Business and Finance

German ball-bearing maker Schaeffler has launched a hostile $18 billion bid to buy tire-to-brakes firm Continental (CONG.DE: Quote, Profile, Research, Stock Buzz) as the dispute over its takeover tactics continues.

If the takeover happens, it would be the biggest so far this year in Europe and would put the combined group head-to-head with Robert Bosch ROBG.UL for the position of second-biggest global car-parts supplier behind Japan’s Denso (6902.T: Quote, Profile, Research, Stock Buzz).

But its advances have provoked a fight between Schaeffler, owned by billionaire Maria-Elisabeth Schaeffler ID:nL15284836, and Continental Chief Executive Manfred Wennemer.

On Wednesday, Schaeffler bypassed Wennemer and went directly to investors, offering to give them 70.12 euros cash for each of their shares.

Even if the offer — below Continental’s share price of around 72 euros — fails, Schaeffler is well positioned to win control of its bigger rival.

The predator has arranged to secure about 36 percent of Continental’s stock through a series of swap deals that banks have organized on its behalf.

By lodging an official offer, Schaeffler will not be obliged to make another and could creep to majority control by buying up shareholders individually.

Schaeffler’s move is similar to Porsche’s (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) takeover of Volkswagen (VOWG.DE: Quote, Profile, Research, Stock Buzz) quick payday. The smaller sports car maker also bought a stake of 30 percent, then made a token takeover bid and is now creeping towards majority control. 

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Treasury Secretary Henry Paulson urged Congress Tuesday to approve the Bush administration’s plan to back up mortgage financiers Fannie Mae and Freddie Mac.

Speaking in New York the day before the House is expected to take up the proposal, Paulson said it’s crucial that the companies have access to the capital they need to maintain their operations and regain the public’s confidence.

"Their continued activity is central to the speed with which we emerge from this housing correction and remove the underlying uncertainty in our financial markets and financial institutions," Paulson said.

"Now, more than ever, we need Fannie and Freddie out there, financing mortgages," he added. "That means we must, in the short term, take steps to boost confidence in the [companies], while also taking steps to address the potential systemic risk they pose."

The recovery, however, will take time, Paulson said.

"We have been experiencing more bumps recently, and until the housing market stabilizes further we should expect some continued stresses in our financial markets," he said. "Working through the current turmoil will take additional time, as markets and financial institutions continue to reassess risk and reprice securities across a number of asset classes and sectors."

The administration on July 13 unveiled a plan to inject untold billions of dollars into Fannie and Freddie by temporarily increasing their line of credit with Treasury and allowing Paulson’s agency to buy stock in the mortgage giants. The secretary has stressed that the two may never need to draw upon the funds, but that the proposal should calm the roiling markets by making it clear the government stands behind the companies.

The plan could cost the federal government $25 billion over fiscal years 2009 and 2010, according to a report released Tuesday by the Congressional Budget Office. It noted the cost could vary widely depending on the extent of the bailout, if any is needed at all.

Paulson also wants Congress to endorse the creation of a new regulator for Fannie and Freddie, which would keep a closer eye on the companies’ operations. The Federal Reserve should have a consulting role in setting capital requirements and other standards, he said.

Fannie and Freddie investors had mixed reactions to the speech and CBO report. Fannie (FNM, Fortune 500) closed down about 5% and Freddie (FRE, Fortune 500) finished up 11%.

Freddie and Fannie are critical to the revival of the United States housing market free credit report.com. The two provide much-needed funding for banks and lenders, who can no longer turn to investors to buy pools of mortgage loans. Freddie has already indicated it might have to reduce its purchases of home loans, which would make it even more difficult and expensive for Americans to obtain mortgages.

Set up by Congress to encourage homeownership but spun off as private companies owned by shareholders, Fannie and Freddie own or guarantee more than $5 trillion in home loans. This is about half the mortgages in the United States.

Responding to a question about how the taxpayer would be protected if the government has to bail out the companies, Paulson said Congress should not put restrictions on Treasury’s rescue plan because greater flexibility engenders greater support in the capital markets.

"It minimizes the likelihood they’ll be used," he said, referring to the bailout measures.

