Bershidsky on Europe: China to Buy Russian Jets
Here's today's look at some of the top stories on markets and politics in Europe.
Top Spanish courtcancels Catalan sovereignty.
Spain's constitutional court nullified Catalonia's "declaration of sovereignty" passed last year by the regional parliament. The judges ruled that the declaration violated the Spanish constitution, which proclaims Spain's "indissoluble unity." The court also said Catalonia could not unilaterally hold a secession referendum. Catalan President Artur Mas has scheduled a non-binding vote on the region's future for November, and while it is hard to ban a "consultative" plebiscite, the court made it clear that Spain will not accept any further moves toward independence by the country's wealthiest region. The ruling pushes Catalonia to stop talking about secession and instead negotiate a certain redivision of powers with Madrid. However, insistence on following the letter of the constitution can prompt radical separatists to act without regard to any form of law. Spain should allow Catalans to decide whether they want a separate country.
Game developer King raises $500 million in IPO.
London-based King, the developer of the hit game Candy Crush Saga, raised $500 million from its initial public offering on Tuesday. The company was valued at $8 billion, in the middle of the price range it had set for the placement. King could not go to the upper limit of the range because some invstors are worried it might be a one-hit wonder. In 2013, its revenue jumped from $164 million to $1.9 billion, all thanks to the Candy Crush Saga. The mobile game market is fickle and it is not clear how long King can ride the game's success. If the developer fails to follow up as strongly, it faces the fate of Zynga, another game company which faced a steep decline after a successful IPO. If the same happens to King, the entire industry will be under a heavy cloud as far as the stock market is concerned.
Cost of labor gap between France and Germany narrows.
French research organization COE-Rexecode released data on European labor costs in 2013. On average in the euro area, hiring a worker costs $40.35 an hour, a 40.3 percent increase since 2000. Italy has posted a record 51.3 percent increase, to $40 an hour, and France has the highest labor cost in the euro area at $49.3 per hour. Last year, however, French labor costs only increased 0.2 percent thanks to the government's efforts to increase the country's competitiveness, while German costs rose 2.2 percent to $45.5. The gap between France is Germany still pretty large, considering the two countries comparable level of technological development. Conservative German governments have only allowed a 24.9 percent increase in labor costs since 2000, while socialist experiments have pushed the costs up in the rest of Europe, resulting in much higher unemployment levels than in the continent's biggest economy.
Hermes tells LVMH to cash out.
The sixth generation of the founding family of French luxury house Hermes is battling to prevent a takeover by the conglomerate LVMH Louis Vuitton Moet Hennessy. Axel Dumas, a Hermes heir who has been chief executive since last month, has prevailed upon 40 members of the family to pool 50 percent of the company's shares in a trust, in response to LVMH accumulating 23 percent. "The best benefit they can have is by realizing the capital gain on their shares," Dumas says of LVMH. The company, which, unlike many peers in the luxury market, did not suffer from China's anti-corruption crackdown, is still run according to old family principles such as "no mass production," "personal credit cards only" and "no price marketing." It is, in effect, an old-fashioned craft-and-retail firm and the family is prepared to fight to keep it that way. Defiant opposition to change is, in some cases, a strategy that pays very well: Hermes has tripled its sales in the past 10 years.
Russia close to bigaircraft deal with China.
The Russian state-controlled aircraft maker Sukhoi has signed a deal with a Chinese consortium, partly controlled by the Henan regional authorities, which involved the sale of 100 Sukhoi Superjets. The deal is valued at $3.5 billion, but a large discount may be involved, since this will be Sukhoi's largest deal so far. The Superjet is a medium-range aircraft that Russia has been pushing for years internationally, but which has seen slow uptake. China has a shortage of medium-range planes and is actively looking for alternatives to expensive Boeings and Airbuses. As the West debates sanctions against Russia, the eyes of Russian government capitalists turn increasingly to China. The Sukhoi deal is a sign that in some cases the realignment can be successful.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Leonid Bershidsky at email@example.com
To contact the editor on this story:
Marc Champion at firstname.lastname@example.org