Tesco Confirms China Merger Talks

Tesco has confirmed it is in exclusive talks over combining its Chinese operations with a major supermarket operator in the country.

While it is unclear at this stage whether a deal would mean the Tesco brand disappearing in China, Britain's biggest retailer updated investors on the talks after they were made public by Sky's City Editor, Mark Kleinman.

Its statement said: "Noting recent media speculation, Tesco Plc and China Resources Enterprise Limited (CRE) today announce that they have entered into a memorandum of understanding and are in exclusive talks to combine their Chinese retail operations to form the leading multi-format retailer in China."

Tesco said the proposed joint venture would create a business with sales of some £10bn, in which CRE and Tesco's effective interests are expected to be split 80% and 20% respectively.

The proposed deal - which would represent a significant watering down of Tesco's China operation - would involve CRE combining its CR Vanguard business, which operates 2,986 stores across China and Hong Kong, with Tesco China's 131 stores and shopping centre business.

"The intended partnership follows a series of highly successful joint ventures between CRE and other multinational corporations and is consistent with Tesco's stated strategy of focusing on profitable routes to growth in fast-growing but less mature markets," Tesco said in the statement.

"The transaction is subject to further due diligence and agreement of final terms. There is no certainty that a transaction will occur," it added.

According to Chinese media the company has failed to turn a profit in nine years in China.

Tesco recently closed its operations in Japan and in the US and it moved to improve its core UK supermarket business.

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Energy Firms Make £3.3bn Profit As Bills Rise

Britain's big six energy companies have raked in £3.3bn in profits over the last three years, at a time when consumers have been hit by an average £300 increase in their bills.

Shadow energy secretary Caroline Flint disclosed the figure as she criticised the Government for failing to reform the "broken" energy market at a time when families are struggling with a "cost in living".

The big six, British Gas, E.ON, EDF, npower, Scottish Power and SSE, together supply 98% of Britain's 26 million households.

Figures from Ofgem, the watchdog to whom the firms must report their profits, showed that since 2010 they have earned £3.3bn.

This when households have seen a £100 a year increase in their power bills every year for the last three years.

Ms Flint said: "The public have been left with a £3.3bn price tag for David Cameron's failure to act on rip-off energy bills.

"He's totally out of touch with millions of people and small businesses who are struggling with soaring energy bills.

"His failure to reform Britain's broken energy market is leaving hard-pressed bill-payers massively out of pocket."

Bills have increased £100 year-on-year for the last three years

Last month RWE npower estimated that increases would only get worse, claiming that bills would increase by a further £240 by 2020 - £100 more than the Government's own estimates.

The firm's chief executive, Paul Massara, attributed the rise to the cost of developing new green technologies to provide power.

Late last year, Mr Cameron promised that energy companies would be compelled to give consumers the lowest tariff to end confusion and stop homeowners repeatedly having to shop around for the best deals.

However, a government impact assessment this year found that millions of families could end up paying higher energy bills under the reforms.

Government plans to limit suppliers to offering only four tariffs would likely lead firms to dropping their cheapest deals.

Last week, British Gas said it was examining the prospect of offering consumers free energy on Saturdays in an attempt to encourage people to use power when demand is typically lower.

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Sants Joins Inner Sanctum Of Bank Lobby Group

By Mark Kleinman, City Editor

Sir Hector Sants, the former chief executive of the City regulator, has cemented his gamekeeper-turned-poacher status by joining the board of the banking industry's main lobbying group.

Sky News understands that Sir Hector, who joined Barclays earlier this year as its head of compliance and government and regulatory relations, will attend his first board meeting of the British Bankers' Association (BBA) in the autumn.

The appointment underscores how Sir Hector's career has come full circle after leaving the investment banking arena to join the Financial Services Authority (FSA) in 2004. He landed the top job at the regulator three years later, and endured a torrid time at the helm as Britain's banking system faced arguably its biggest-ever crisis.

Sir Hector replaces Matt Hammerstein, who has moved to a new role in Barclays' retail operations, as the bank's BBA board representative.

Each of the main UK high street banks nominates a director of the BBA, which does not routinely publish the names of those representatives. A number of international banks with a major presence in the UK, such as BNP Paribas, also have BBA directors.

Sir Hector's arrival on the board comes as the lobbying group prepares to redefine its strategy following the loss of its role in setting the interbank borrowing rate, Libor.