Paulson’s speech comes as Congress is poised to vote on the housing rescue plan. The House is expected to take up the proposal on Wednesday. House Financial Services Chairman Barney Frank, D-Mass., and others have said they are concerned about giving the Treasury department a blank check to bail out Fannie and Freddie.

Tuesday’s speech comes a day after Paulson spent time with Wall Street chief executives discussing the current economic situation. He also took a weekend tour of the talk show circuit, appearing on CNN and CBS on Sunday to drum up support for the plan.

Looking beyond the current turmoil, Paulson said Wall Street needs to consider a more significant overhaul of the financial market operations and the regulation of the industry. That way, problems at one institution - be it a mortgage finance company, a hedge fund or a brokerage firm such as Bear Stearns - doesn’t threaten to upend the entire sector.

"Looking beyond today’s market challenges, we need to get to a point where large, complex financial institutions are not perceived to be too big or too interconnected to fail," he said. 

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Two additional members of the Federal Communications Commission have cast votes on a proposal to approve Sirius Satellite Radio Inc’s acquisition of XM Satellite Radio Holdings Inc, one voting for it and another against it, agency sources said on Tuesday.

Republican FCC commissioner Robert McDowell has voted for a plan by agency chairman Kevin Martin that would allow the $3.5 billion deal to proceed, giving it the support of two members on the five-member commission, a source close to the FCC said.

Democratic commissioner Michael Copps recently voted against it, according to another source.

However, the two votes were widely expected and provided no new clues into whether, and under what conditions, the deal ultimately will get the three votes needed for approval.

The two swing votes on the issue, Republican commissioner Deborah Taylor Tate and Democrat Jonathan Adelstein, were still hashing out potential changes to Martin’s proposal.

Martin has proposed the commission approve the deal so long as the companies make available to consumers radios that receive both Sirius and XM, cap prices for three years, offer programming on an “a la carte” basis, and make 24 radio channels available for noncommercial and minority programming, among other things.

The FCC decision is the final hurdle in a regulatory marathon for the deal that was first announced in February 2007 get a free credit report. Antitrust authorities at the U.S. Justice Department approved the merger this past March.

The merger would bring entertainers such as Oprah Winfrey and shock jock Howard Stern under the same banner. It has been criticized as anti-competitive by the traditional radio industry, and by some U.S. lawmakers. 

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Wal-Mart Stores Inc presented a colorful, casual line of youthful looks for kids and teens on Saturday at a fashion show that previewed the mass-market chain’s new low-cost offerings for back to school.

The world’s largest retailer has been careful not to accentuate the fashion quotient in its clothing offerings this year ever since a disastrous push into more stylish gear in late 2005 alienated its core customers looking for basics.

Still, the company’s presence at the Fashion on the Square runway show in this city’s posh downtown Union Square was a nod to the importance of youth trends when it comes to selling apparel.

This year, Wal-Mart is focusing on key seasonal items for families, and showcasing young women and girls’ denim brand l.e.i. from Jones Apparel Group Inc and surfer brand Op, which it has licensed from Iconix Brand Group pay day loan.

Little girls in jeans and T-shirts with pink ribbons in their hair sauntered down the runway.

The image of Hannah Montana, the popular Disney television character who is a student by day but a pop star by night, emblazoned many T-shirts, whether sparkly pink, bright fuchsia, or adorned with images of silver and gold guitars.

Boys sported mismatched plaids in khakis and blues, or bright Op T-shirts in sunset colors.

Wal-Mart, one of the event’s sponsors, stayed relatively under the radar at the fashion show, which included looks by other designers, including Chris March, who appeared on last season’s TV reality show “Project Runway.” 

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The old saying what goes up must come down seemed true of oil markets this week as falling demand helped to wipe more than $10 off the price, but long-term supply constraints could keep investors keen.

Bullish forecasters say the record rally that took prices to more than $147 a barrel last week has a long way to run and that it will take years to make up for a chronic lack of investment in bringing on new supplies.

Others say prices, which were below $134 a barrel early on Thursday, have hit the kind of levels that have a significant impact on demand.

“We believe the 100 percent rise in the oil price over the last year is not sustainable going forwards,” said Richard Batty of Standard Life Investments.

