Bestway To Buy Co-op Pharmacy Arm For £620m

The embattled Co-operative Group has agreed to sell its pharmacy division to Bestway for £620m.

In a statement, the Co-op said the sale would be completed in October, following the successful separation of the division from the parent group.

The sale proceeds would be used to help reduce group debt and plug a capital black hole of more than £1.5bn.

Sky News City Editor Mark Kleinman revealed last March that the Co-op was lining up City advisors for the pharmacy sale, at the time estimated to be around £600m.

As the Co-op attempted to rein in its massive debt a decision was taken to sell the profitable pharmacy section, with the proceeds injected into its retail and consumer services division.

As part of the deal the Co-op said it would provide transitional assistance for up to 18 months and would include branding continuation for up to a year.

Bestway is the UK's 18th largest privately owned company and seventh biggest family-owned business.

Co-op Group interim group chief executive Richard Pennycook said: "The successful sale of our pharmacy business is an important move for (the group).

"The proceeds will enable The Co-operative to reduce debt and invest in our business and is part of the focused delivery of our clear strategic plans and priorities.

"I am pleased that the agreement we have reached with Bestway reflects the quality of the business and the high level of interest from a number of bidders."

With this acquisition, Bestway will have an annual turnover of approximately £3.4bn and a global workforce of more than 32,600 people, with nearly 12,000 people in the UK.

It owns the UK's second largest independent wholesaler serving 125,000 independent retailers and caterers, from 64 warehouses nationwide.

It also operates Pakistan's second largest cement manufacturer, with an annual capacity of six million tonnes.

Bestway group chief executive Zameer Choudrey said: "We are delighted to be bringing The Co-operative pharmacy business into the Bestway family, adding to our growing and diverse business portfolio.

"In line with our own ethos, there is a strong focus on supporting and servicing the needs of the local communities within this business."

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Top City Banker To Pay £450,000 FCA Penalty

By Mark Kleinman, City Editor

One of the City's top financiers is poised to pay a £450,000 fine after deciding to accept a market abuse ruling by the Financial Conduct Authority (FCA).

Sky News understands that Ian Hannam, a banker who became known as the 'king of mining M&A' after engineering some of the world's biggest natural resources mergers, is to accept the watchdog's original verdict after losing an appeal in May.

An insider said on Friday that a statement from the FCA confirming that the original decision is to be upheld is expected as early as next week.

Mr Hannam, who had a long career at JP Morgan Cazenove before leaving in 2012, was accused by the FCA of inappropriately disclosing inside information in 2008 about Heritage Oil, a client, to a potential buyer.

He had argued that the FCA's ruling was erroneous and that he acted in accordance with City rules, vowing to fight the decision.

The regulator did not accuse or find Mr Hannam guilty of deliberately setting out to commit market abuse or accuse him of lacking honesty or integrity.

The Upper Tribunal of the High Court rejected his appeal in a judgement which was greeted by relief at the FCA but which raised questions about the clarity of guidelines about acceptable City conduct.

Both parties are understood to have made representations about the scale of the fine following the verdict of the Upper Tribunal, which said:

"Although the parties' written submissions did say something about the appropriate penalty if Mr Hannam had been engaged in market abuse, we consider that we cannot properly deal with this aspect of the case without giving the parties the opportunity to make further submissions in the light of our findings on the substantive issues.

The tribunal and the parties will need to consider the best way forward procedurally for dealing with the question of penalty."

The ruling left open the question of whether the penalty imposed on Mr Hannam should be increased or decreased.

Mr Hannam, who received backing from a number of prominent City figures and company bosses during his appeal, is said to have racked up legal fees of approximately £1m during his case.

Since leaving JP Morgan, he has rebuilt his career, taking control of a number of businesses in the mining and resources industries.

He has also given financial backing to Heathrow Hub, one of the shortlisted candidates for expanding runway capacity in south-east England.

Spokesmen for Mr Hannam and the FCA declined to comment on Friday.

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Germans Seek To Land Gatwick Air Traffic Role

By Mark Kleinman, City Editor

Germany's state-owned airspace controller is vying with its principal British rival to land a 10-year deal to run air traffic services at the UK's second-busiest airport.

Sky News has learnt that London Gatwick's shareholders have been running a secret process to appoint a partner to run the airport's air traffic control tower until 2025.

Sources said the final two shortlisted bidders were the UK's National Air Traffic Services (NATS) and Deutsche Flugsicherung (DFS).

A decision is expected to made imminently, with an announcement about the winner possible as early as Friday.

The contest represents the biggest UK airport to consider moving oversight of its airspace to a foreign administrator to date.

The Civil Aviation Authority's approval would be required to approve such a change.