According to people close to the BBA, it is expected to thrash out a number of changes to its activities in the autumn. In recent months the industry has faced criticism for the extent of its efforts to water down new rules forcing banks to hold more capital, and Barclays in particular was censured for threatening to shrink its lending as a result.

Barclays was the first bank to be fined for its role in the rate-rigging scandal when it landed a £291m penalty from regulators including the FSA last year.

The BBA and Barclays declined to comment.

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Revealed: The UK's Most Wanted Tax Fugitives

By Poppy Trowbridge, Business and Economics Correspondent

A rogues' gallery of the UK's most wanted tax fugitives has been released in an effort to collect hundreds of millions of pounds in unpaid duty.

One year on from releasing the details of the UK's 20 most sought-after tax criminals, HM Revenue & Customs (HMRC) has now added the names and photographs of 10 more fugitives to that original target list.

Those on the list are being pursued for a range of crimes, including VAT fraud, tax evasion and money laundering.

Together, their crimes have cost the taxpayer close to £720m.

Among the new names on the list are Michael "Arthur" Fearon, who is wanted in connection with evasion of excise duty on nearly £8.4m of cigarettes, and is believed to be in the Republic of Ireland.

Chancellor George Osborne says tax evasion 'will not be tolerated'

Anish Anand, who is believed to be in the UK, is wanted in relation to £6m VAT and film tax credit fraud, while Michael George Voudouri is wanted in connection with a £10m VAT fraud. He is believed to be in Northern Cyrpus.

And Sumir Soni (aka John Soni, John Miller, Samir Soni, Bhader Singh), who is believed to be in Kenya, is wanted in connection with evading duty of £3.6m from the illegal sale and distribution of alcohol, and the illegal importation of nine million cigarettes.

Anthony Judge, who was wanted for his role in over £350,000 of tax fraud and had been on the run for 10 years, was detained at Heathrow Airport last month as he attempted to enter the UK on a forged passport.

He is the second of HMRC's most wanted to be captured since the rogues' gallery was first published.

In May, John Nugent was apprehended in the US after the authorities there saw the list.

The gallery has been viewed more than 1.5 million times, with new intelligence received from the public on the current whereabouts of 17 of the 20 named on the original list.

HMRC has also launched an interactive map of the world to illustrate where the tax fugitives are believed to be.

The crimes of those on the list have cost the taxpayer £720m

Chancellor George Osborne said: "Our message is clear, tax fraud and evasion is illegal and will not be tolerated.

"The Government has stepped up HMRC's enforcement activities to enable them to pursue tax cheats relentlessly around the world."

"This new list will help put more tax fraudsters in the spotlight and bring them to justice."

The Chancellor has faced public outrage in recent months over the number of large, multinational corporations operating in Britain that pay little or no corporation tax on earnings which can top billions of pounds each year.

Yet some tax experts say HMRC is missing the real problem in tackling tax avoidance.

Richard Murphy, of Tax Research UK, told Sky News: "The problem is very large companies who aren't paying very large amounts of tax that they might owe because of skilful tax avoidance by accountants and lawyers.

"The second problem is actually ordinary people avoiding and evading income tax by putting cash in their pockets … paying their builders, their plumbers, their cleaners, their tutors and everybody else without tax being paid and that is a massive problem in our economy.

"But the big problem is not this form of crime of which this list is being published about."

Taxpayers Alliance chief executive Matthew Sinclair said part of the difficulty was with the UK's "hugely complex and fundamentally dysfunctional tax system".

He said reforming taxes to make them simpler would reduce the scope for evasion and free up HMRC resources to focus on fraud.

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Asiana Plane Crash Lawsuits Target Boeing

Pilot's Shouting Warnings 'Ignored'

Updated: 11:59pm UK, Wednesday 10 July 2013

One of the pilots of Asiana Flight 214 that crashed in San Francisco shouted warnings that were ignored, according to South Korean media.

Sources in the country's transport ministry confirmed Bong Dong Won - who was in the cockpit jump seat - repeatedly yelled "sink rate" in the final minute before the crash, it was reported.

If the sink rate - the rate of decrease in altitude - was checked when Mr Bong raised the alarm, it may have prevented the plane from hitting the seawall as it landed at San Francisco Airport, reports said.

