What could happen to Potash Corp?

http://economictimes.indiatimes.com/news/international-business/What-could-happen-to-Potash-Corp/articleshow/6756093.cms

TORONTO: News that China's Sinochem will not launch a counterbid for Potash Corp, removes one of the biggest potential obstacles to BHP Billiton's $39 billion offer for the Canadian fertilizer giant.

The fate of Potash Corp is far from certain, however, as other white knights may emerge, and BHP faces regulatory hurdles on the one hand and demands from Potash Corp for a higher bid on the other.

Shares in Potash Corp slipped 1.2 per cent in New York at midday on Friday to $145.37, but remained well above BHP's $130 per share bid, suggesting investors are still confident of a higher offer. BHP, the world's largest miner with a tradition of discipline when it comes to takeovers, may even walk away.

Following are some of the scenarios facing Potash:

HOSTILE SHOWDOWN Probability: Most likely With Sinochem out of the picture this is the most likely scenario because it makes it more difficult for Potash to convince shareholders there are other bidders and that it is worth more. Potash shareholders had indicated they would need BHP to raise its $130 per share bid to $162 before accepting an offer, according to a recent Reuters poll.

If BHP sweetens its bid, but still can't win over Potash's board, it may again take its higher bid directly to shareholders. BHP also might persist with its hostile offer and hope Potash shareholders will be convinced of the bid's merits. For now, Potash is sticking with its "just say no" defense.

A NEGOTIATED DEAL Probability: Likely This outcome is only possible if BHP is willing to substantially raise its bid for Potash. Some analysts argue that it would take an offer of at least $150 a share, while others say Potash's net asset value alone is in the region of $160 to $170 a share. Potash shares touched a high of $240 in 2008. Some analysts say a deal above $165 a share would hurt earnings, but that those levels are unlikely.

BHP's bid faces the additional obstacle of needing formal approval by its own shareholders if it sweetens its offer to a point where the value of the bid exceeds 25 per cent of its own market capitalization.

POTASH FORMS A JOINT VENTURE Probability:

Possible Potash could foil BHP's takeover attempt by selling a portion of its assets into a joint venture at a price that implies a substantially higher value for the whole company than BHP's current bid. Sinochem, China's top fertilizer maker and its No. 4 oil company, could be a viable joint-venture partner, especially now that it has abandoned plans for a counterbid for the whole company.

A Chinese company would ideally seek a supply agreement deal with Potash in the event of a joint venture. However, any agreement on this would have to be structured around Canpotex -- the international marketing arm of potash producers Potash Corp, Mosaic Co and Agrium Inc.

Analysts have also speculated that a consortium of companies could consider the joint-venture model if they were unable to secure enough capital for an all-out bid.

http://www.smh.com.au/business/potash-there-for-bhps-taking-20101019-16sin.html

THE chief executive of BHP Billiton, Marius Kloppers, can clinch control of Potash Corp and put the two misses he has had in game-changing deals with Rio Tinto behind him. But according to analysts, control of the feisty Canadian company will only come if BHP's $40 billion offer is increased substantially.

The Canadian Imperial Bank of Commerce said in a report that since no white knight had arrived with a counter-bid to BHP's one of $130 a share, Mr Kloppers could bank on ultimately being successful, as long as the offer price is closer to $150 a share. It said fundamentals in the crop nutrient markets were improving and that $150 a share could be the ''magic number''.

The bank said it did not expect BHP would receive the necessary shareholder acceptance from Potash shareholders at $130 a share by November 18, the current bid expiry date.

'At $150 a share, there is probably enough of a premium for Potash shareholders to capitulate while still being below the the threshold at which BHP would be required to take this deal in front of its own shareholders (triggered at about $157 a share),'' the bank said.

On the improved outlook for crop nutrients, Morgan Stanley said in a report that inventories for Potash's namesake main product were getting tighter. Inventories are currently 55 per cent lower year-on-year and 17 per cent below the five-year average.

Prices for potash have started to move higher. Potash Corp recently secured a $50 a tonne increase for potash which was followed by the $25 a tonne increase posted by fellow producer Mosaic in the US market. Morgan Stanley said global fertiliser application rates were well below recommended levels. Application rates have been fairly constant over the past 10 years but the bigger crops have been removing more nutrients from soil, it said.

Despite the stronger outlook for crop nutrients and calls for BHP to increase its bid to at least $150 a share, Potash shares have weakened. They fell to $143.21 on Monday.

Mr Kloppers has said he would not acquire Potash simply for the sake of completing a deal.

"I hope my shareholders consider that my job is on the line if we do an acquisition purely for the sake of doing an acquisition," he said in August when the bid was announced. "I will be as disciplined on this bid as I've been on every other endeavour that we've been on."

Pressure is building on Mr Kloppers to seal the deal after a proposed $116 billion iron ore production joint venture with Rio Tinto in the Pilbara was cancelled this week. It would have saved the companies a collective $10 billion - the biggest near-term prize either had on the go. It was killed off when it became clear anti-trust regulators around the world would withhold approval.

Vimpelcom Dials Up a Deal

http://www.investmentu.com/2010/October/vimpelcom-dials-up-a-deal.html

Investors may recall Vimpelcom ADR (NYSE: VIP) for the long legal battle over ownership of its Ukrainian telecoms assets. The contestants are its two biggest shareholders: Mikhail Fridman, the Russian oligarch behind the Alfa group, and Jon Fredrik Baksaas, CEO of Norway’s Telenor ADR (PINK: TELNY).

But now, Vimpelcom has gained attention for much more positive reasons: a merger. And one that will create the world’s fifth-largest mobile phone carrier as ranked by customers.

It plans to combine with most of Egyptian entrepreneur Naguib Sawiris’ telecommunications assets. That $6.6 billion deal will open further doors for Vimpelcom across the former Soviet Union, Asia, Africa and Italy.

By combining with Sawiris’ Weather Investments, it also secures a 51.7% stake in Egypt’s Orascom Telecom group and full ownership of Wind, Italy’s third largest mobile operator. In return, Weather Investments gets $1.8 billion in cash and a 20% stake – 18.5% of the voting shares – in the enlarged Vimpelcom… worth about $4.8 billion.

After the merger finalizes, Telenor will have 29.3% of the voting shares and the Alfa Group will have 36.4%.

Vimpelcom Likes the Weather in Russia

While Vimpelcom is Russia’s second-largest mobile operator, that country has a relatively mature mobile market. So it can definitely use the extra boost.

It does already have businesses in eight other countries in key areas such as central Asia. Vimpelcom gains significant growth potential from such countries, including Kyrgyzstan.

But this new merger gives it so much more…

It doesn’t give Vimpelcom access to Orascom’s Egyptian assets. But it does include the Cairo-listed company’s seven mobile businesses in Africa and Asia.

Those in Algeria, Pakistan and Bangladesh are especially significant. Orascom has operations where tremendous growth opportunities exist, including in the Central African Republic, where less than half the population owns a mobile phone.

The enlarged business will benefit from the near doubling of the number of its customers, since the mobile phone operator industry’s profitability rests largely on size: economies of scale.

It also enables Vimpelcom to expand into Africa and beef up its presence in Asia, where the company already has operations in Vietnam and Cambodia.

And Vimpelcom’s move into western Europe via Wind in Italy should help it gain valuable knowledge of the fast-growing consumer appetite for smartphones.

Vimpelcom Shares Tank on Rumors

Despite all that, investors don’t like the deal so far. Vimpelcom shares have tanked 10% since rumors about it leaked this summer.

Some think it can’t handle such a big shift away from its traditional base. Others worry about it taking on Weather Investment’s large debts.

Under the terms of the deal, Vimpelcom will accept $14 billion of Weather’s debt and issue an additional $2 billion. This means its net debt will increase from $4 billion to $24 billion… hardly desirable.

Additionally, Orascom’s Algerian mobile phone business, Djezzy, has an ongoing dispute with the local government, partly over taxes.

Djezzy, which generates about half of Orascom’s earnings, got hit with a $597 million 2009 tax bill. Since then, Orascom has struggled to get any of the cash it generates.

The larger company even tried to sell its African assets to South Africa’s MTN Group ADR (PINK: MTNOY) earlier this year. But discussions broke down after the Algerian government interfered.

In Vimpelcom’s favor, however, Russia has excellent relations with Algeria. So Russian President Medvedev is trying to broker a deal to the satisfaction of all right now.

The Merger Makes Sense for Vimpelcom

In the end, the merger actually does make sense for Vimpelcom and its shareholders.

Net debt will start out at 2.5 times earnings before interest, tax, depreciation and amortization. But with combined annual revenues of $21.5 billion, that should easily fall over the coming years.

Besides, Vimpelcom’s main telecoms market in Russia is stagnating; it needs to find growth elsewhere. And the smaller emerging markets of Africa and Asia offer just that.

In addition, while Orascom is a leading emerging markets player, it doesn’t have a prayer against giants like Vodaphone ADR (NYSE: VOD). Neither does Vimpelcom.

But together, they can really compete in the scale-oriented industry.

It might not be the ideal solution considering the uneasy alliance between Vimpelcom’s biggest investors. But it’s still not a bad one.

Good investing,

Tony D’Altorio

Crop Report 'Shocker' Ripples Through Agriculture Sector

CHICAGO (Dow Jones)-- Government forecasters slashed estimates for the U.S. corn harvest Friday, causing futures prices to surge while igniting shares of many agriculture companies.

