The referral of the pounds 395m deal is a severe blow to Liam Strong the beleaguered

The referral of the pounds 395m deal is a severe blow to Liam Strong, the beleaguered Sears chief executive, who had hoped to use the proceeds from the sale to return up to pounds 410m to shareholders. The MMC is due to report on the deal by 9 June causing a delay in Sears’ plans for a special dividend.
Mr Strong had asked Sears’ increasingly frustrated investors to give him until the summer to show the group was turning the corner.Sears said it remained committed to the disposal of Freemans to Littlewoods. However, the MMC’s decision means the contract for the sale signed last month will lapse.The deal’s referral surprised the City because Sears had said in January that the Office of Fair Trading had indicated that the Secretary of State did not intend to refer the acquisition.As Sears shares fell 2p to 83.5p one analyst said: “It is further evidence of Sears’ ability to attract bad luck. Sears is understood to have had legal advice which indicated that there would not be a problem.”Though analysts said they felt the MMC was unlikely to block the deal, the delayed sale could place further strains on Sears’ cash flow.If the deal is blocked it would force the company to seek an alternative buyer for Freemans, possibly at a lower price.A combined Freemans-Littlewoods mail order business would have more than 25 per cent of the UK mail order market. However, the Government’s statement refers specifically to the combined group’s dominance of the agency part of the sector, where cash is collected every week by the company’s army of agents.Sears and Littlewoods are likely to argue that the mail order sector also includes direct catalogue groups such as a Next Directory, Racing Green and N Brown.Mark Josephson of Panmure Gordon said the two companies could also argue that the mail order market transcends national boundaries and should be regarded as a pan-European industry.Nick Bubb of Mees Pierson also expressed surprise at the decision. “It’s not their [Sears'] fault but it must put a bit more pressure on the management.”.

The future of Lehman Brothers, the American investment bank with a significant presence in London, is again under the microscope amid a swirl of rumours that it could be the subject of a buyout bid by Japan’s Sumitomo Bank. Lehman, which does not have a large securities retail network following its separation from Shearson in 1990, is one among several US financial houses being viewed as likely players in a new wave of consolidation on Wall Street in the wake of the Morgan Stanley-Dean Witter merger of last week.
Sources inside the bank yesterday said they had no knowledge of an approach by Sumitomo. “I have been hearing a lot about Hong Kong Shanghai and the really hot one for a while was Bankers Trust,” one insider remarked. “If it were Sumitomo, I would be really surprised.”There is a consensus that Lehman, which has seen its stock value double since it was spun off by American Express in 1992, is an attractive target for firms, including banks, seeking new partners. Banks have had the path cleared toward the purchase of investment firms by the recent easing of the 1933 Glass-Steagall Act, which placed barriers between them and brokerages.Other possible targets regularly cited include Bear Stearns, the Prudential Securities division of Prudential Insurance Co, Paine Webber and regional US firms like AG Edwards and Alex Brown of Baltimore.If Lehman is anxious to remain independent, however, it could equally attempt to move first in an acquisition of its own. A search for a partner with a strong securities retail capability could lead it to Paine Webber.Paine Webber shares were driven up last week by rumours that it, and not Dean Witter, would be the target of Morgan Stanley’s appetite.Expectations of further consolidations were fuelled by sharp rises in the shares of many Wall Street firms immediately after the Morgan Stanley- Dean Witter announcement.However, Scott Pardee, a senior adviser with Yamiachi International, voiced doubts yesterday that foreign banks, including Sumitomo, could easily overcome regulatory concerns in Washington.”I think this is going to be US banks looking at each other,” he said.

“Cross-border and cross-industry acquisitions could quickly run into questions with the regulators and I think it would be very difficult.”Ironically, the history of Lehman Brothers, and in particular its unhappy pairing with Shearson in the 1980s, offers one cautionary tale about the limits of coupling traditional investment banking services with a strong retail capacity. Shearson was meant to provide Lehman with a strong retail dimension, but the two firms never firmly melded.. British Petroleum yesterday attributed a 30 per cent increase in its underlying annual profits to a record pounds 2.6bn to the group’s so-called “self-help” drive to cut costs, rather than the unexpected surge in oil prices. However the results failed to grab the enthusiasm of investors, who had expected a stronger increase in the dividend payout in the last three months of 1996. The dividend rose by 0.25p to 5.25p compared with the previous quarter.
BP shares were marked down sharply, ending 27p lower at 694p.

Its annual dividend increased by 28 per cent to 19.5p, reflecting the longer-term recovery in the oil giant’s fortunes.John Browne, chief executive, said BP had achieved efficiency savings and productivity gains worth $600m (pounds 375m) in just 12 months. The improvement meant the group had more than exceeded its internal targets in the push to reduce costs by $1.5bn over three years.Mr Browne said two-thirds of BP’s profits rise last year had been achieved through these cost savings, with the remaining third from the boost to oil prices.Last autumn the price of Brent crude briefly went through the $25 barrier for the first time since the 1990 Gulf War. In the last quarter of 1996 BP’s average oil selling price was $23.1, up from $17 during the same period in 1995.However, Sir David Simon, BP chairman, was quick to dampen speculation of another “30 per cent year” in 1997. He said: “The board fully recognises you can’t continue to grow at those sort of levels …

the board doesn’t expect that to be repeated every year.”The oil price boost helped profits from oil exploration to rise by 41 per cent to pounds 814m in the last quarter of last year. Quarterly earnings from refining and marketing improved slightly to pounds 163m, as profit margins recovered following last year’s petrol price wars.. The pound rose by more than three pfennigs against the mark yesterday, as the markets reacted to rumours that German borrowing will be much higher than the 2.9 per cent of GDP that the government is predicting, writes Yvette Cooper. Closing at DM2.7458, sterling is at its highest level against the mark since late 1992 and just below the DM2.78 level at which the pound left the exchange rate mechanism.
Traders have taken several days to respond fully to the abysmal German unemployment figures released last Thursday. Although analysts were quick to sound the alarm when unemployment statistics proved higher than expected last week, the markets are still adjusting to the idea that the German economy is even weaker than it had previously thought.Rumours yesterday that German officials were revising upwards their predictions for government borrowing to push the mark down in relation to the pound were denied by the Finance Ministry.. Niall FitzGerald, Unilever’s recently appointed chairman, likes to depict his company not as the giant oil tanker it is often described as – difficult to turn – but rather as a flotilla of nimble frigates all sailing in the same direction with a consistent set of battle orders. For the time being that analogy – intended to convey the impression of a hard-hitting, fast, flexible and entrepreneurial machine – may owe more to wishful thinking than reality.