But the two pilots at the controls - Lee Kang Kuk and his instructor Lee Jung Min - apparently did not respond to Mr Bong's shouted warnings, the respected Joongang Daily newspaper said.

The crash killed two Chinese students and left more than 180 injured.

Among those injured were three flight attendants in the back of the plane who survived despite being thrown onto the runway as the plane crashed on Saturday.

US investigators previously said that just 1.5 seconds before the plane crashed, a member of the flight crew asked to abort the landing, though it was too late to take such action.

However, it is now being reported that Mr Bong started giving warnings 54 seconds before impact.

There was also a fourth pilot - the relief captain - on board, but he was not in the cockpit at the time of the crash. 

The US National Transportation Safety Board (NTSB) has confirmed that Mr Bong had flown five to six times to San Francisco and previously worked for the Korean air force as a fighter pilot.

Lee Kang Kuk was around halfway through his training for the Boeing 777, but had led 29 flights to San Francisco on Boeing 747s in the past, according to the airline.

However, his trainer had not flown in that role before, the NTSB said.

At 41, Mr Bong is much younger than the other two pilots in the cockpit.

A Korean Airlines Boeing 747 crashed in Guam in 1997 - a crash that investigators blamed in part on an authoritarian cockpit culture that made newer pilots reluctant to challenge captains.

But since then, the industry has adopted broad training and requirements that mean pilots who are not at the controls should feel free to voice any safety concerns.

Sky News producer Jen Kwon, a South Korean based in Beijing, said: "Even though Bong Dong Won is younger than the other two pilots in the cockpit I do not believe that age or rank would be a reason why people would not respond to a warning.

"Perhaps conservative Korean traditional culture might be a bar to communication in many aspects of Korean life, it is hard to imagine the same happening in a cockpit of a civil airliner after seeing what had happened to their competing airline company, Korean Airlines."

South Korean-based Asiana has defended the four pilots as "very competent".

The airline's chief executive, Yoon Young-Doo, lashed out at reports that pilot inexperience may have been to blame for the fatal crash, saying such speculation was "intolerable".

The aircraft went skidding out of control after clipping the seawall, breaking up and bursting into flames when one of its engines caught fire.

The NTSB said the plane was flying far too slowly before the landing. Its investigation is expected to continue for months and it has warned against speculating about the cause of the crash.

But the Air Line Pilots Association International (Alpa) has already criticised the information provided by the NTSB.

"The NTSB's release of incomplete, out-of-context information has fuelled rampant speculation about the cause of the accident," Alpa said.

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BA Compensation After Saudi Flight Horror

British Airways has promised compensation after hundreds of Heathrow-bound passengers reportedly endured an horrific experience on a faulty plane that led to fights in Saudi Arabia.

The Boeing 747 had to return to Riyadh twice because of a recurring wing flap problem.

Describing the scenes after the second landing, passenger Dean Jones told the online Daily Mail there was "mayhem" as a BA worker tried to deal with more than 300 passengers while other ground crew allegedly "hid' in a back office.

He went on: "Fights broke out and the military turned up."

The letter to passengers from BA. Pic. Hetaf Bin Saedan

Mr Jones said that on the first return to Riyadh on Wednesday "there was screaming and crying and we hit the runway with a massive bang".

He said passengers had to make their own way to accommodation, before being told to return to the airport at 3am for a flight on the same plane that eventually took off at 8.45am.

Around 30 minutes in, the wing flap problem recurred. Mr Jones said: "This time people were even more frightened. Women were crying. People were being sick."

After landing, around 70 passengers refused to leave and called for an official to explain what was happening.

A BA spokesman said today: "We apologise to customers for their experience, and we sent a replacement aircraft to fly them to the UK.

"Our customer service teams are contacting customers directly to offer compensation, expenses and complimentary tickets as a gesture of goodwill.

"The safety of our customers and crew is always our first concern and due to a technical problem, the decision was taken to return the aircraft to Riyadh.

"Our crew and customer service teams did everything they could to care for customers, and we provided overnight hotel accommodation."

Another BA plane suffered an 'air scare' in May when an engine caught fire

The incident first began 48 hours before a BA aircraft bound for Hong Kong returned to the airport because of technical problems understood to involve the left wing's landing gear.

In May, a BA flight caught fire as it flew over central London - leading to a dramatic emergency landing at the west London hub airport.