Gatwick handles 36 million passengers annually and has 55 air traffic movements every hour, making it the busiest single-runway airport in the world.

An aviation industry source said the tender process to run Gatwick's air traffic services would prioritise capability ahead of costs.

The contract will be awarded at a time when expansion at London's capacity-constrained airports is a serious political issue.

An independent commission chaired by Sir Howard Davies, the former head of the Financial Services Authority, is due to make a final recommendation about the location of new runways after next year's general election.

If Gatwick is selected as the venue for an additional runway, construction would begin during the operation of the new air traffic control contract.

The competition between NATS and DFS is intriguing because the German group was bidding a year ago to buy a big shareholding in its British counterpart.

DFS lost out to the Universities Superannuation Scheme, a UK pension fund, despite tabling a higher offer for a stake in The Airline Group, which controls 41.9% of NATS.

If the German group was to win the Gatwick contract, which will come into effect when NATS' existing deal expires next year, it would be seen as disappointing news for the UK operator.

Last month, it emerged that top managers at NATS had had bonuses withheld because of a December computer failure which caused hundreds of flights to be delayed or grounded.

NATS handles 2.2 million flights and 220 million passengers in UK airspace every year.

Gatwick could not be reached for comment on Thursday.

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FedEx Denies Illegal Drug Delivery Charges

Delivery giant FedEx has denied a United States Department of Justice (DoJ) charge that it has transported illegal drugs for customers.

The company said it is innocent of charges that it "knowingly and intentionally conspired to distribute" controlled substances and prescription drugs sold by illegal online pharmacies.

The firm said it would "plead not guilty" to the indictment and "defend the integrity and good name of its employees".

Authorities said they had warned FedEX in 2004 that its shipping services were being used by illegal online pharmacies.

Throughout a nine-year investigation, the DoJ said it had found evidence of claims that some company employees in three states had previously voiced concerns.

It said employees in Kentucky, Tennessee and Virginia had expressed safety issues to senior management.

These included complaints that trucks were "stopped on the road by online pharmacy customers demanding packages of pills".

Officials added that sometimes a delivery address would be "an empty property or school, where several carloads of people were waiting for the FedEx driver to arrive".

The indictment said that drivers were "threatened if they insisted on delivering packages" to the delivery addresses.

Instead of putting an end to these activities, FedEx was accused of adopting "a procedure whereby internet pharmacy packages from problematic shippers were held for pick-up at specific stations" rather than the recipients address.

In its defence, FedEx said they were a transportation company and not the police.

It said the privacy of their customers, which is essential to their business, was threatened by the charges.

And while it said it would support and assist the authorities, it cannot enforce the law.

This is not the first time US officials have set their sights on companies over online pharmaceuticals.

In a similar case, advertising giant Google agreed to pay $500m (£295m) to settle charges that it sold advertisements to Canadian-based online pharmacies that marketed drugs to Americans, in violation of US law.

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Retail Banks Face Competitiveness Probe

The competition watchdog has confirmed it is consulting on a provisional decision to launch an in-depth investigation into the retail banking sector.

The Competition and Markets Authority (CMA) said essential parts of the UK market lack effective competitiveness.

The CMA said the existing structure did not meet the needs of consumers or that required by small and medium-sized enterprises (SME).

It said there will now be a consultation for an in-depth market investigation for personal current accounts and SME banking.

The watchdog said despite claims of competitiveness, customers have not benefited sufficiently from attempts to open up the market.

Recent changes have included a simplification of switching current accounts between providers.

The CMA said it would possibly launch a full-scale market investigation but has told the "big four" banks - Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland - to offer an industry solution.

It said a formal decision on the investigation would be made in the autumn.

The current account sector is around £8bn in size, while the SME sector is worth £2bn.

The watchdog commissioned two reports, one into current accounts and the other into SME functionality.

The SME banking market study was a joint project with the City watchdog, the Financial Conduct Authority (FCA).

It was the first formal collaboration between the organisations since the CMA was formed following a merging of the Office of Fair Trading and the Competition Commission.

The CMA said it was interested in hearing from consumers and companies about their experiences.

It said there appeared to be limited scope for newer and smaller banks and the markets remain concentrated, particularly in Scotland and Northern Ireland.

It added that there was very little movement in the market share of the largest banks - other than as a result of mergers and acquisitions.

The CMA said many customers see little difference between the largest banks in terms of the services they offer.

In addition, it said limited transparency and difficulties for customers in making comparisons between banks, particularly for overdraft charges, are "very complex".

"This makes it hard for customers to choose the cheapest or most appropriate accounts for them, so limiting banks' incentives to compete," the CMA said.

