run Midamar Corporation, based out of Cedar Rapids, Iowa, has been tapping into the halal market since 1974. Midamar exports American beef and chicken to around 35 countries.

Jalel Aossey said the company’s halal certification comes from an organisation his father started called the Islamic Services of America, which he says was the first of its kind in the US.

Today there are around 30 halal certification bodies in the US and several mainstream supermarkets that carry halal food items.

Even in markets where Muslims are not the majority, there are billions of dollars to be made in the halal industry. The Islamic Food and Nutrition Council of America, a not-for-profit halal certification organisation, said the domestic US halal market is estimated at $20 billion.

Mark Napier, director of the Gulfood trade show that brings together more than 4,500 food and beverage vendors from around the world to the Dubai World Trade Centre annually, said producers of halal products want to serve markets where their supply is not keeping up with demand. 

Many Muslims in the West buy Jewish kosher products when their halal counterparts are not available.

“Food business is big business,” Napier said. “Producers are increasingly aware of the need for halal standards and certification and bringing that to the fore of their export promotions.”

AMMAN — Hikma Pharmaceuticals Plc. announced Wednesday in a press statement that its earnings increased by 23 per cent last year. “In the Middle East and North Africa, where Hikma employs 5,532 people, the company focused on improving its product mix enhancing sales activities and driving further manufacturing efficiencies,” the company said in the statement. It pointed that branded revenue grew by 5 per cent and that income from global injectables business grew by 14%, driven by a strong performance in the US. According to the company, generics business benefitted from very strong sales of doxycycline which generated strong profitability. Boasting sales to 50 countries across MENA, Europe and the US, “Hikma is actively looking at opportunities to enter new emerging markets. In September, it began expansion into Sub-Saharan Africa with a joint venture with MIDROC Pharmaceuticals Limited, to enter the Ethiopian pharmaceutical market”.