U.S. corn futures soared to a daily trading limit on the Chicago Board of Trade when the market opened, rising 30 cents, or 6%, to $5.82 1/4 a bushel -- near a two-year high. Soybean and wheat futures also hit their exchange-imposed trading limits at the market opening.

"Shocker may be an understatement," said Jason Britt, president of Central State Commodities, a Kansas City brokerage. "It's very out of character for the USDA to lower the corn yield so much."

The crop report spilled into equity markets with tractor makers such as Deere & Co. (DE) climbing on the news along with seed and fertilizer companies such as Monsanto Co. (MON). Livestock and poultry producers such as Smithfield Foods Inc. (SFD), meanwhile, traded lower on expectations that higher crop prices would increase feed costs. Longer-dated future contracts for cattle and hogs rose as well.

The U.S. Department of Agriculture projected a national corn yield of 155.8 bushels an acre, well below last month's projection of 162.5 bushels and lower than analysts' average forecast of 159.9 bushels per acre.

The USDA was projecting a record crop a couple months ago. But farmers have largely been disappointed as harvest progresses. The crop faced problems from excessive rains early in the season that washed away supplies of nitrogen, a crucial nutrient, and was also stressed by unusually hot night-time temperatures all summer.

While many traders and analysts could see this year's corn crop yield drifting down to 155 bushels an acre, few expected the USDA to make such an aggressive revision so soon. The U.S. harvest is roughly 50% complete.

"This is a very tight balance sheet we now have to live with for a long time," said Sal Gilbertie, lead manager of the Teucrium Corn Fund, an exchange-traded fund based on corn futures.

Other agriculture commodities followed corn higher. Wheat and soybeans surged in part because both, like corn, serve as an animal feed. Livestock futures also climbed because feed is a major cost for producers.

Stocks for farm machinery manufacturers and other agribusiness companies rose on prospects that higher prices for corn will provide farmers with more money to spend on equipment, fertilizer and seed. Tractor makers Deere, CNH Global (CNH) and Agco Corp. (AGCO) are all higher, along with seed and fertilizer companies Monsanto, CF Industries Holdings Inc. (CF) and Potash Corp. of Saskatchewan (POT).

Shares for crop processors Archer Daniels Midland Corp. (ADM) and Bunge Ltd. (BG) also moved up as tight supplies of crops provide them with leverage to raise their prices. But meat and poultry producers, including Smithfield Foods, Tyson Foods Inc. (TSN) , Pilgrim's Pride Corp (PPC) and Sanderson Farms Inc. (SAFM), were lower in morning trading.

Analysts said Friday's report reignites concerns that the market needs higher prices in order to discourage demand and stave off a supply crisis. The report could have other ramifications, since the government has yet to rule on a request to increase the amount of ethanol that can be blended in gasoline to 15% from 10%.

"This could (heighten) the debate on moving ethanol blends higher, and 'food versus fuel,'" debate, Britt said.

HEARD ON THE STREET: VimpelCom Bets Bigger Is Still Better

http://online.wsj.com/article/SB10001424052748703843804575534371691572824.html?mod=googlenews_wsj

Bigger is better" still holds sway in some parts of the telecom world.

Russia's VimpelCom is acquiring the bulk of Egyptian billionaire Naguib Sawiris's telecom assets for $20.6 billion. Those include Italian mobile group Wind Telecomunicazioni, or Wind Italy, and a 52% stake in Cairo-listed Orascom Telecom Holdings, with operations in Africa and Asia. VimpelCom will more than double in size, entering the global top five by subscribers. While the risks are high, VimpelCom is buying the assets at a reasonable price.

The deal remedies weaknesses for both players. VimpelCom is challenged for growth outside the former Soviet Union and has no presence in developed markets to benefit from mobile data growth. Mr. Sawiris's problem is debt, which has curbed Wind Italy's growth and led to a restructuring at Wind Hellas in Greece. In Algeria, he faces crippling retrospective tax charges and nationalization threats. Mr. Sawiris has sought a tie-up before, but a deal with South Africa's MTN failed this year over Algeria, responsible for roughly half Orascom's earnings before interest, taxes, depreciation and amortization, or Ebitda. Mr. Sawiris's 20% posttransaction stake in VimpelCom will allow him to benefit from any upside if the Algerian situation works out better than expected.

VimpelCom is paying 6.2 times Ebitda for Mr. Sawiris's assets. Even if the Algerian business were to be nationalized with no compensation to VimpelCom, the effective multiple still would be below seven. Recent emerging-market deals have commanded double-digit multiples. Add in $2.5 billion of VimpelCom synergy estimates and the deal looks reasonable even through a developed-market prism, important given the bulk of Ebitda comes from Italy.

VimpelCom also could fare better in Algeria than Mr. Sawiris appears to be doing. Management is meeting Algerian authorities. If Russian President Dmitry Medvedev, in the country to discuss a raft of possible trade opportunities, backs VimpelCom, it could make a difference. Selling the assets to the Algerian state is one option under consideration.

The deal will push VimpelCom's net debt to Ebitda from 0.8 to a hefty 2.5 times. Still, rivals such as Telefónica operate with similar leverage, and the $2.5 billion in operating free cash flow VimpelCom is acquiring should cover interest payments from the deal almost four times. Entering 10 new markets also is risky. VimpelCom argues it has ample experience building operations in tricky places like Kyrgyzstan, while the Russian market now shares many of Italy's characteristics.

Getting bigger hasn't always helped telecom groups. Economies of scale often fail to materialize. After a string of acquisitions, for example, U.K. behemoth Vodafone Group now is in divestment mode. But while speculation over a deal has weighed on VimpelCom's shares since August, reflected in 6% underperformance versus Russian peer Mobile TeleSystems, Algerian problems may be surmountable, and the acquisition less costly than feared. VimpelCom's big gamble could pay off.

CFSG other verticals

China Fire & Security Group (CFSG) is a leading provider of industrial fire protection systems. The company’s China-based rivals tend to focus on low-end and technically less sophisticated products which are low-grade and unsuitable for large projects.

The market for the design and installation of fire safety systems is served by numerous small firms. Of these, China Fire has emerged as the largest in the past five years. The company’s leading position in the domestic industry helped it to win a high percentage of bids, which is around 60%-70% of bids in the iron and steel industry.

China Fire is benefiting also from the Chinese iron and steel industry's Revitalization Scheme, which promotes production control, encourages industry consolidations and emphasizes the development of new technologies. This stimulus plan provides financial subsidies and loan discounts to leading iron and steel companies, allowing larger and more advanced steel producers to upgrade existing plants and develop new innovative facilities. China Fire sees huge growth potential for its Total Solutions business as the segment derives more than 80% of revenue from the iron and steel industry.

Although the company primarily serves the iron and steel industry, it is now looking to expand into other industrial sectors. In China, about three to five large-scale nuclear plants are expected to be built every year until 2020. This represents an attractive opportunity for China Fire to grow in a new industrial vertical as the Chinese government directs that at least 50% of the equipment used for new nuclear power plants should be sourced locally. As the largest industrial fire protection provider in China, China Fire will benefit from the government policy.

Given its brand reputation as a leading total solution provider and its comprehensive line of proprietary products, we believe China Fire is well-positioned to capitalize on the growth potential in China’s industrial fire protection market. We are upgrading our rating on the stock from Neutral to Outperform.

Stuy Town Foreclosure Auction Postponed

Two groups of investors battling over the sprawling Stuyvesant Town and Peter Cooper Village apartment complex neared a deal Monday that could save the new owners of the complex as much as $100 million in state and local taxes, according to people familiar with the matter.

The negotiations involving the firm representing the main mortgage holders of the 11,200-apartment property and a separate group of investors led by Bill Ackman and Winthrop Realty Trust pushed off the foreclosure auction that was scheduled for Monday and the long-awaited transfer of the property. The complex has sat in limbo ever since January, when the owners, a group led by Tishman Speyer, defaulted on their $5.4 billion purchase.

While the over-leveraged complex is financially ailing, it is still enormously valuable, a fact not lost on investors who are eager to capitalize on the mistakes of others. The custodian of the $3 billion first mortgage on the property, CW Capital, has long been trying to foreclose on the 80-acre residential complex.

But Mr. Ackman's group, which bought a key piece of junior debt, has been maneuvering for control. That effort was thwarted last month when a court ruled against them.

The Ackman group could still cause problems for CW Capital, however, if CW Capital's strategy involves "cleansing" the complex through a bankruptcy filing. Such a move could help CW avoid paying taxes to the city, state and MTA, estimated upward of $100 million.

Terms of the deal being negotiated were not available Monday. One likely scenario would involve the Ackman group being bought out by CW Capital.

But should a deal indeed lead to a transfer that avoids taxes, it could also draw scrutiny from state and city officials, according to legal experts, as it would mean foregone revenue during the recession.

"If the deal was reached in an effort to minimize significant New York state and New York City taxes, no doubt they are spending considerable time structuring in a way to minimize scrutiny by state and local tax officials," says Mark Edelstein, head of the real-estate group at the law firm Morrison & Foerster.

Tishman Speyer has long sought an exit, while CW Capital has plodded through the lengthy foreclosure process and beaten back two challenges by two separate hedge-fund managers.

Once a transfer does occur, regardless of the specific route, the keys would be turned over to CW Capital, a Boston-based special servicer of loans that has grown substantially amid the exploding world of distressed mortgages.