"This may result in higher overdraft charges than would otherwise be the case."

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Microsoft Cuts 18,000 Jobs In Nokia Cull

Microsoft has confirmed plans to "eliminate" up to 18,000 jobs worldwide as part of efforts to simplify the company's operations and cut costs.

The announcement was made in an email to staff entitled 'Starting to Evolve Our Organization and Culture' by new chief executive Satya Nadella, who is moving to reshape Microsoft into a cloud-computing and mobile-friendly software company.

The $7.2bn (£4.2bn) purchase of Nokia's mobile division - which is being integrated into Microsoft - was to account for the majority of the losses, Mr Nadella said, as overlaps were identified.

The deal, completed in April, added 28,000 positions to Microsoft's payroll.

The company, which now employs 127,104 people globally, has 3,500 staff in the UK but no announcement was made on exactly where the cuts would be made, apart from identifying 1,300 losses in Seattle.

It estimated costs of up to $1.6bn (£1bn) initially before any savings would be felt.

Mr Nadella told staff: "The first step to building the right organisation for our ambitions is to realign our workforce.

"With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year.

"Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers.

"We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months.

"It's important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas.

"My promise to you is that we will go through this process in the most thoughtful and transparent way possible.

"We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company."

Microsoft's share price rose more than 1% in pre-market trading after news of the plan was confirmed.

The shake-up was seen as central to the company's shift from being software-focused to one that sells online services, apps and devices it hopes will make people and businesses more productive - challenging the dominance of firms like Samsung, Apple and Google.

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Shire Agrees To £32bn AbbVie Takeover Deal

The board of UK drug firm Shire has agreed to a £32bn takeover deal by American rival AbbVie, it has been confirmed.

Shire said the merger would see its shareholders entitled to £24.44 cash for each share.

The announcement comes on the deadline day for the deal to proceed, amid a record high for Shire shares.

It includes a premium of more than 50% to the stock price of Shire, based on its May 2 price ahead of the initial offer period, and 42% up on an updated June 19 offer.

Shire's share price was up more than 2% in late morning Friday trades.

"The boards of AbbVie and Shire are pleased to announce that they have reached agreement on the terms of a recommended combination of Shire with AbbVie," the pair said in a statement.

The deal comes after Shire reversed its initial opposition to a takeover.

On Monday, the board of London-listed Shire said it was ready to recommend a deal which would value it at £53.20 per share - a rise of more than £2 per share on AbbVie's last bid less than a week ago.

Under the terms of the cash and stock offer AbbVie, which wants to buy Shire to cut its tax bill and diversify its product line-up, would own 75% of the new entity - giving Shire investors a greater stake than the 24% previously proposed.

Dublin-based Shire, which makes drugs to treat rare diseases, had rejected four earlier offers and asked AbbVie to sweeten its bid in order to recommend an agreement to its shareholders.

AbbVie's pursuit of Shire comes just weeks after AstraZeneca fought off takeover interest worth £69bn from US drugs giant Pfizer.

Shire has been under pressure to secure new products, as it currently gets nearly 60% of its revenue from rheumatoid arthritis drug Humira, the world's top-selling medicine, which loses US patent protection in late 2016.

Earlier this week, Professor John Lyon, of Warwick Business School, said: "Shire may be headquartered in Dublin but it is managed from Boston where most of its medicines are sold.

"It is well known for targeting rare diseases with its medicines where accelerated drug development pathways are sometimes available once an orphan drug status is agreed with the regulatory bodies."

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The Week's Big Business Stories

Germans Seek To Land Gatwick Air Traffic Role

Updated: 11:00pm UK, Thursday 17 July 2014

By Mark Kleinman, City Editor

Germany's state-owned airspace controller is vying with its principal British rival to land a 10-year deal to run air traffic services at the UK's second-busiest airport.

Sky News has learnt that London Gatwick's shareholders have been running a secret process to appoint a partner to run the airport's air traffic control tower until 2025.

Sources said the final two shortlisted bidders were the UK's National Air Traffic Services (NATS) and Deutsche Flugsicherung (DFS).

A decision is expected to made imminently, with an announcement about the winner possible as early as Friday.

The contest represents the biggest UK airport to consider moving oversight of its airspace to a foreign administrator to date.

The Civil Aviation Authority's approval would be required to approve such a change.

Gatwick handles 36 million passengers annually and has 55 air traffic movements every hour, making it the busiest single-runway airport in the world.

An aviation industry source said the tender process to run Gatwick's air traffic services would prioritise capability ahead of costs.

The contract will be awarded at a time when expansion at London's capacity-constrained airports is a serious political issue.