“While cheap oil may be a thing of the past, oil prices could be much more volatile, falling and rising with the business cycle in the years ahead.”

Oil contracts for delivery as far into the future as December 2016 have traded above $140 and are still above $130, implying strength in the market will be maintained.

Goldman Sachs, one of the most active investment banks in the commodities markets, has predicted prices could reach $200 and oil tycoon T faxless payday advance. Boone Pickens said this month prices would not ever fall below $100.

But $100-plus oil and fall-out from the credit market crisis is spilling over into the wider economy. 

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A flurry of visits by Chinese leaders to cities hit by sluggish exports and a reported tax rebate for textile exporters are being interpreted by the market as signals that Beijing might cautiously ease tight economic policies.

The official China Securities Journal said on Wednesday that China will soon agree to raise tax rebates on exports of textile products and garments as it faces a narrowing trade surplus.

That would mark something of a turnaround from China’s progressive lowering of tax rebates in recent years as it has tried to tilt the economy away from low-value manufacturing and reduce its reliance on exports.

The newspaper report followed separate visits this past week to key exporting centers on the eastern coast by Premier Wen Jiabao, Vice Premiers Wang Qishan and Li Keqiang, and Commerce Minister Chen Deming. At every stop along the way, these economic leaders voiced their concern about the deteriorating business conditions faced by exporters as the world economy slows.

“This (textile rebate), plus Premier Wen Jiabao’s emphasis on steady economic growth during the visits to major exporting provinces, sent us a strong signal that the tight economic policies would be relaxed to some extent,” Zhu Jianfang, chief economist of CITIC Securities in Beijing.

Expectations of a friendlier policy environment have also helped the stock market bad credit payday loans. The benchmark Shanghai Composite Index has gained almost 10 percent so far this week.

Zhu said the government had many options if it wanted to ease. It could relax restrictions on bank lending, increase export tax rebates on a range of products or slow the pace of yuan appreciation.

The market has been rife with talk about a meeting of the State Council, or the cabinet, held on Tuesday, where key government agencies discussed the economy. Investors were waiting to see what conclusions policy makers had drawn. 

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As Las Vegas sees its hotel and casino businesses sputter and office, apartment and retail real estate markets flag, the rest of the country is hoping what happens in Vegas stays in Vegas.

Despite its crushing housing market, one of the worst in the nation, Las Vegas’ economy has been held up on the shoulders of tourists ready to imbibe giant drinks, shop, see shows, and, of course, gamble.

But there are growing signs that the higher cost of gas, food and airline travel is trumping the gold and glitter.

“The tourist economy of Las Vegas can’t just rely on its own or nearby surrounding areas,” said Sam Chandan, chief economist of real estate research firm Reis. “People really have to come in from outside.”

So far in 2008, overall visitation to Las Vegas is down from last year. Nevada casinos won just over $1 billion from gamblers in April, the latest figures available, a 5.1 percent decrease from the same month a year earlier, according to Nevada’s Gaming Control Board.

The major casino operators all reported lower profits or outright losses for the first quarter, and there are few indications that conditions are improving payday loans. Last week UBS cut its share price target on Las Vegas casino owners Las Vegas Sands Corp, Wynn Resorts Ltd and MGM Mirage.

In the second quarter, the office vacancy rate in Las Vegas rose to 17.3 percent, up 3.2 percentage points, the greatest jump among the 79 office market Reis tracks.

The apartment vacancy rate in the quarter rose to 7 percent, up 0.5 percentage point, according to Reis. The Las Vegas apartment market was the third worst performer among major U.S. markets. In comparison, the average overall U.S. apartment vacancy rate was stable at 5.9 percent. 

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Homebuilder Lennar Corp., said Friday its fiscal second-quarter loss narrowed, but the company continued to struggle through the housing market doldrums, posting a 61% drop in revenue and taking hefty charges to write down land values and deposits.

The Miami-based company, one of the nation’s largest builders of residential homes, also said it expects further deterioration in the housing market this year.

For the three months ended May 31, Lennar reported a loss of $120.9 million, or 76 cents per share. That compares with a loss of $244.2 million, or $1.55 per share, in the same period a year earlier.