Anxiously awaiting a transfer have been the tenants at Stuyvesant Town, as the tenants association and Councilman Daniel Garodnick have been working for months with CW Capital on a plan for a conversion to co-ops or condominiums, which would likely unlock significant value in the short-term.

In a statement, Mr. Garodnick was critical of the postponement Monday, calling it a "distracting move that destabilizes what was on track to be an orderly process."

CW Capital, while not committing itself publicly to a conversion, has retained a law firm to handle a conversion: Kramer Levin. The foreclosure auction, should it occur, has been postponed to Oct. 13.

Never Underestimate Wily Bill Ackman

Last week, the Observer was prepared to count Bill Ackman out at Stuyvesant Town. The brash investor had lost an appeals court decision that meant he could not seize control of the massive East Side housing complex and force it into foreclosure, wiping out his and Winthrop Realty's $45 million investment. CW Capital, which represents the senior lenders on the property, was expected to prevail in a foreclosure auction scheduled for today.

But the sale has been called off, and it looks like Mr. Ackman might carry the day after all.

The auction is now scheduled for Oct. 13 because CW Capital is said to be in negotiations with Mr. Ackman and Winthrop for their $300 million in debt. The speculation is that by buying out Mr. Ackman, CW can force the complex into bankruptcy, saving it what the Journal says is $90 million in taxes and fees or as much as $200 million, according to Crain's.

With those kind of numbers, Mr. Ackman might go from getting wiped out to making a profit on his gambit. Not nearly what he would have made had he won the complex as a whole, which he set out to do this summer, but not a bad beat, either.
-------

Now it looks like his "worst case scenario" is getting his money back and perhaps double it. Or, he might get a stake in the property instead.

This is what I kept looking for because I knew that Ackman & Ashner were too smart to throw away $45 million.

In this case, it sounds like they knew what they were doing.

And paying Ackman even $70 million would be cheaper than paying transfer taxes of $90-200 million.

Vimpelcom merger

http://www.reuters.com/article/idCNLDE6930OI20101005?pageNumber=1

* Involves $1.8 bln cash, 326 million new shares

* CEO says has yet to agree on purchase of Algerian unit

* Wind's Greek unit not included in the deal

* Vimpelcom shares down 2.3 percent

(Changes byline, adds Orascom chairman comments)

By Maria Kiselyova and Alexander Dziadosz

MOSCOW/CAIRO, Oct 4 (Reuters) - Russian mobile operator Vimpelcom (VIP.N) will buy Italian mobile group Wind and control of Egyptian operator Orascom Telecom (ORTE.CA) for $6.6 billion, and seek a deal with Algeria to keep Orascom's Djezzy unit.

The cash and shares deal, with Egyptian tycoon Naguib Sawiris' Weather Investments, will create the world's fifth-largest mobile operator, worth around $23 billion and with 174 million mobile subscribers.

For Vimplecom, an emerging market specialist partly owned by Russian billionaire Mikhail Fridman, the transaction marks a major expansion into Asia and North Africa and a first move into the developed European market.

Vimpelcom Chief Executive Alexander Izosimov told Reuters Insider Television the fate of Orascom's Algerian unit, Djezzy, its biggest single source of revenue, had yet to be decided. <^^^^^^^^^^ "We had to accept that risk (around Djezzy). But we are absolutely open to a deal with the Algerian government and propose to them to resolve it somehow amicably. We believe it will be a fair process and we will find a solution," he said in an interview in Amsterdam. He later said on a conference call that it was a "highly unlikely scenario" that Vimpelcom would lose Djezzy to an Algerian government that wants to nationalise it. Izosimov will travel this week to Algeria as part of a delegation led by Russia's president, Dmitry Medvedev. Sawiris, chairman of the Weather investment group, said he expected the visit to have a positive impact on Djezzy's operating conditions, adding that the value in a previous "discounted" offer for Djezzy from South Africa's MTN (MTNJ.J) of $7.8 billion still held. "I'm sure he's (Medvedev) going to raise the subject and he's going to try and help improve the circumstances under which Djezzy operates," Sawiris said in a phone interview.

While Orascom's operations in Egypt and North Korea were included in the deal, the assets will be demerged in the third quarter of 2011, Vimpelcom said. Wind's Greek unit is not included in the deal.

It was the biggest international deal by a Russian company -- the previous record of $5.9 billion was set when metals and mining company Norilsk Nickel bought LionOre Mining.

Vimpelcom's NYSE-listed stock was down 2.2 percent in late trade on Monday on what a Moscow-based trader said were risks surrounding the Algerian deal.

OUTSTANDING ISSUES

Upon completion of the deal, Russian Alfa-Group would have 31.4 percent of economic rights in Vimpelcom, and minority shareholders would have 17 percent.

Alfa said it was "committed to finalise it (the deal) in due terms."

Norwegian group Telenor (TEL.OL), whose economic stake in the enlarged Vimpelcom would fall to 31.7 percent from 39.6 percent, said it would give final approval if certain conditions were met.

"There are a few conditions to closing this deal. One is approval from regulatory authorities in some markets and another is a final shareholders' agreement between all three parties -- and presumably the Weather shareholders," spokesman Dag Malgaard told Reuters.

Telenor has voiced concerns the deal will weaken dividend payouts. Its shares closed down 1.7 percent.

Algiera, which rejected Orascom's plans to sell Djezzy to South Africa's MTN, has been trying to nationalise the unit and was expected to make an offer in coming months.

Algerian law gives the government the right to block any sale of Djezzy to Vimplecom, but analysts said Medvedev's visit on Oct. 6 could help ensure the lucrative business was not stripped out after a deal was done.

The deal would help Orascom's holding company lighten its debt burden and become a player in the one of world's top five telecommunications companies, a goal Sawiris has talked about since 2006.

Sawiris said Orascom would be split into two separate stocks listed on Egypt's bourse in order to demerge the company's Egyptian and North Korean assets.

Orascom's London-listed global depositary receipts (GDRs) (ORTEq.L) rose 7.3 percent.

Vimpelcom said it would raise $2 billion to $2.5 billion of debt, taking the total burden of the combined group to $24 billion. (Additional reporting by Alexander Dziadosz in Cairo, Victoria Howley in London, Christian Lowe in Algiers, Melissa Akin and Anastasia Teterevleva in Moscow; Editing by John Bowker and Lin Noueihed)

Under the terms of the agreement, the Russian wireless operator will own 100% of Wind Telecomunicazioni, with Weather stockholders receiving about 325.64 million newly issued VimpelCom common shares, as well as $1.8 billion in cash and certain assets demerged from Orascom Telecom and Wind Italy.

The assets being acquired are Orascom Telecom investments comprised principally in Egypt and North Korea.

If approved, Weather will gain 20% economic interest and 18.5% interest in the larger VimpelCom.

http://www.bloomberg.com/news/2010-10-04/vimpelcom-record-low-yields-show-bondholders-supporting-m-a-russia-credit.html

OAO VimpelCom’s borrowing costs are falling to record lows, a sign investors will support higher indebtedness to fund acquisitions as the Russian mobile-phone operator buys assets from Egyptian billionaire Naguib Sawiris.

VimpelCom’s $1 billion of bonds due April 2013 traded at a yield of 4.77 percent yesterday, the lowest since the notes were issued in April 2008 and down from 7.41 percent in May, according to data compiled by Bloomberg. The yield is 143 basis points, or 1.43 percentage points, higher than Russian government bonds due 2015, the smallest premium in two months.

Investor sentiment is shifting after the global credit crisis and the country’s worst recession since the Soviet era drove Russian companies to cut foreign acquisitions by 73 percent this year to a five-year low, according to data compiled by Bloomberg. Foreign takeovers by Russian firms totaled $3.24 billion this year, lagging behind the biggest emerging markets as acquisitions from India surged fourfold to $56 billion and Brazilian companies spent $41 billion, the data show.

“We might see more Russian corporations coming out to snap up emerging-market assets in other, faster growing countries,” said Peter Varga, who helps manage the equivalent of about $171 million of emerging-market corporate bonds at Erste Sparinvest KAG in Vienna. Varga said he increased VimpelCom bonds to 4 percent of his fund on Aug. 18, when the yield on the notes due in 2013 was 5.59 percent. “VimpelCom can take on some debt and still be in the comfort zone,” he said.

Weather, Wind

VimpelCom of Moscow and Egyptian billionaire Naguib Sawiris agreed yesterday to merge their phone assets in a transaction valued at about $6.5 billion.

VimpelCom’s bonds rallied as the Sawiris merger is poised to turn the Russian company into the world’s fifth-largest mobile phone operator, with 174 million subscribers, according to its statement yesterday. The enlarged company will have a market capitalization of $24 billion, up from $19 billion, according to the statement.

The Russian company will own the 51 percent stake in Cairo- based Orascom Telecom Holding SAE held by Sawiris’s Weather Investments SpA along with all of Italian mobile operator Wind Telecomunicazioni SpA. Weather shareholders will get 20 percent of the merged entity. The combined entities earned total revenue of $21.5 billion in 2009, according to the statement yesterday.

VimpelCom shareholders will vote on the transaction by year-end and the company expects to complete the deal in the first quarter.

‘Strategic Move’

“This is really a strategic move since this would create a large mobile company that will cover a wide range of still unpenetrated markets in the Middle East, North Africa, the CIS and the eastern part of the world,” Sergey Dergachev, who helps manage $6 billion at Union Investments in Frankfurt, said in a phone interview. “I do not expect a significant deterioration in VimpelCom’s credit profile.”

