Business this week: 27th August - 2nd September 2005

From The Economist print edition

KPMG agreed to pay $456m to settle an investigation by America's Justice Department into a fraudulent tax-shelter scheme offered to wealthy individuals. The “Big Four” accountancy firm will not now face criminal charges (although it has admitted wrongdoing and is on probation until the end of 2006), thus avoiding the fate that befell Arthur Andersen, which was brought to trial for its part in the Enron affair. However, eight former partners at KPMG were indicted. The shelters, which operated between 1996 and 2002 cost the American government billions of dollars in lost tax revenue.


It was reported that Industrial and Commercial Bank of China, one of China's big state-owned lenders, had agreed to sell a 10% stake to a consortium led by Goldman Sachs for $3 billion. Another top institution, Bank of China, said that Temasek, the Singapore government's investment agency, would pay $3.1 billion for a 10% stake, in BoC's second deal with foreign investors in two weeks.


MasterCard announced it would have an initial public offering early next year that will give investors a 49% stake. The credit card association is also adopting new governance structures, including a board of mostly independent directors. MasterCard is currently owned by 1,400 financial institutions that issue its cards, but may face huge liabilities if it (and Visa) lose an antitrust lawsuit brought by competitors.


Old Mutual, a financial services group based in South Africa, confirmed it had held discussions about taking over Skandia, the Nordic region's biggest insurer, for around $5.7 billion. Skandia has suffered a series of high-profile resignations and financial scandals of late and recently reported a second-quarter net loss of SKr 1.47 billion ($192m).


France's industry minister, François Loos, said he would soon publish a list of the country's strategic industrial sectors that will be protected from foreign takeovers. Mr Loos's comments came the same week that a French building-materials firm made a euro5.4 billion ($6.6 billion) hostile bid for a British rival.


In a deal that will create the world's biggest satellite operator, Intelsat announced it was buying PanAmSat for $3.2 billion. The merged firm will operate 53 satellites and combine Intelsat's telecoms speciality with PanAmSat's focus on television services.


Creative, a digital audio company based in Singapore, revealed that it had been awarded a patent for its “Zen” portable media-player interface. The technology is used in Apple Computer's iPod, which Creative said is covered by the patent. Pundits speculated that Apple might face a lawsuit for royalties.


In a move that plants it firmly in the vaccine business. Novartis, a large pharmaceutical firm based in Switzerland, offered to buy the 58% of shares it does not already own in Chiron, for $4.5 billion. Based in California, Chiron earlier said it should be able to supply America's flu vaccine this winter. The plant that produces Fluvirin (in Britain) had its licence suspended last year, but has since received a favourable inspection from American regulators.

ABN Amro announced what is thought to be one of the biggest-ever outsourcing deals. The Dutch bank said it will pay five groups, including IBM and India's Infosys, euro1.8 billion ($2.2 billion) over five years to manage its IT systems, which it hopes will result in annual savings of euro258m.

In order to stem a sharp fall in the rupiah, Indonesia's central bank raised its key interest rate by three-quarters of a percentage point, to 9.5%. The currency declined by around 10% against the dollar in August as investors worried about the country's extensive fuel-price subsidies to consumers.