1999: mega-mergers back as the new economy rewrites the rules

Surprise UK rebound leads to fears of over-heating and inflationSoaring hi-tech stocks leave the traditional retailers flounderingVodafone's £82bn Mannesmann bid is world's largest hostile strike
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The Independent Online

Amid much doom-mongering at the start of 1999, UK economic growth rebounded, helped by lower interest rates at home and stronger growth abroad. The impact of those forces now has policy makers worried that over-heating and a revival of inflation can be avoided in 2000.

Amid much doom-mongering at the start of 1999, UK economic growth rebounded, helped by lower interest rates at home and stronger growth abroad. The impact of those forces now has policy makers worried that over-heating and a revival of inflation can be avoided in 2000.

1999 will also be remembered as the year of the mega-mergers. Vodafone opened with a $60bn agreed bid for AirTouch of the US and ended the year with an unsolicited £82bn bid for Mannesmann, still unresolved.

The year also saw UK technology stocks enter the FTSE 100, while a fully fledged Internet stock sector was born. ARM Holdings, the micro-chip designer, roared into the FTSE 100, as did other tech companies, including Misys and Logica.

Yet as Britain's first big Internet floats took place, underlining the rise of the new economy, retailers faced unparalleled trading difficulties. This was symbolised by Marks & Spencer, which saw £4bn wiped off its market capitalisation.

JANUARY

The last year of the 20th century began with the launch of a new currency, the euro. The birth of the single currency was initially a success as bullish investors piled in, expecting a surge against the dollar. It was launched at $1.17, but had eased to $1.01 by the year end.

The focus quickly shifted back to the UK as the Bank of England's Monetary Policy Committee (MPC) delivered New Year cheer with another quarter-point interest rate cut to 6 per cent - the level when Labour won power in May 1997.

The FTSE rallied, hitting the first of many highs during 1999. But across the Atlantic, Brazil became the latest casualty of the global financial crisis. A botched attempt to head off capital flight by devaluing the real and keeping interest rates high sent the Brazilian currency tumbling.

Vodafone, the UK's largest mobile group, beat out Bell Atlantic to forge a $60bn agreed merger with AirTouch of the US.

FEBRUARY

The MPC doubled the previous month's cut with a half-point fall in UK interest rates to 5.5 per cent, reflecting growing concern that the country would slip into recession. A £22bn merger between French banks Société Générale and Paribas sowed fears that hundreds of City jobs would be lost.

Wolverhampton & Dudley Breweries won control of rival Marston Thompson & Evershed in a £295m deal. Vaux, the hotels and brewing group, became the subject of takeover speculation after its chief executive and finance director were ousted in a boardroom coup.

Two of Britain's largest companies revealed shocking results. Shell produced its worst for a century with a 95 per cent drop in net income, while British Airways announced a pre-tax loss of £75m for 1998's last quarter.

MARCH

Gordon Brown's Budget dominated the month, with his new 10 per cent rate of tax - the lowest for 37 years - grabbing the headlines. But the Chancellor recouped much of the money by scrapping the married couples' tax allowance, announcing a new energy tax and hiking duties on fuel and smoking.

Marks & Spencer gave the first hint of trading troubles to come, forecasting that the share of UK-made goods in its stores would drop by 50 per cent. Barclays admitted that Martin Taylor, its former chief executive, was paid a total of £2.5m last year including a payoff of £1.6m.

Stock market euphoria continued as the Dow Jones industrial average broke through the 10,000 mark for the first time.

APRIL

Barclays Bank suffered an embarrassing setback when Michael O'Neill, its new chief executive, resigned for health reasons on his first day. The French bank consolidation took a new twist when the boards of Société Générale and Paribas rejected a deal with Banque Nationale de Paris, saying they would stick to plans to merge with each other.