The latest quarter included a 60 cent per-share charge stemming from write-downs and write-offs related to land option deposits and other costs.

All told, the company booked $5.4 million in losses on land sales, including $2.1 million in valuation adjustments and $6.6 million in write-offs on deposits and costs related to lots the company had under option but now does not plan to buy.

Revenue plunged to $1.1 billion from $2.8 billion last year.

Analysts surveyed by Thomson Financial were looking for a loss of 55 cents per share on revenue of $1.09 billion. The earnings estimates typically exclude one-time items.

"Consistent with our expectations, the housing market has continued its downward trend throughout our second quarter," Lennar President and Chief Executive Stuart Miller said in a statement.

Miller noted rising foreclosures and still-high levels of unsold homes on the market continue to be a drag on home prices and sales.

"The prospect of further deterioration in the home-building industry will likely become reality absent Federal government action," he said, echoing calls by the industry for lawmakers to pass a tax credit for home buyers in a housing stimulus package being considered by Congress.

On Wednesday, the Commerce Department reported that sales of new, single-family homes slipped 2.5% in May to an annual rate of 512,000 units.

The slowdown in sales threatens to prolong the amount of time unsold homes remain on the market, further depressing home prices guaranteed cash advance. The inventory of new homes for sale in the U.S. declined 1.7% in May to 453,000 units, which translates into nearly an 11-month supply.

Housing prices, meanwhile, fell at the sharpest rates ever in April, according to data released this week by Standard & Poor’s/Case-Shiller.

Lennar (LEN, Fortune 500) has homebuilding operations in 14 states, including California and Florida, the hardest-hit housing markets in the nation.

In the most recent quarter, it delivered 3,830 homes, down 60% from last year.

The average sale price of homes delivered fell to $274,000 during the quarter compared with $298,000 in the same quarter a year ago.

The drop was due pricing discounts and higher sales incentives, the company said.

New orders totaled 4,396 homes, a 45% drop.

The cancellation rate from buyers backing out on home contracts was 22%, improving from 29% in the same quarter last year.

Lennar’s backlog, or homes under contract yet to be delivered, fell during the quarter. As of May 31, the figure stood at 3,958, compared with 8,199 units at the close of the same quarter last year.

The value of homes in backlog plunged by 56% from a year ago to $1.3 billion.

Lennar ended the quarter with about $880 million in cash and selling, general and administrative expenses were reduced by $238.9 million, or about 60%.

"We recognize that the remainder of 2008 will likely see further deterioration in overall market conditions; however, we are confident that we remain well positioned with a strong balance sheet and properly scaled operations to navigate the current market downturn as a leaner and more efficient homebuilder," Miller said.

For the first six months of Lennar’s fiscal year, the company’s net loss widened to $209.1 billion, or $1.32 per share. That compares to a loss of $175.6 billion, or $1.12 per share, in the same period last year.

Revenue fell to $2.2 billion, compared with $5.67 billion in the same period last year. 

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Yahoo Inc on Monday sought to rally shareholder support in the face of a proxy battle with billionaire Carl Icahn, saying the activist investor had an “ill-defined plan” for the future of the Internet company.

Yahoo detailed its rationale for rejecting a $47.5 billion takeover offer by Microsoft Corp, questioning whether the software maker was ever serious about a full-scale merger in a filing with the U.S. Securities and Exchange Commission.

“The record casts doubt on whether Microsoft was ever committed to a whole-company transaction,” the filing states.

Microsoft spokeswoman Jamie Moser fired back at Yahoo’s allegations that the software giant was not earnest in pursuing the deal: “This is simply revisionist history,” she said.

Icahn is running a slate of directors to replace Yahoo’s board and has called for the removal of Chief Executive Jerry Yang ahead of the company’s annual shareholder meeting to be held in Silicon Valley on August 1.

The activist shareholder has said the company should still offer to sell itself, though Microsoft has said it is no longer interested in a full buyout.

“Icahn misrepresents the manner in which we negotiated with Microsoft,” Yahoo said in an investor presentation it plans to make at the meeting cash advance loan no fax. “Our board remains the best and most qualified group to maximize value for Yahoo stockholders.”

The company struck a similar tone in a letter to shareholders last week. 

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