According to an official accident investigation, doors on both engines had been left unlatched during maintenance.

They then fell off as the aircraft left the runway, puncturing a fuel pipe on the right engine.

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RBS Gets Heated Over £230m Radiator Deal

By Mark Kleinman, City Editor

The taxpayer-backed Royal Bank of Scotland (RBS) is risking a renewed political outcry by opposing the restructuring of a major British-based manufacturer that would preserve hundreds of UK jobs.

Sky News has learnt that RBS intends to vote against a proposed takeover of Ideal Stelrad, which makes boilers and radiators, by Bregal Capital, a private equity firm, in a move which will potentially prevent a transition to new ownership.

Bregal has tabled an offer valuing Ideal Stelrad's equity and debt at roughly £230m, a sum sufficient to enable the company's senior lenders to recover their original exposure to it.

RBS, which holds approximately 15% of Ideal Stelrad's shares, is understood to be holding out for a better offer despite the fact that the group's lenders have run an auction lasting well over six months.

Bank of Ireland, another major financial institution that was bailed out by taxpayers during the banking crisis of 2008, is also said to be opposing the deal, although it speaks for only around 5% of the company's shares.

The takeover bid from Bregal is understood to require the approval of at least 75% of Ideal Stelrad's shareholders, but with time running out ahead of an initial deadline on Friday evening, support for the deal is understood to have stalled at around the 70% mark.

Although it is possible for Ideal Stelrad's board to extend the deadline, many of the manufacturer's lenders are understood to be frustrated at RBS's stance and are concerned that Bregal could withdraw its interest.

A spokeswoman for RBS declined to comment, although a source close to the bank said that several options for the future of Ideal Stelrad remained under consideration. RBS did not have the power on its own to block a deal and the bank was intent upon remaining as an investor even after a transaction, they said.

RBS has frequently encountered a political backlash over its lending activities since it was rescued by taxpayers in 2008, with complaints ranging from its choice of customers to its perceived willingness to lend to British companies seeking funds to expand.

Headquartered in Newcastle, Ideal Stelrad has manufacturing facilities in Hull and Mexborough, south Yorkshire. It employs roughly 1,800 people in the UK and at its international operations in countries including Holland, Romania and Turkey, and Bregal is understood to have indicated that it would maintain the manufacturing capacity in the UK.

Ideal Stelrad is one of hundreds of companies in which RBS ended up holding a significant equity stake after the banking crisis and subsequent recession, with these shareholdings apportioned to dedicated teams within the taxpayer-backed bank.

Insiders said that relations between Ideal Stelrad's chairman, Richard Connell, and RBS had been strained for some time.

The bank is said to have been keen for the radiator and boiler divisions of the company to be sold separately in an effort to maximise value. Insiders said on Friday, however, that profits had been in decline at the radiator unit while trade buyers had not made compelling bids for the boiler business.

Bregal is a private equity firm whose investors include the billionaire Brenninkmeijer family, founders of the high street retailer C&A. Its investments in the UK include the fast-growing education company Cognita, and Zephyr, a wind-power generator.

The prospective buyer is understood to have structured its offer to allow existing shareholders to remain owners of up to 24.9% of the company if they wish to remain exposed to it.

If Bregal does succeed in acquiring Ideal Stelrad, it would become the third private equity firm to own the manufacturer in less than a decade.

Previously called Caradon Plumbing, the company was acquired by Montagu, formerly HSBC's buyout division, for £496m in 2000. The new owners decided to break up the business, selling Twyford Bathrooms for £85m and Mira Showers for £301m, and selling the rump of the group to Warburg Pincus for £227m in 2005.

That investment went awry after Warburg Pincus refinanced Ideal Stelrad at the height of the debt boom in 2007. The company then breached its borrowing agreements and underwent a financial restructuring that culminated in a debt-for-equity swap.

The current auction is being run by BNP Paribas, another of Ideal Stelrad's shareholders. Among the other investors are understood to be HSBC, GSO, a division of the giant US investment firm Blackstone, and National Australia Bank.

BNP and Bregal, which is being advised on its bid by DC Advisory Partners, were both unavailable for comment.

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Apple Wins Samsung Patent Case In US

Apple has won the latest victory in a long and bitter global battle with Samsung over alleged patent infringement.