Asda, the supermarket chain, and Kingfisher, the Woolworths to B&Q group, announced plans for a £17bn merger. Enterprise Inns took over Century Inns with a £79.1m all-paper bid, closed in nine hours. Telewest and Cable & Wireless Communications said they were in merger talks to create Britain's biggest cable company. Zeneca completed its £43bn drugs merger with Astra of Sweden.

MAY

Whitbread revealed it was in talks to buy Allied Domecq's 3,500 pubs for £2.3bn. Punch Taverns later emerged as a rival bidder and won backing from Texas Pacific, the US venture capital group, while Allied said that Philip Bowman, its finance director, would take over from Tony Hales as chief executive following the sale of the retail estate.

Credit Suisse First Boston was fined Skr2m (£150,000) by the Swedish Stock Exchange as a result of the trading activities of the Flaming Ferraris, including James Archer, son of Lord Archer. Marks & Spencer unveiled the worst profits fall in its 115-year history, with full-year pre-tax profit down to £546m from £1.2bn the previous year.

Airtours, the UK's second-ranked tour operator, unveiled a hostile £850m bid for First Choice. Barclays Bank announced plans to axe 6,000 jobs, 10 per cent of its workforce.

JUNE

Wal-Mart, the US retail giant, stormed into the UK with a £6.7m agreed takeover of Asda, breaking up the supermarket group's intended merger with Kingfisher. Sir Richard Greenbury abruptly quit as chairman of Marks & Spencer after finding it impossible to surrender control of the business to Peter Salsbury, his chief executive.

J Sainsbury issued a profits warning and said it would cut 1,100 jobs to generate savings of £160m over three years. George Soros, the financier, joined the battle for Allied Domecq's pub estate, investing £30m in Punch Taverns' hostile £2.7bn bid.

The European Commission launched an investigation into Airtours' hostile bid for First Choice. Airtours let its £850m offer lapse. Lloyds TSB offered £7bn for Scottish Widows. The deal triggered windfall payments averaging £6,000 for a million policy holders.

British Steel said it was in talks to buy Hoogovens, the Dutch steel maker, in a deal to create a Europe-wide group with production of more than 22 million tonnes a year. Invensys unveiled plans to cut 5,600 jobs, spin off £1.8bn worth of businesses, return £1bn to shareholders and list in New York.

Gannett, the largest US newspaper publisher, bought Newsquest, Britain's number three regional newspaper group, for £904m. Hicks, Muse, Tate & Furst, the US buy-out group, beat Candover with an agreed £822m offer for Hillsdown Holdings.

JULY

Whitbread's purchase of Allied Domecq's pubs was halted when Stephen Byers, the Secretary of State for Trade and Industry, referred the £2.8bn offer to the Competition Commission. Allied was forced to accept a rival offer from Punch Taverns.

The Bank of England defied political protests from South Africa's mining industry and began selling off the UK's gold reserves. Totalfina launched a £27bn hostile takeover of Elf Aquitaine, prompting a £32bn counterbid and a war of words between the French oil groups.

First Choice Holidays and Kuoni of Switzerland scrapped merger plans after getting a frosty reception from investors.

Freeserve made a stunning market debut; Dixons' loss-making Internet service provider leapt from a 150p issue price to 205.5p on the first day.

AUGUST

BNP gained control of Paribas, but failed to create a French bank giant when the enlarged group's hostile bid for Société Générale (SG) ended in failure. French regulators threw out BNP's claim that the one-third acceptance by SG shareholders amounted to effective control.

Martin Sorrell, chief executive of advertising group WPP, brushed off criticism of a new share incentive scheme that could leave him up to £31m richer and could distribute a further £31m among 14 senior executives. British Sky Broadcasting said the cost of giving away free set-top boxes to entice new digital subscribers helped push it to a £389m annual loss.

The London office of the Bank of New York sacked two women involved in an alleged moneylaundering scandal. The FBI investigated whether billions of pounds of Russian mafia money passed through the bank.

NTL, the cable group, beat Telewest to an £8bn merger with Cable & Wireless Communications. Deutsche Telekom bought One2One for £8.5bn.