Gains in Russia’s dollar bonds due in 2020 today reduced the yield ten basis points, or 0.10 percentage point, to 4.385 percent, the lowest level since they were sold in April. The yield on government ruble notes due August 2016 fell eight basis points to 7.2 percent.

Default Swaps

The extra yield investors demand to hold Russian debt rather than U.S. Treasuries fell six basis points to 225, according to JPMorgan Chase & Co.’s EMBI+ indexes. The difference compares with 153 for debt of similarly rated Mexico and 207 for Brazil, which is rated two steps lower at Baa3 by Moody’s Investors Service.

The yield spread on Russian bonds is 47 basis points below the average for emerging markets, down from a 15-month high of 105 in February, according to JPMorgan indexes.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps fell three basis points to 158, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Credit-default swaps for Russia, rated Baa1 by Moody’s, its third-lowest investment grade rating, cost the same as contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.

Ruble Gains

The ruble climbed 0.3 percent to 30.3624 per dollar by 1:18 p.m. in Moscow, its strongest intraday level since Aug. 18. Non- deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, show the ruble at 30.5767 per dollar in three months.

President Dmitry Medvedev said in November he wants to reduce the country’s “humiliating” reliance on commodities. The economy of Russia, the world’s biggest energy exporter, shrank by a record 7.9 percent last year after a 54 percent slump in oil prices in 2008.

VimpelCom Chief Executive Officer Alexander Izosimov said the deal will be “transformational” for the company. “It offers our shareholders exposure to attractive growth markets in both Asia and Africa and the opportunity to diversify further our revenue base in terms of geography, currency and market characteristics,” Izosimov said in a regulatory statement yesterday.

Sawiris said in a statement minority shareholders in Orascom Telecom will benefit from synergies created by the merger, “especially in the area of procurement, and by the overall strengthening and de-risking of the balance sheet.”

Rising Debt

VimpelCom’s debt will increase to 2.5 times earnings before interest, taxes, depreciation and amortization because of the acquisition, said Maxim Raskosnov, a banking analyst at Moscow- based investment bank Renaissance Capital. The current level is 1.45 times Ebitda, according to data compiled by Bloomberg for 2009.

Wind Italy had net debt of 8.29 billion euros ($11.4 billion) as of June 30, data compiled by Bloomberg show. Orascom Telecom owed $4.61 billion.

The deal is “risky” as it may saddle VimpelCom with an additional $12 billion of debt, taking the combined total to $17 billion, Konstantin Chernyshev, head of research at Moscow brokerage UralSib Financial Corp., said in an e-mailed report yesterday. “The upside of the potential deal is also questionable given the relatively weak position of Wind in its main Italian market, which is already saturated, as well as Orascom’s problems in Algeria, where the company has been charged with back-tax claims,” according to the report.

Tax Tangle

Orascom is entangled in a tax dispute in Algeria, which will be dealt with “in due course,” VimpelCom’s Izosimov said yesterday in a conference call with reporters. He and Russian President Dmitry Medvedev will be in Algeria this week, he said.

Mikhail Galkin, the head of fixed-income research in Moscow at VTB Capital, the investment banking arm of VTB Group, recommends investors avoid increasing VimpelCom bond holdings. Reports from ratings companies will be “negative,” he said.

Carlos Winzer, a telecom analyst at Moody’s in Madrid, and Michael O’Brien, a credit analyst at Standard & Poor’s in London, both declined to comment.

VimpelCom’s Amsterdam-based parent, VimpelCom Ltd., was formed by Russian billionaire Mikhail Fridman’s Alfa Group and Norway’s Telenor ASA to consolidate holdings in Russian and Ukrainian mobile-phone operators. The company is 39.6 percent- owned by Fornebu, Norway-based Telenor while Alfa’s Moscow-based Altimo unit controls 39.2 percent and minority shareholders own 21.2 percent.

VimpelCom bonds plunged in August following initial reports that the company was in talks with Sawiris, pushing the yield on the company’s bonds due in 2013 to their highest since July 21 at 5.93 percent.

‘Market Fears’

“The market fears have been allayed somewhat,” Sergey Kolesnikov, head of fixed income at Moscow brokerage Metropol IFC, said in a telephone interview. “VimpelCom realized the negative effect the deal was having on their bonds and shares and it looks like they will find a clever way to structure the deal so the debt doesn’t sit on their balance sheet.”

VimpelCom is rated Ba2 at Moody’s, two levels below investment grade, and BB+ at S&P’s, the highest non-investment grade. Wind is ranked Ba3 at Moody’s, three levels below investment grade, and B+ at S&P, four levels short. Orascom Telecom Holding has a B2 rating at Moody’s, five below investment grade, and B- at S&P, six levels under.

Egypt mogul confident over Russian telecom merger

CAIRO (AP) -- Orascom Telecom's chairman said Tuesday there was 90 percent chance that the planned merger of his investment company and Russia's VimpelCom Ltd. will be finalized, despite uncertainty over the fate the Egyptian telecom giant's Algerian subsidiary.

VimpelCom and Naguib Sawiris' Weather Investments SpA -- which owns most of Orascom Telecom -- had announced on Monday a $6.6 billion deal that would create the world's fifth largest mobile telecommunication service provider.

The deal would give VimpelCom, via Weather, 51.7 percent of Orascom Telecom and all of Italy's Wind Telecomunicazioni SpA, both of which are headed by Sawiris. A potential question mark was Djezzy, OT's lucrative Algeria subsidiary that has been locked in a bitter feud with Algiers over taxes.

Sawiris told reporters that Djezzy's struggles had been a key factor in his decision to strike a deal with VimpelCom, and that he believed Russia's relationship with Algeria may help solve the dispute that has already scuttled an earlier deal between OT and South Africa's MTN Group.

Weather and VimpelCom "have signed a deal that is subject to some refinancing of the debt, some regulatory issues," Sawiris said when asked if he thought Algeria could scuttle the planned merger. "But my gut feeling, the answer would be 'No'."

"But as you know, in any deal, before the closing, you can never be sure," he said, adding that he believed there was a "90 percent" chance the planned merger would be finalized.

OT's shares are up almost 5.6 percent to 5.48 Egyptian pounds near market close Tuesday, a day after the Egyptian stock exchange halted trading in the stock pending a reply from OT about the reports of the possible merger.

The deal is one Sawiris said he would have preferred to wait to conclude to get a better price. But he said he saw little choice given the Algeria dispute with what was OT's chief revenue earner.

OT's first run-in with Algeria was over some $600 million in back taxes. Orascom -- which with France Telecom jointly operates Egypt's largest mobile phone service provider by subscribers -- unsuccessfully appealed that bill and saw its bid with MTN collapse after Algeria said it would exercise its right to buy the company first. It has yet to act on that possible purchase.

Complicating matters for OT is a new $230 million tax reassessment claim by Algeria, an issue which may be eased with Russian President Dmitry Medvedev's visit to the country this week. OT has said it will challenge that assessment.

But Sawiris expressed frustration with the obstacles the company was facing in the country, saying Djezzy's operations had largely been frozen for months and that "our ability to continue work is blocked."

"We can't continue," he said. "We're ready for any solution. We're ready for this blockade to be lifted so we can work. We're ready to sell the company to them."

"We never objected to that," he said, stressing that any such sale would have to be at fair market price.

Algeria's industry minister, Mohamed Benhamadi said Tuesday that the government still wanted to buy Djezzy.

"Any change in the shareholding of Orascom Telecom Holding does not undermine the commitments already made to cede Orascom Telecom Algeria to the Algerian state," he said, according to the official Algerian news agency APS.

"The negotiations under way between the Algerian government and the owners of the OTA group were not all put under question," he said. "They are two distinct operations. The first concerns a transaction between two international holdings, and the second concerns a procedure of ceding the rights to a company under Algerian law."

The planned merger with VimpelCom is expected to close next February, with those assets not included in the sale to be split off two months later, OT's chief executive Khalid Bichara said.

Under the deal, Weather shareholders would get 20 percent economic interest and 18.5 percent voting interest in the new company, as well as $1.8 billion in cash. Not included in the deal are Egyptian telecom firm Mobinil and OT's North Korea operation.

Egypt's financial regulator said it wanted assurances that the deal would not undercut the rights of OT's minority shareholders and a disclosure of OT's valuation before the Egypt operation was separated as part of the merger.

The planned merger is seen as a boon for VimpelCom, expanding its reach in developing markets. OT operates in several African and Asian nations and the new company would have operations in 20 countries with 174 million subscribers.

VimpelCom, which is jointly owned by Russia's Alfa Group and Norway's Telenor, had a net debt of almost $4 billion by the end of the first half of 2010. Wind's net debt stood at about $10.6 billion.

Vimpelcom (VIP.N) will attempt to broker a deal with the Algerian government to retain ownership of telecoms group Djezzy following its $6.6 billion deal for the Weather empire, CEO Alexander Izosimov told Reuters on Monday.

"We had to accept that risk (around Djezzy), but we are absolutely open to a deal with the Algerian government ... we believe it will be a fair process and we will find a solution," he told Reuters Insider Television.

The $6.6 billion valuation includes Djezzy. Algeria had wanted to buy back Djezzy from previous owner, Egypt's Naguib Sawiris.

Izosimov said he would travel to Algeria to join a delegation led by Russian President Dmitry Medvedev later this week. (Reporting by Adrian Murdoch, Writing by John Bowker, Editing by Melissa Akin)

n">MOSCOW/LONDON Oct 6 (Reuters) - Russian President Dmitry Medvedev faces an uphill battle on Wednesday convincing Algeria to approve the sale of its biggest mobile telephone operator and BP's Algerian assets to Russian companies.

