Archive for May, 2010

Consumer spending posts weak April reading (AP)

Friday, May 28th, 2010 | Finance News

WASHINGTON – Consumer spending was stagnant in April while incomes posted a tiny advance, signs that the economic recovery could slow.

The flat spending level was the weakest showing in seven months, according to the Commerce Department report. Economists had expected a 0.3 percent rise.

Personal incomes rose 0.4 percent, slightly off expectations.

More people are holding on to their money, the report noted. The savings rate rose 3.6 percent in April. The rate had fallen to 3.1 percent in March, the lowest reading since October 2008.

Consumer spending is closely watched because it accounts for 70 percent of total economic activity.

The unchanged level of spending came despite a 0.6 percent rise in March. It also was flat despite a 0.4 percent rise in April retail sales.

"The lesson here is that relatively strong retail sales numbers do not guarantee robust consumption," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, noting that retail sales account for only two-fifths of spending.

The rise in incomes followed a similar jump in March. A pickup in wages and salaries are being helped by increases in payroll employment.

The country added 290,000 jobs in April. But the jobless rate jumped to 9.9 percent as people who had given up looking for work have resumed searches. High unemployment could dampen spending going forward, limiting the pace of the economic recovery.

The government reported Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3 percent in the January-March quarter. That was below the initial 3.2 percent estimate for first quarter GDP growth. Economists worry that growth won't be high enough to push down the unemployment rate and generate the kinds of income gains that will support sustained spending increases.

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Toys “R” Us to go public again through $800M IPO (AP)

Friday, May 28th, 2010 | Finance News

NEW YORK – Toy retailer Toys "R" Us plans to go public again by raising as much as $800 million in an initial public offering.

The retailer of toys and other products for infants and children says in a securities filing that it will use the proceeds from the offering to pay off some of its debt and for general corporate purposes. It did not say how many shares it will sell.

Toys "R" Us Inc., based in Wayne, N.J., was acquired for $6.6 billion and taken private in 2005 by a group of investors led by Bain Capital, Kohlberg Kravis Roberts and Vornado Realty Trust as it was facing competitive pressure from discounters and Internet sales.

Toys "R" Us operates or licenses more than 1,500 stores under the Babies "R" Us, FAO Schwarz and its namesake banners.

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Prudential, AIG in talks about AIA sale (AP)

Friday, May 28th, 2010 | Finance News

LONDON – Prudential PLC said Friday it is talking with U.S. insurer AIG about the terms for the proposed sale of AIG's Asian unit, AIA, a deal which faces strong resistance from Prudential shareholders.

Some shareholders are organizing opposition to the $35.5 billion price agreed for AIA, and needs to line up support from holders of 75 percent of shares by June 7.

"We confirm that discussions regarding the current status of the transaction have taken place between Prudential and AIG and are continuing," Prudential said in an announcement to the London Stock Exchange."

"These discussions may or may not lead to a change in the terms of the combination of AIA Group Limited and Prudential."

Prudential shares were up 1 percent at 553 pence in early trading on the London Stock Exchange.

A number of analysts believe Prudential agreed too high a price for AIA.

Opponents of the deal have formed a Prudential Action Group, which is seeking to muster support for a vote of no confidence in the Pru's chief executive, Tidjane Thiam. The Action Group claims that at least 15 percent of shareholders intend to vote against the deal.

Prudential has announced a rights issue — 11 new shares at 104 pence each for every two existing shares — to raise $20.9 billion to help finance the deal. The company also plans $5.4 billion in hybrid debt financing.

American International Group Inc., which received more than $180 billion in aid from the U.S. government during the financial crisis, hoped to raise a total $51 billion from the Prudential deal and the sale of its American Life Insurance Co. division to MetLife Inc.

"The key question remains how much the price needs to be reduced by to convince the skeptics to vote yes," said Eamonn Flanagan, analyst at Shore Capital.

"Our view would be that a $30 billion revised price would nudge many over the line, although the transaction and integration risks are likely to remain insurmountable for many others."

The other big question, he added, was whether AIG would accept such a big cut in price.

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