An independent commission chaired by Sir Howard Davies, the former head of the Financial Services Authority, is due to make a final recommendation about the location of new runways after next year's general election.

If Gatwick is selected as the venue for an additional runway, construction would begin during the operation of the new air traffic control contract.

The competition between NATS and DFS is intriguing because the German group was bidding a year ago to buy a big shareholding in its British counterpart.

DFS lost out to the Universities Superannuation Scheme, a UK pension fund, despite tabling a higher offer for a stake in The Airline Group, which controls 41.9% of NATS.

If the German group was to win the Gatwick contract, which will come into effect when NATS' existing deal expires next year, it would be seen as disappointing news for the UK operator.

Last month, it emerged that top managers at NATS had had bonuses withheld because of a December computer failure which caused hundreds of flights to be delayed or grounded.

NATS handles 2.2 million flights and 220 million passengers in UK airspace every year.

Gatwick could not be reached for comment on Thursday.

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Malaysia Airlines Offers Passenger Refunds

Malaysia Airlines is to refund fares for passengers no longer wishing to travel on the carrier, Sky News has confirmed.

Previously booked passengers due to fly up to and including July 25 can seek a refund without incurring any penalty.

The decision comes amid a wave of concern following the downing of MH17 over eastern Ukraine.

It is unclear how many passengers will cancel their flights.

Nevertheless, the refund will further harm the perception of the carrier both for passengers and investors.

Shares in Malaysia Airlines closed down more than 10% on Friday.

The Kuala Lumpur-listed company saw its stock fall more than 17% at one point before easing prior to the market close.

"Perception-wise it really hits home - It's very challenging. It's very difficult to fight against negative perception," Maybank aviation analyst Mohshin Aziz said.

"I can't comprehend of anything they can do to save themselves."

Many of the carrier's woes precede the loss of MH370 earlier this year

The company has struggled recently, and its accounts have been in the red for the last three years.

In 2013, the airline's full-year losses grew to £215m - up almost threefold on the 2012 loss of £80m.

The Malaysian government owns 69% of the firm.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes.

Budget rivals have adapted to the changing air market, particularly in Asia, with greater speed than legacy carriers such as Malaysia.

Many of its woes precede the mysterious loss of flight MH370 in the Indian Ocean.

Airline Weekly managing partner Seth Kaplan described it as being in "worse shape" financially than almost all other carriers - even before MH370 vanished.

"It's just hard to imagine that they could have even survived the first incident without a lot of government help and now they're going to need even more," Mr Kaplan said.

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Newly-Listed TSB Says Yes To £1.4bn UKAR Bid

State 'Bad Bank' Plots £1.5bn Mortgage Sale

Updated: 3:07pm UK, Tuesday 03 June 2014

By Mark Kleinman, City Editor

The state-owned 'bad bank' which holds the remnants of Bradford & Bingley and Northern Rock is to sell a £1.5bn mortgage portfolio that will attempt to exploit buoyant demand for UK housing market assets.

Sky News has learnt that UK Asset Resolution (UKAR) has hired investment bankers at Credit Suisse to market the loans, with the agency understood to be determined to secure a sale price at close to or better than the book's par value.

Prospective buyers are likely to include investment funds and a number of UK high street lenders, sources said on Tuesday.

The auction will represent the first such transaction since July 2012, when UKAR agreed the sale of £465m of Northern Rock Asset Management (NRAM) mortgages to Virgin Money.

The proceeds of that sale were used to repay part of NRAM's loan from the Government, which enabled it to stave off outright collapse in 2008.

Since then, the most significant deal involving UKAR took place last year, when NRAM's portfolio of standalone unsecured personal loans was sold to OneSavings Bank plc and Marlin Financial Group for a combined price tag of £400m.

News of the latest sale process emerged on the day that UKAR trumpeted its return to the taxpayer of roughly a quarter of the £38.3bn loan it took on six years ago.

Richard Banks, UKAR chief executive, said the results represented "good progress" for the taxpayer-backed organisation.

"It is also pleasing to see the significant reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes."

He went on to warn, however, that the prospect of rising interest rates would be a significant obstacle for many of its 467,000 customers.

"The signs are that the UK economy is continuing to recover, both in terms of growth and employment and in the housing and mortgage markets," UKAR said.

"House prices have increased faster than expected over the past 15 months, which, combined with continued low rates of interest, is good news for our customers and has driven increased redemption activity.

"However, despite the more positive conditions, many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers."

That warning echoes those of leading public figures in recent weeks, with representatives of major housebuilders due to meet Vince Cable, the Business Secretary, and George Osborne, the Chancellor, this week.

UKAR declined to comment on the new mortgage sale.

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