On the line is Vimpelcom's bid to become the world's fifth largest mobile phone operator and enter the developed European market by buying control of Egyptian tycoon Naguib Sawiris's telecoms assets for $6.6 billion.

The jewel in the crown of the proposed deal is Orascom Telecom's Algerian unit Djezzy, its biggest revenue earner, which Algeria's government is trying to nationalise.

With no break fees on the deal, either side could walk away from the agreement without financial penalty.

Vimpelcom Chief Executive Alexander Izosimov, travelling with Medvedev, said he hoped Djezzy would be discussed in the Russia-Algeria talks, adding Vimpelcom would consider selling "if the Algerian government insists".

"I am ready to raise this question because it is a big investment, one of the biggest Russian investments in the Algerian economy," he told reporters in Algiers.

With the complex Djezzy and BP transactions depending on the approval of Algerian President Abdelaziz Bouteflika, Medvedev's ability to clinch big deals for Russian business -- the hallmark of his patron Vladimir Putin -- will be put to the test.

Algeria has already rejected approaches from Egyptian President Hosni Mubarak and South African President Jacob Zuma to sanction the sale of Djezzy to South Africa's MTN and has said it would make an offer for the unit within months.

But Elena Mills, a senior analyst with Alfa Bank in Moscow, said interest in energy assets in Russia and Algeria could help the countries find a resolution over Vimpelcom too.

"The presence of Medvedev is not exactly a coincidence," she said. "Now a deal has been announced he can raise the issue of Djezzy. That Russia and Algeria both have oil and gas assets is helpful -- a common ground could be found."

SAWIRIS OUT OF PICTURE

Medvedev, also accompanied by Russian billionaire Mikhail Fridman, whose Alfa-Group owns 40 percent of Vimpelcom, should have a better chance of ending uncertainty over Djezzy with Sawiris out of the frame.

Tensions between the Algerian government and the Sawiris family go back to 2008, when Orascom Construction Industries, led by Sawiris's brother Nassef, sold its Algerian cement business to France's Lafarge.

Algeria has fraught ties with its former colonial ruler and Algiers felt it should have been consulted.

Credit-Card Issuers Scramble for Profits

http://online.wsj.com/article/SB10001424052748704913704575453572340768654.html#articleTabs%3Darticle

The golden age of credit cards may be over.

Faced with a raft of new regulations and customers who are spending less on their cards, executives at the nation's biggest issuers of plastic such as J.P. Morgan Chase & Co. and Citigroup Inc. are bracing for a less profitable future. As a result, they are scrambling to figure out how to make money in a business that is shrinking while getting more costly to operate.


"As you look out into the future, we think the business will be smaller, but how much smaller remains to be seen," said Chip Rossi, who oversees credit for Bank of America Corp.'s credit-card business. "It's a product that is important to the consumer, so we have got to figure out a value proposition that makes sense."

Card companies are struggling to recover from $1 billion in losses racked up last year as a result of the financial crisis. Auriemma Consulting Group, a New York firm that specializes in the payments industry, estimates that card companies could earn about $4 billion this year. That is less than a quarter of the record $18 billion earned in both 2006 and 2007, according to Auriemma, which doesn't include financial results from American Express Co. or Discover Financial Services Inc.

"We will all have to get used to lower profits, lower credit lines and higher interest rates. There's no precedent for this," said Megan Bramlette, a director at Auriemma.

Data show that the pace of delinquencies and defaults slowed in July, which is expected to help stem industry losses and even help banks post profits because they no longer need to set aside as much cash to cover future losses.
[cards1] Bloomberg News

Credit-card companies are struggling to recover from $1 billion in losses racked up last year as a result of the financial crisis.

But the slowdown of delinquencies isn't expected to help the bottom line as long as unemployment stays high and purse strings remain tightened. Those conditions don't help growth. The amount of outstanding credit-card loans shrank 10% last year, to $772.19 billion, due to tighter lending standards and a drop in consumer spending, according to the Nilson Report, a Carpinteria, Calif., industry newsletter.

Those loan portfolios are continuing to shrink. Chase, one of the largest issuers, has shaved more than $20 billion from its $127 billion portfolio. Over the past year, the bank has pulled back credit from its riskiest and least profitable customers.

Regulators also are squeezing growth. New federal card rules are expected to drain $11 billion a year from the industry over the next five years, said Robert Hammer, who runs a credit-card-consulting firm in Thousand Oaks, Calif. Those losses represent lost fee and interest revenue from charges that the law, enacted this year, bans. The losses also include higher costs of compliance with the law.

Issuers are trying to offset those costs by raising other interest rates and imposing new types of fees, but Mr. Hammer estimates that they will be able to recoup only 25% of that lost revenue.

"The industry is healing slowly, but there's a long way to go," said Gordon Smith, who runs the credit-card business at J.P. Morgan Chase. The bank's card unit squeezed out a $343 million profit in the second quarter after six consecutive quarters of losses totaling more than $3 billion.
[Cards]

"At its very root, there is strong consumer demand for our products. We are in a difficult environment, but I view it optimistically," Mr. Smith said.

But consumers, like regulators, also are vigilant. They are showing less loyalty and more skepticism about the cards in their wallets.

A survey released last week by J.D. Power and Associates found that only 22% of customers said they definitely wouldn't switch their primary card in the next 12 months, down from 25% in 2009 and 30% in 2008. More customers also said they had seen the interest rates on their cards rise.

To bolster themselves against such head winds, banks are grasping for the most profitable strategy, no two of them alike.

"The lack of loan growth makes it tough to say where the profitability drivers will come from," said Jeffrey Harte, an analyst at Sandler O'Neill & Partners, LP in Chicago.

Chase, which is running ads set in upscale ski resorts and Hawaiian retreats, has focused on affluent consumers with good credit histories. Citigroup, meanwhile, is going in the opposite direction.

"We are bringing to market services for people who are disenfranchised and are now building back their credit-worthiness," said Paul Galant, who runs the bank's card business.

Bank of America is focused on offering cards to its retail-banking customers and other mass-market consumers. It once pitched 5,000 affinity cards tied to colleges and professional organizations. The bank has pared back those cards to 3,500.

While Bank of America is exiting such specialized cards, Capital One Financial Corp. is doubling down on them. This month, Capital One acquired 20 million new accounts when it signed a deal with Kohl's Corp. to offer store-branded credit cards to its customers.

"The credit-card industry will still be an attractive business in the future, but right now it is adjusting to a new regulatory environment and what appears to be new consumer attitudes on debt," Mr. Harte said.

Potash Corp. Could See Chinese Offer

Dundee Capital Markets
http://online.barrons.com/article/SB50001424052970203914204575453614060768600.html?mod=googlenews_barrons
BHP BILLITON'S acquisition of Potash Corp. of Saskatchewan would all but certainly mean the end to the potash export consortium Canpotex given BHP's preference for selling through their own sales channels and directly to customers.

Potash (ticker: POT) (not rated) accounts for over half of the group's sales and the loss of Potash's substantial volumes would render other members Agrium (AGU) (rated at Buy) and Mosaic (MOS) (not rated) unable to exert the same level of influence as it would with Potash.

The Saskatchewan government is reviewing the full implications of a Saskatchewan without Canpotex with financial and political advisors but generally views the consortium as one of the province's strengths. The government's potash tax revenues are based on pricing, not volumes, and therefore a BHP (ticker: BHP, not rated) takeover could mean a decrease in tax revenue for the government given BHP's strategy to sell as much volume as it can at market prices.

While BHP is busy trying to win approval of its bid with Potash shareholders, there comes a point in the valuation when BHP management has to turn around and ask their own shareholders for approval. An acquisition valued at more than 25% of BHP's market cap would need to be brought before shareholders and works out to about $153 per share based on BHP's market cap of $184 billion.

We've mentioned in our notes dated Aug. 19 and 20 that a rival bid from a large mining conglomerate would be unlikely and even more so for a competing fertilizer producer.

We maintain that that scenario is definitely a possibility, but it would probably not be for the entire company. A Chinese company may seek to form a partnership with another large player, perhaps in the form of an off-take agreement in order to secure supplies for domestic needs at favorable rates. The Chinese are the largest consumers of fertilizer, and we expect them to import an additional five million tons in the next 12 months so they would be rightly served to go out and secure some product.

Rio Tinto (RTP) is the latest miner to enter the rumor mill as a possible bidder, but the Alcan acquisition might have left a bad taste in the company's mouth after admittedly paying too rich a premium for the company.

We continue to believe that, in order to win approval from shareholders, a bid of about $170 per share would be needed, and we still see this as unlikely. Speculation of rival bids and "white knight" saviors has quickly run up Potash's share price, and we would expect continued volatility in the stock. News of Chinese involvement has lifted the stock, but it could come back down quickly if BHP gets cold feet thinking that the Chinese are going to bid over C$170 [Canadian], or the Saskatchewan government opposes a Chinese buyout.

Firm Makes Bold Bet on Falling Prices

http://online.wsj.com/article/SB10001424052748704540904575451910642552160.html?mod=mktw

A Canadian insurer is turning to a seldom-used strategy to make a big wager on falling prices over the next decade.