SEPTEMBER

NatWest unveiled a £10.7bn offer for Legal & General, only later to face a £22bn hostile bid from Bank of Scotland, threatening 16,000 jobs. The Bank of England raised rates a quarter-point to 5.25 per cent.

In France, Carrefour and Promodes agreed a £10bn merger to create the world's second largest retailer after Wal-Mart. Total and Elf Acquitaine agreed to merge. It was revealed that Royal Bank of Scotland had been investigated by the Bank of England in connection with handling money linked to Russian mafia activities. Rolls-Royce announced the £576m acquisition of Vickers.

Shares in Reuters, the financial information group, tumbled when analysts revised earnings forecasts after a briefing that confirmed lower trading volumes at Instinet, its electronic trading arm.

Shares in Freeserve fell below their 150p issue price as QXL, the online auctioneer, prepared its float. The yen reached an eight-month high against the dollar, prompting concern that its strength could hinder Japan's tentative recovery.

OCTOBER

Mannesmann, the German engineering and telecoms group, announced a £20bn takeover of Orange. Nissan unveiled a drastic restructuring, including the loss of 21,000 jobs.

SmithKline Beecham suffered a setback after European regulators failed to approve Avandia, its anti-diabetes treatment. BMW unveiled a 30 per cent drop in sales at its Rover subsidiary for the first nine months of the year.

Gordon Brown issued a warning on pay after August average earnings rose by 4.9 per cent. The Nobel Prize for economics went to Robert Mundell, an early advocate of the single currency.

The National Institute for Clinical Excellence recommended that Relenza, Glaxo Wellcome's flu treatment, should not be prescribed on the NHS on cost-effectiveness grounds.

MCI WorldCom pulled off the biggest takeover in history with a $115bn all-share offer for Sprint. Credit Suisse First Boston put a 7 per cent stake in Canary Wharf up for sale, but admitted 24 hours later that there were no takers.

NOVEMBER

Vodafone launched an £82bn hostile offer for Mannesmann - the largest takeover bid ever. The Bank of England raised rates by a quarter-point to 5.5 per cent.

Marks & Spencer reported its largest-ever profits drop with first-half pre-tax earnings down 58 per cent to £114m. British Airways reported a 38 per cent fall to £240m in interim pre-tax profits, paving the way for its first annual loss since privatisation.

Shares in Knutsford, the AIM-listed shell company taken over by Archie Norman soared. The Chancellor's pre-Budget report watered down proposals for an energy tax on industry.

Virgin launched a mobile phone service. National Power said it would sell more of its generating capacity and return £600m to shareholders.

Digby Jones, a corporate financier, was named to follow Adair Turner as director-general of the CBI. UK inflation rose to 1.2 per cent, the first rise in 18 months, while growth in retail sales reached its highest level for two years. The oil price rose above $25.

Scottish Media Group made a £225m bid for Ginger Media, the radio and TV group. Warner-Lambert and American Home Products, the US pharmaceutical companies, unveiled a merger; Pfizer later gatecrashed with a hostile bid.

DECEMBER

Psion shares tumbled after Microsoft and Ericsson announced a venture to deliver Net access and e-mail on mobile phones. TeleWest struck an agreed merger with Flextech, the pay-TV group; BSkyB bought 24 per cent of Kirch PayTV, the German group.

Toy company Hasbro announced a restructuring to cut 19 per cent of its workers. Germany produced strong third-quarter GDP figures, showing its economy on the way to recovery. Edmond Safra died in a fire at his Monte Carlo home; he was in the midst of selling his controlling stake in Republic Bank of New York to HSBC.

Marks & Spencer became the subject of feverish bid rumours, with Philip Green, Tesco and Knutsford in the frame. United Biscuits recommended a £1.26bn bid from Finalrealm, a French venture capitalist consortium. Royal Bank of Scotland formally launched its rival bid for NatWest. The water industry announced heavy job cuts, prompted by price curbs inflicted by the regulator.

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