The US International Trade Commission (ITC) found Samsung was in violation of two patents and banned American imports of some of its devices.

However, the ban is currently on hold because US President Barack Obama has 60 days to review the decision and could veto it.

Just days ago, the Obama administration overturned an ITC ruling from June that would have banned the sales of some older iPhones and iPads in the US for violating Samsung patents.

Letting the ban on Samsung devices stand after having so recently intervened in the Apple case could spur allegations of favouritism towards the Californian company.

Samsung's Galaxy 4 (front) and Apple's iPhone 5

The South Korean firm was cleared of infringing four other patents involved in the dispute, which has deepened as competition between the two firms intensifies.

Apple claims Samsung's Android phones copy vital iPhone features but the rival has fought back with its own complaints.

It has recently cut into Apple's market share and is now the leading smartphone manufacturer, as well as having growing success with its Android tablet computers.

The legal cases typically involve older products that are no longer widely sold but a victory could affect future features and therefore slow down a rival's momentum.

Apple could also seek to ban imports of phones released since the case was filed in 2011.

The so-called 'Steve Jobs patent' was one of those upheld

Samsung spokesman Adam Yates said the company was disappointed but vowed it would continue to release new products.

He added that measures had been taken to ensure they would continue to be available in the US.

Apple said in a statement that the ITC "has joined courts around the world in Japan, Korea, Germany, Netherlands and California by standing up for innovation and rejecting Samsung's blatant copying of Apple's products."

It continued: "Protecting real innovation is what the patent system should be about."

The patents supported by the ITC ruling included the so-called "Steve Jobs patent" which relates to the use of touchscreens, and one covering the audio socket.

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The Sky News Business Round-Up And Look Ahead

Sky's Naomi Kerbel offers a look ahead to what's coming up in the week's business news.

:: Monday August 12

Japan - Q2 GDP. January to March growth was better than expected at 4.1%. The Prime Minister Shinzo Abe has introduced sweeping reforms and more stimulus, nicknamed "third arrow", to try to end years of deflation

CIPD Labour Market Outlook which gives both a current and future look at the UK labour market

Prudential interim results

:: Tuesday August 13

UK monthly inflation figures. Last month's release showed that the consumer price index was 2.9% in June, up from 2.7% in May but still within one percentage point of the government 2% target

RICS Housing Market Survey and ONS House Price Index

:: Wednesday August 14

UK monthly unemployment figures. Last month unemployment fell by 57,000 in the three months to May, currently standing at 2.51 million, while the unemployment rate was 7.8%

EU, France and Germany - Q2GDP

:: Thursday August 15

Asda Q2 results. The UK supermarket chain is owned by U.S parent company Wal-Mart, the world's biggest retailer by revenue

UK monthly retail sales figures

Imperial Tobacco Group - interims

:: Friday August 16

John Lewis & Waitrose weekly sales figures

EU Foreign Trade Statistics

EU Inflation Statistics

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Yahoo!: Tumblr Founder Nets 'Golden Handcuff'

It has emerged that the recently completed acquisition of Tumblr by Yahoo! includes a $81m (£52.2m) payment to the internet blogging service's founder.

The retention payment - dependent on David Karp remaining at Tumblr for the next four years - was disclosed in a regulatory filing and part of the windfall that he and Tumblr investors realised by agreeing to sell the service for $1.1bn (£700m) in May.

At the time of the sale, Yahoo! boss Marissa Mayer pledged not to make any dramatic changes at Tumblr in the hope it would not alienate the blogging service's existing users, which include a substantial number of teenagers and young adults.

As part of her promise "to not screw it up," Ms Mayer is allowing Mr Karp, 27, to run Tumblr independently in New York.

Mr Karp is believed to own a stake of up to 25% in Tumblr, which means he probably has already received a windfall though no such payment from the sale has been disclosed.

Under the terms of his retention payment he must stay at Tumblr until June 2017.

It will consist of $41m in stock and options and $40m in cash, according to Yahoo!'s filing.

The documents also disclosed that Yahoo! paid a total of $44m to buy six other companies during the three months ending in June.

All told, Yahoo! paid about $1.15bn (£740m) to buy 10 companies, including Tumblr, during the first half of the year.

Yahoo has bought several other start-ups since the end of June. The prices for those deals are likely to be disclosed in another regulatory filing.

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