As more investors worry about the possibility of deflation—or a sustained period of falling prices that could cripple stocks—Fairfax Financial Holdings Ltd. has spent nearly $200 million to buy derivative contracts wagering on a decline in the consumer-price index, an inflation indicator. The trade could lead to huge profits if deflation occurs.

Fairfax purchased some of the derivative investments in the first three months of the year, when few fretted about deflation and the cost of the contracts was cheap. It added more in the second quarter.

The derivatives now are catching the attention of some on Wall Street. They have gained more than 50% in value since Fairfax made its original purchases from a number of banks, generating paper profits of more than $100 million.

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FAIRFAX
Bloomberg News

Prem Watsa's Fairfax Financial has already made a $100 million paper profit by wagering on deflation.
FAIRFAX
FAIRFAX

The Fairfax bet, which aims to protect $22 billion of Fairfax's investment portfolio, comes as investors grapple with a particularly challenging environment, with the economy fragile and stock indexes struggling. Few investors are willing to make big wagers on deflation, despite its potential, with many skeptical any deflationary period would last long. The U.S. hasn't experienced an extended bout of deflation since the Great Depression.

Still, Fairfax isn't selling its deflation protection, despite its recent run-up in value. It thinks bigger gains could be ahead if the U.S. experiences a painful bout of deflation.

"We are extremely concerned about a double dip in the economy and about a deflationary environment," says Paul Rivett, chief operating officer for Fairfax's investing department.

Derivative bets on inflation aren't new. Some companies and investors pay small premiums to buy inflation "caps" or "floors" that pay off if inflation rises above or falls below a certain level. Others buy derivatives betting on moves in economic indicators like the CPI, the inflation indicator that is now running at an annual rate of about 1%.

But interest is growing among some larger investors for deflation derivatives like those Fairfax bought. Today it would cost about $330 million to protect the same $22 billion, dealers say.

Traders can sell these contracts to others in the "interdealer market," where banks trade with each other, something that was rare for such contracts six months ago. About $4.5 billion worth of these contracts have been trading each month in the interdealer market, up from $2.5 billion a month last year, according to traders.

Fairfax was founded in 1985 by Prem Watsa, who has made a series of acquisitions; its name derives from the phrase "fair, friendly acquisitions." Mr. Watsa's investments for Fairfax have led some to dub him Canada's Warren Buffett.

But in the U.S., Fairfax also has drawn attention for heated battles with short sellers; it has claimed these bearish investors helped drive down the insurer's shares several years ago before they turned higher in 2006. Fairfax shares have soared to more than 400 Canadian dollars (US$377) a share from about C$100 four years ago.

The insurer has a solid track record anticipating bad economic times. In 2003, Fairfax bought credit derivatives wagering on weakness among lenders including Countrywide Financial, scoring several billion dollars of profits when the housing market cracked in 2007.

Lately, the company has been studying bouts of deflation suffered in the U.S. and, more recently, in Japan, and it is getting worried.

"People say they understand deflation, but they don't understand how corrosive it is," Mr. Rivett says.

The Fairfax team believes U.S. households have only begun reducing borrowing and increasing savings, a trend it expects will lead to less spending, higher unemployment and deflation.

Fairfax paid $174 million in upfront fees to protect $22 billion of its investment portfolio against the possibility of deflation over the next decade. In exchange, Fairfax will receive a payment amounting to the drop in CPI below 2%—the level of inflation when Fairfax bought its contracts—multiplied by the $22 billion.

If deflation averages 2% annually over the next 10 years, Fairfax's contracts would rise in value the equivalent of 4% of $22 billion, or $880 million, each year over the next decade, according to traders familiar with Fairfax's trades.

In that scenario, if Fairfax holds on to its investments during the 10-year period, it would reap nearly $9 billion from its $174 million investment.

The company wouldn't get anything for its bet if inflation turns out to be higher than 2% over the next 10 years.

Fairfax wouldn't comment on potential returns or how the trades were structured.

Some banks selling these derivatives say they are skeptical of deflation. Prices for the derivative insurance suggest a 20% chance of deflation over the next 10 years, traders say. The banks say they have hedged their exposure, or reduced their risk, by finding other investors skeptical of deflation to take the other side of the trades or by purchasing their own insurance.

But traders say there are no perfect hedges when selling these derivatives. Some could be on the hook in the event of steep deflation.

Sawiris Pushes Vimpelcom Deal as Debt Mounts, Options Wane

http://www.bloomberg.com/news/2010-08-23/sawiris-pushes-25-billion-vimpelcom-deal-as-debt-mounts-options-dwindle.html

Egyptian billionaire Naguib Sawiris, chairman of the Middle East’s biggest mobile-phone operator Orascom Telecom Holding SAE, says nothing drives him more than being told something’s impossible.

“When I go anywhere and someone says ‘impossible,’ I laugh,” he told a gathering of young businessmen in Cairo last month. “In 90 percent of the cases, the impossible happens. A key feature in an entrepreneur is self-confidence. He must believe he’s Superman.”

The 56-year-old is trying to practice what he preaches. Undaunted by his failure to forge a deal with South Africa’s MTN Group Ltd. in June, Sawiris is now in talks to merge his phone business with Russia’s OAO VimpelCom, two people familiar with the matter said on Aug. 20. The transaction would create an entity valued at more than $25 billion, the people said.

Finding a partner is critical for Sawiris’s ambition of building an emerging markets telecoms behemoth, while at the same time shrinking about $15 billion in debt. The VimpelCom transaction would form a company with more than 200 million mobile-phone subscribers in Africa, the Middle East and the former republics of the Soviet Union.

“He has always wanted to grow, regardless of the leverage,” said Amr Elalfy, a director at CI Capital Research in Cairo. His company also needs “cash to pay a big chunk of debt maturing in 2013,” he said, adding that “Sawiris wants to capitalize on his assets now before he reaches a situation where he must sell.”

Near Collapse

Sawiris’s expansion in the past decade has taken him to Robert Mugabe’s Zimbabwe, Kim Jong-Il’s North Korea, and post- Saddam Hussein Iraq. Naguib, the oldest of three brothers who control some of Egypt’s biggest companies, made forays into markets shunned by others. Sawiris has said his goal is to make Orascom one of the biggest telecoms companies in the world.

His appetite for risk pushed him close to collapse in 2002 after his buying spree the previous year boosted debt to $2.2 billion. Sawiris paid $737 million in 2001 for an Algerian license, $315 million more than his closest rival. He then paid $454 million for a license in Tunisia.

Investors began to question whether he might default, said CI Capital’s Elalfy. Sawiris survived by selling his Jordanian unit that year and several of his sub-Saharan units. He also sold half of his Tunisian unit to Kuwait’s National Mobile Telecommunication Co.

VimpelCom Talks

Sawiris has largely proved his skeptics wrong. Orascom Telecom’s net income almost tripled to $2.02 billion in 2007 from 2006, according to Bloomberg data. Profit fell 23 percent to $332.4 million in 2009, hurt by a tax dispute with Algeria. Shares of Orascom Telecom more than tripled in value from 2005 until the start of the financial crisis in 2008. In the past year, the shares have gained 8.2 percent.

A deal with VimpelCom would allow Sawiris to prevent forced asset sales. He would become a significant minority investor in the new company, which would include his Weather Investments SpA’s 51 percent stake in Orascom Telecom and Italian mobile operator Wind Telecomunicazioni SpA, said the people familiar with the talks, declining to be identified because the discussions are private. The structure of a deal hasn’t been decided and an agreement may not be reached, the people said.

Lazard Ltd. and EFG-Hermes Holding SAE are advising Sawiris, while VimpelCom is being advised by UBS AG.

Sawiris didn’t respond to calls seeking comment. Orascom Telecom said in a statement this month it wasn’t party to any discussions with the Russian company.

Debt Burden

Among the hurdles would be the increased indebtedness at New York-listed VimpelCom, Russia’s No. 2 mobile-phone operator. Debt at VimpelCom and its units would rise to 2.5 times earnings before interest, taxes, depreciation and amortization, said Maxim Raskosnov, a banking analyst at Moscow-based Renaissance Capital. That’s up from 1.45 times Ebitda in 2009.

Sawiris’s Wind had net debt of 8.29 billion euros ($10.5 billion) as of June 30, while Orascom Telecom had $4.61 billion in borrowings. About $1.8 billion of Orascom’s debt matures in 2013, said Sally Gerges, an analyst at Cairo-based investment bank Beltone Financial.

“Orascom has tried all these different things to cope with its leverage and talked to strategic counterparts,” said Dalibor Vavruska, an analyst at ING Groep NV. “Given the specifics of Orascom, not every company would look at it, and the ones who would, have already spoken to them.”

Algerian Obstacle

Sawiris’s efforts to dispose of some of his African assets to MTN in a transaction that analysts and bankers had valued at $10 billion were halted after Algeria blocked the sale of a local unit.

Algeria, which said it would buy the unit, known as Djezzy, has yet to act on its pledge, prompting some analysts to question how Sawiris is going to extricate himself from the situation. Algeria has also handed Orascom a $596.6 million tax bill that the company is contesting.

The dispute with Algeria pits Sawiris against a government emboldened by coffers enriched on high oil prices, said Edward Bell, a London-based analyst at the Economist Intelligence Unit.

Aborting MTN’s purchase of Djezzy was probably because the government felt that it was not “getting a fair deal from Orascom. That said, there has been a fair bit of cooperation between Algeria and the Russians, particularly in defense.”

A solution for the Algerian unit, Orascom’s biggest by revenue, is key, said Marise Ananian, a Cairo-based analyst at Egyptian investment bank EFG-Hermes Holding SAE.

Sawiris Empire

“Algeria is Orascom’s biggest challenge,” she said. “If the Algerian government doesn’t buy Djezzy or doesn’t allow any other party to buy it, Orascom will have to sort out their regulatory and tax issues.”

Born in 1954 into a family of Egyptian Coptic Christians, Naguib started Orascom Telecom in 1997 with $60 million from the family. He teamed up with France Telecom SA to set up the Egyptian Co. for Mobile Services, or Mobinil.

His brother Nassef heads Orascom Construction Industries, Egypt’s largest publicly traded builder, and Samih chairs Orascom Development Holding AG, which develops resorts and real estate projects in Egypt, Europe and the Middle East.

The Sawiris empire was built in the 1950s, when their father, Onsi, worked for Egypt’s Irrigation Ministry, building canals and ditches that collected overflow from the Nile River.

Orascom’s operations now span from Canada to North Korea. At the end of the first half this year, its subscribers exceeded 99 million compared with 4.3 million in 2002.

Sawiris, a devout Coptic Christian, says faith that God is on his side keeps him optimistic in the face of challenges.

“To believe in God is to have courage,” he said in his speech last month. “It gives you an extraordinary power that, pardon my language, an atheist won’t have.”

Potash Corp Analyst Reaction

http://blogs.wsj.com/deals/2010/08/17/analysts-react-bhp-makes-a-move-for-potash/

“The Big Australian” is on the prowl, again.

Potash Corp. of Saskatchewan said it has received and rejected an unsolicited $38.56 billion takeover bid from BHP Billiton. Potash called the proposal from the cash-rich mining company “grossly inadequate” and not in shareholders’ interests. This for an offer that was a 16% premium to the company’s Monday closing price and for a stock that was up 23% for the year when the bid was revealed.

Below is roundup of analyst reactions to the offer:

Vincent Andrews, Morgan Stanley: “We are not surprised by such an offer given the confluence of the significant global interest in the potash industry (i.e., there are 8+ number of companies at present interested in greenfielding potash mines [developing new mines]) and that fact that equity valuations across the industry remain well below replacement cost [the cost of replacing an asset]. Given current equity valuations, we have long been skeptical that global players would want to: 1) Enter the industry through greenfielding when that action would increase the amount of production capacity in place; 2) Incur the cost of significant cost greenfield production when existing assets were available below replacement cost; and 3) Wait 5-7+ years to generate cash flow. This is not to mention that fertilizer fundamentals have materially (and we believe structurally) improved in the last two months as grain prices have rallied substantially.

“We are not surprised by Potash Corp.’s rejection of this unsolicited offer given that the offer is ~18% below what we believe is our conservative estimate of Potash Corp.’s replacement cost.”

P.J. Juvekar, Citigroup: “Given POT’s unanimous rejection of BHP’s offer, we believe this could be a long battle with a higher offer likely to emerge. A theoretical 30% premium to last night’s close (in line with average M&A premiums paid in the sector over the last 5 years) would place POT shares at $146/share. Our Metals & Mining team estimates BHP would be able to fund this out of debt and potentially also do a buy-back.” Juvekar adds that Vale is unlikely to make competing offer because the miner would not be able to finance “a bid of $40B+ without a huge equity component.”

Mark Gulley, Soleil Securities: He expects higher bids to materialize. He predicts that Vale and Rio TInto will join the fray. “The initial offer is way too low for change of control of the global leader, just a 16% premium over yesterday’s closing price, and we view the board’s rejection as appropriate. The shares are already trading at $140 pre-market.”

Ackman on Path to Own NYC's Stuyvesant Town

http://abcnews.go.com/Business/wirestory?id=11358591&page=2

But the grand plans collapsed after the market's decline and a court decision that ruled the apartments were illegally brought out of rent stabilization.

Most real estate experts have said that any new owner would likely partner with the politically well-organized tenants and convert many of the units to tenant-owned co-operative apartments.

"No future owner can or will be successful without the support and participation of the tenant community," New York City Council Member Dan Garodnick, a life-long resident of the complexes who represents Stuyvesant Town and Peter Cooper Village, said in a statement on Monday.

Ackman, in a statement, said his plans include tenant ownership.

"We share the Tenants' Association objective to complete a non-eviction, affordable, co-op conversion of the property, which will require the restructuring of the property's first mortgage debt," Ackman said.

Should a bidder offer $3 billion or more, the winner would be required to pay off the $300 million mezzanine loan.

However, many experts have said they believe the property today is worth far less than that amount, and unless someone steps up to bid $3 billion to cover the first mortgage, Ackman's joint venture will become the new owner and assume the mortgage.

HEM Q2 CC

Remainder of the year
backlog 70% higher than 2009
unusual high back half revenue
very optimistic
canada down significantly in Q2. lost opportunity for 2010 western canada
double digit growth for the year

china market, OEM, similar growth rate as first half.
minimum breakeven for the back half of the year
ebidta positive for the year...too challenging

record back half of the year more than 2008

cash balance

m&a activity
we have been actively exploring
not active in this market just some dealer consolidation

brazil best growth

china early stage...guidance system

restructuring cost
last 6 months---severance charge
building less products

Q3 Q4

some seasonality stronger Q3 than last year,
Q4 stronger than Q3, potentially best quarter in 2010

distribution channel
australia better revenue generation

still expects 50% plus gross margin
seasonality

2011---record revenue level

less reliant on north america

China July Trade Surplus Widens On Import Slowdown

http://online.wsj.com/article/BT-CO-20100810-706876.html

BEIJING (Dow Jones)--China recorded its biggest trade surplus in a year and a half for July, government data showed Tuesday, likely adding to the pressure on Beijing to allow faster yuan appreciation.

A sharp slowdown in import growth meant that China's trade surplus widened to $28.7 billion in July from $20.02 billion in June, surpassing expectations of a $19.6 billion surplus in a poll of economists. July's surplus was the biggest since January 2009's $39.11 billion.

The data come ahead of U.S. trade figures for June, due out on Wednesday and which are likely to show a trade deficit of more than $40 billion.

"This contrast in the trade position of the two most important economies in the world will likely increase the pressure from Washington for Beijing to allow further currency appreciation, particularly in the lead-up to mid-term elections in November," Royal Bank of Canada economist Brian Jackson wrote in a note.

July's slower imports growth is the latest sign that economic activity in China is easing as the impact of stimulus spending, which created a construction boom resulting in massive demand for imports of raw materials and equipment, has faded. Government measures to cool property-market speculation and crack down on polluting, energy-intensive industries have also contributed to the slowdown.

Property market figures also out on Tuesday illustrate the slowing construction activity, which is leading to lower demand for imported raw materials. China's National Bureau of Statistics said investment in real-estate development, one of the main forms of private investment in China, rose 33.0% in July from a year earlier to CNY411.8 billion ($60.82 billion), but slowed from June's year-on-year 46.3% increase to CNY583.0 billion. Analysts expect a further slowdown in property investment in the coming months.

Nationwide property sales fell 15.4% to 64.7 million square meters in July from the same period a year earlier. July's sales were down 29.4% from 91.6 million square meters in June.

Despite the decline in sales, urban property prices in 70 Chinese cities were unchanged in July from June, and 10.3% higher than a year earlier, according to government data, highlighting the challenges Beijing faces in keeping asset-price inflation in check and dashing any hopes of a potential easing in the sector's tightening measures.

Analysts said the resilience of property prices indicates Beijing won't be eager to loosen its measures to cool the sector, which include higher mortgage downpayment requirements for second and third homes. They see prices and sales dropping further in the coming months.

Exports grew 38.1% in July from a year earlier, China's Bureau of Customs said, slowing from June's 43.9% rise, but beating economists' expectations of a 36.3% increase.

The data showed no signs that exports to the European Union have been weakening, as some analysts had expected. Exports to the EU rose 5.4% to $28.67 billion in July from $27.2 billion in June, and were up 38.3% from July 2009.

Zheng Yuesheng, director of the statistics department of the General Administration of Customs, said the effect of the European sovereign debt crisis on China's exports will likely appear in the fourth quarter, China state radio reported Tuesday, suggesting exports growth may slow more obviously later this year.

July imports rose 22.7%, down sharply from June's 34.1% increase and well below expectations of a 30.2% rise.

The weak import growth affected stock markets around Asia on Tuesday, raising concerns that softening Chinese consumption could have negative implications for the global recovery. The Shanghai Composite Index ended down 2.9% at 2595.27, reversing early-morning gains.

Analysts said the larger trade surplus makes yuan appreciation more likely in the coming months.

"China says it will allow market supply and demand to determine the exchange rate. Well, the balance of payments is the most important factor in the market supply and demand picture," said Morgan Stanley economist Wang Qing.

The yuan has risen 0.77% against the dollar since Beijing's June 19 announcement that it would increase the exchange rate's flexibility, effectively ending a two-year peg to the dollar.

Decision Time Looms for Wheat Farmers

http://online.wsj.com/article/SB10001424052748704268004575417672972922474.html#articleTabs%3Darticle

Wheat farmers in the U.S. and elsewhere are gearing up to make a crucial bet on the health of the world's grain supplies.

Many farmers must decide within the next few weeks whether to plant more wheat to take advantage of rising prices triggered by the crippling drought in Russia and the nation's export ban.

Earl Kleeman, left, and his son-in-law, Gary Millershaski, are deciding whether to ratchet up wheat production.

At the same time, Russian farmers are facing a rapidly closing window. The fate of their 2011 crop rests on whether rain finally falls in time for new plantings to take hold.

The weather and decisions made by farmers throughout the world will have ramifications for the price of wheat and many other commodities. Worries about a shortage already have sent grain prices soaring, threatening a potentially damaging bout of food inflation. But if waves of farmers decide to plant added wheat to take advantage of that threat—and if next year's Russian crop is strong—the balance could quickly tip to a glut, driving prices down and hurting rural economies.

On Monday, an Australian commission warned that a hatching of a huge locust plague with the potential to devastate winter crops, including wheat, in eastern Australia could start as early as next week. Australia usually is a major global supplier of wheat and barley.

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Egypt, the world's top importer, said over the weekend that the recent rise in prices could cost it an additional four billion Egyptian pounds, or about $705 million. Cairo also moved to secure other supplies after Russia imposed an export ban, buying 240,000 tons from France on Saturday.

Indonesia, Thailand and other nations already face higher costs for various food items, including sugar and pork, heightening concerns about a return of the civil unrest that accompanied rising food costs in 2008.

Much depends on decisions made by farmers such as Gary Millershaski, who has a 6,000-acre farm in southwestern Kansas, typically the top-producing state in the U.S., which is the world's largest wheat exporter.

"I'm an opportunist," says Mr. Millershaski, who is deciding whether to ratchet up wheat production. He estimates he could generate almost 1,000 extra bushels by planting land he had planned to keep fallow, which could generate thousands of dollars in extra income.

Similar calculations are being made around the state, the country and the world. Dean Stoskopf, another Kansas farmer, in Hoisington, guessed that about 10% more acres will be planted with wheat in the state than last year.

Russia's crop next year is dependent on the drought breaking. Seeds in the Black Sea region that includes Russia and Ukraine need at least an inch or two of rain in coming weeks, said David Streit, founder of Commodity Weather Group in Bethesda, Md.

But there is little rain in the near-term forecast.

"If you're playing the odds, you've got a tough uphill struggle," Mr. Streit said.

The unfolding global reaction to Russia's export ban makes it hard to predict whether the market for wheat will face a shortage or a surplus. In the short-term, in particular, it isn't clear what governments will do with their existing stocks.

"I'm an opportunist," says Kansas farmer Gary Millershaski, shown holding a handful of this summer's wheat.

Russia's Deputy Prime Minister Igor Shuvalov has said the government may revise the ban—currently set to run from Aug. 15 until Dec. 31—later this year, depending on the harvest. Meanwhile, the influential grain union is pressing the government to delay the start of the ban until Sept. 1.

And D.P. Singh, president of the All India Grains Exporters Association, estimates that India has around 47 million to 50 million tons of wheat in storage across the country. Mr. Singh sees a good chance that the government will open up to wheat exports in the near future, taking advantage of its stocks and a likely increase in wheat prices.

The high stakes in coming weeks show how thin the margin for error is in the global food supply. The appetites of many nations are growing, and they rely on international trade to sate it.

The world got a taste of the consequences with the 2008 food riots, and many governments took steps to increase stockpiles and increase production as a result. The current wheat-market seizure could mark the start of a major test of those fixes.

Russia is facing discontent over its handling of the disaster, and in Malaysia and Thailand there already are rumblings over food prices.

In Thailand, many consumers have been complaining about an unexpected jump in the price of sugar after the country ran low on supplies and had to import the commodity for the first time in 30 years.

"Prices of food are higher in every category" since the beginning of this year, says Porntip Uthaichan, a 30-year-old coffee vendor in Bangkok. The cost of sugar, which she uses in the coffee she sells, has shot up about 45% to roughly 29 Thai baht (91 U.S. cents) a kilogram this year, she says, while the pork she buys is about 20% more expensive than earlier this year.

Also, the Muslim holy month of Ramadan is set to begin this week, a time of daily fasting and feasting when families increase their normal food purchases by upward of 25%. That could increase pressure on governments to check price increases. The oil-rich Gulf countries import an estimated 85% to 90% of all basic food goods, according to a recent report by the Arab Organization for Agricultural Development.

The world's farmers must choose with incomplete information about forces that could drive future price swings. Wheat stocks are high, but it isn't clear if key nations will share the bounty. Moreover, if Russia's drought eases by fall, it could produce a strong crop next year, which could turn fears of a shortage into a sudden glut.

"A titanic 2011 U.S. acreage battle is brewing," said Rich Feltes, senior vice president for research at MF Global, a commodities brokerage firm.

In recent years, a move toward ethanol has boosted demand for corn.

U.S. farmers have pulled back from wheat, and the size of the crop shrank 11% in the past two years, to 2.2 billion bushels, according to U.S. Department of Agriculture data.

The number of harvested acres world-wide has also stagnated and was forecast to decline in the coming crop.

Futures prices fell sharply in the financial crisis, from nearly $13 a bushel in early 2008 to around $4.50 a bushel less than 10 months later. In early June, they were trading around $4.28 due to an apparent glut. Prices surged above $7 last week.

On Wednesday, when wheat rose 7%, Mr. Millershaski in Kansas was taking a break from field work to refill the machine that he uses to spread fertilizer, when his father-in-law brought up the idea of planting more wheat than usual this fall.

"We're doing the math," he said.

—Jacob Gronholt-Pedersen contributed to this article.

CFSG Q2 CC

increasing demand in iron and metal retrofitting
customers want to preserve cash first
special AR plan to collect payment
sensitive to steel product price

implement
July 12th, anshan iron steel group
only a short term challenge
long term 2 billion dollar retrofit project has not changed
share buyback

http://www.reuters.com/article/idCNSGE6780EZ20100809?rpc=44

Fire safety products maker China Fire & Security Group Inc (CFSG.O) posted lower-than-expected quarterly results, and cut its 2010 outlook, hurt by a slowdown in China's iron and steel industry, sending its shares down to a 52-week low.

The company said it suffered a slowdown in execution of projects from the iron and steel industry, which was hurt by lower steel selling prices and rising costs of iron ore.

The company's major clients in the iron and steel industry are facing a difficult time due to the weakness in the housing and household industries, the company said on a conference call with analysts.

China Fire & Security, which is being cautious in the short run due to slower payment from its customers, said it is deliberately slowing ongoing projects to control expenses.

The company cut its 2010 earnings forecast to a range of $1.20 to $1.26 a share, from $1.65 per share to $1.70 per share.

It now expects 2010 revenue of $118 million to $125 million, down from its previous forecast of $135 million to $145 million.

Q2 RESULTS MISS STREET

For the second quarter, the company posted net income of $6.3 million, or 22 cents a share, compared with $8.3 million, or 29 cents a share, a year ago.

Excluding items, the company earned 26 cents a share.

Revenue almost remained flat at $22.8 million.

Analysts on average were expecting earnings of 28 cents a share on revenue of $27.9 million, according to Thomson Reuters I./B/E/S.

Gross margin contraction to 54.3 percent from 63.8 percent was mainly driven by lower revenue contribution from the system contracting projects. The segment contributed about 80 percent of revenue.

Shares of the company, which touched a low of $8.11, were trading down 9 percent at $8.30 Monday morning on Nasdaq. (Reporting by Megha Mandavia in Bangalore; Editing by Jarshad Kakkrakandy)

Gross Margin
between 50 and 60%

new marketing campaign with importance of retrofitting

Nuclear, petrochemical, international expansion

compliant with the new firecode

nuclear vertical: installation capacity for nuclear power plant
Government highly encourage self-reliant technology renovation
further expand market share.
establish a solid footprint in this market. well positioned for this business opportunity.

power generation and transmission
Q2 2. 9 million

regional transformer
thermo hydro,

transportation vertical:
7.9 % year over year
railway
2 small contract in this quarter
bidding for larger contract

International market
1. direct bidding international market
2. bid for project with chinese company

Joint venture, merger acquisition

Wuhan iron and steel hurt more than

Aug 2nd 2010

BEIJING, Aug. 2 /PRNewswire-Asia/ -- China Fire & Security Group, Inc. (Nasdaq:CFSG - News) ("China Fire" or "the Company"), a leading industrial fire protection product and solution provider in China, today announced that Mr. Weigang Li, the chairman of the Company, was selected as an executive director of the fifth council of the China Fire Protection Association (the "CFPA") on July 8, 2010.

The CFPA is a nationwide fire protection organization composed of researchers, experts and industry professionals who specialize in the fire protection field. The mission of the CFPA is to maximize the effectiveness of fire prevention and protection technology and to foster advanced nationwide fire safety codes and standards. Every four years, the CFPA nominates distinguished intellectuals, scientists and industry experts from various backgrounds in the fire protection field to become the executive directors of its council.

Mr. Weigang Li was selected as an executive director of the CFPA in recognition of his outstanding commitment and contributions to the fire protection industry. Mr. Li has over 15 years of hands-on experience in management, marketing, and project management and implementation within the industry. In addition to actively leading China Fire, Li is also devoted to advance industrial fire protection technology and fire safety standards throughout China.

Mr. Li commented, "I am thrilled to be recognized by the CFPA and along with other notable researchers and officers from the Ministry of Public Security to be chosen as one of its executive directors. To be honored by such a respected industry association further motivates me to promote fire protection technology development as well as nationwide safety codes and standards enforcement. I am looking forward to leveraging China Fire's technical leadership and deep industry experience to improve and increase knowledge exchange and technology transfer within the fire prevention and protection industry."