Russia In EU And US Food And 'Flight Ban'

Russian Prime Minister Dmitry Medvedev has said the country is considering a ban on flights from Europe and the US to Asia.

Speaking at a government meeting he said the "serious measure" of blocking Russian airspace was a response to sanctions that recently stopped Dobrolyot, one of Russia's low-cost airlines, from flying.

It comes as Mr Medvedev confirmed the country has banned transit flights for Ukrainian airlines via its territory.

If Russia goes ahead with the ban on Western airlines, passengers could see ticket prices rise because carriers would be forced to use more fuel to reach destinations using longer flight paths.

The move could hit major European airlines such as British Airways, Lufthansa and Air France, leaving them faced with multibillion-pound losses.

Mr Medvedev said a response to sanctions against Russia was needed

Meanwhile Russia announced further details of its sanctions on food and agricultural products from the West.

Mr Medvedev said an immediate ban has been put on fruit, vegetable, meat, fish, milk and dairy imports from the European Union, United States, Australia, Canada and Norway.

He said: "Until the last moment, we hoped that our foreign colleagues would understand that sanctions lead to a deadlock and no one needs them.

"But they didn't and the situation now requires us to take retaliatory measures."

He said the food ban would last for a year, but could be lifted earlier if the West reacted with a "constructive approach".

Responding to the decision, the European Commission warned it was ready "to take action".

In a statement it said: "This announcement is clearly politically motivated.

"Following full assessment by the Commission of the Russian Federation's measures, we reserve the right to take action as appropriate."

In 2013 the EU's agricultural exports to Russia were worth €11.8bn (£9.4bn), while the US says its food and agricultural exports amounted to $1.3bn (£77m).

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Malaysia Airlines Launches 'Complete Overhaul'

Malaysian officials have released a share buy-back plan to take Malaysia Airlines off the stock market, as part of a "complete overhaul" of the embattled carrier.

State investment firm Khazanah Nasional, which owns 69% of the airline, wants to purchase the majority shareholding from investors ahead of a delisting.

The move comes as the company continues to reel from the dual effect of losing two aircraft this year - the disappearance of MH370 and the crash of MH17 in eastern Ukraine.

The airline struggled with profitability for several years ahead of this year's disasters.

Khazanah Nasional has proposed buying the outstanding stock at 27 sen (£0.0475) a share, 29% higher than the three-month average.

The complete takeover would cost 1.38bn ringgit (£255m). Shares were suspended in Kuala Lumpur ahead of the announcement.

"The proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier," Khazanah said in a statement.

"Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity."

Before this year's disasters, the carrier's financial performance was among the worst in the industry, putting a question mark over its future.

Some industry experts recently voiced concern of its ability to survive without a major cash injection from the Malaysian government.

Branding specialists have said Malaysia Airlines must take dramatic steps such as replacing its senior management and a name change.

As a state-owned flag carrier, the airline must fly unprofitable domestic routes.

Its workforce has a strong union presence that has resisted operational changes, amid the rise of low-cost regional rivals.

Khazanah said the plan required approvals from regulators and Malaysia's finance minister.

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Co-op Group Reveals Major Restructure

The struggling Co-operative Group has announced plans for reform of its governance structure.

It said the executive board would be reduced from the current 18 positions to nine, as soon as new rules are registered.

It also said the smaller board would consist of members "qualified to lead an organisation of its size and complexity".

The plan has been formulated to help protect against de-mutualisation of its assets.

The move comes after "disastrous" results for the mutual.

Last year a £1.5bn capital black hole was discovered in its banking arm.

In April, the group revealed a 2013 annual loss of £2.5bn, on the back of a loss of £529m in 2012.

In detailed plans to be released later this morning, the Co-op also plans to give the group's members appropriate powers to hold the board properly to account for performance and ethics.

It said recruitment of new board members would begin immediately.

The proposals, which follow a period of consultation with the society's members, have been reflected in a proposed new rule book and would be put to a vote at a special general meeting on August 30.

Co-op Group chairperson Ursula Lidbetter said: "These governance reforms represent the final crucial step in delivering the necessary change to restore the group and return it to health.

"This has been a process built on co-operation, focusing above all on creating a society where every member has a voice in shaping the group's future.

"I would like to thank our members for their engagement in building a governance structure that strengthens the society and enhances member engagement and our unique democracy."

More follows…

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Lloyds Boss Joins Ranks Warning On New Rules

By Mark Kleinman, City Editor

The boss of Lloyds Banking Group has become the latest heavyweight figure to raise concerns about the impact of impending industry regulation, warning that a proposal to force bankers to prove they were not liable for major failures risks "incentivising people to do nothing".

Speaking to Sky News, Antonio Horta-Osorio said he supported the bulk of the proposals outlined last week by City watchdogs to strengthen accountability in banking, including seven-year clawback periods for bonuses and a new annual MOT to verify the propriety of bank employees.

He warned, however, that reversing the burden of proof for bankers risked being economically counter-productive at a time when financial institutions are under intense pressure to support the growth of the wider economy.

"I welcome the clawback proposals in principle. I have always believed that bonuses for senior managers should be linked to results, deferred for significant periods so that they can be potentially clawed back at a later date and that they should be made in shares to align the interests of management with those of shareholders," the Lloyds boss said.

He also agreed with the Parliamentary Commission on Banking Standards that the approach to enforcement within the UK should be reviewed.

"Enforcement and fines have an important role as a credible deterrent against future misconduct.

"But the new rules will potentially reverse the burden of proof where individuals are guilty until they prove themselves innocent in the eyes of the regulator.

"I worry that this could incentivise people to do nothing, as they could waste their time trying to create a paper trail rather than doing what they should be doing, focusing on customers.

"Secondly everyone makes mistakes. If you do a major thing wrong like causing the failure of a bank you should be held accountable for the decisions that you made. But we need to separate the major mistakes from the small ones which will always happen.

"Under the proposed rules we will run the risk that people spend their time avoiding accountability as they fear being prejudged as guilty when they get something wrong. We want to make sure that bankers, like any other profession, operate to the highest standards but we have to be fair in how we judge them."

Mr Horta-Osorio's remarks, which came days after Lloyds was fined more than £220m for manipulating the benchmark interest rate Libor, echo those made by Douglas Flint, chairman of HSBC.

Mr Flint said staff were becoming risk-averse because of potential regulatory consequences.

"We are in a business that manages risks and we have got to avoid getting to a state where people believe that there is a zero risk tolerance," he said on Monday.

"There certainly isn't within the firm. We expect to take risks which means we expect some outcomes to be adverse to your expectations but I think within the firm there are those who believe that our regulators in some cases have less tolerance for poor outcomes."

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Walgreens Confirms Full Takeover of Boots

US pharmacy chain Walgreens has confirmed it is to take full control of Boots.

In a deal worth £5.6bn worth of cash and shares, the drugs giant will acquire the remaining 55% of Alliance Boots that it does not already own.

But as US markets opened following the news, shares in Walgreens were 16% lower, wiping $10.6bn (£6.3bn) off the company's market value.

The transaction is expected to be completed early in 2015, following full shareholder approvals.

The new enterprise will be named Walgreens Boots Alliance and will keep its headquarters in the US.

Meanwhile, UK-based Boots will remain headquartered in Nottingham.

Walgreens Boots Alliance will be led by chief executive Greg Wasson, with senior executives from both companies on the management team.

Mr Wasson said: "We are excited to move forward with the next important step in becoming a new kind of global healthcare leader. 

"Expanding globally with Alliance Boots will make quality healthcare more affordable and accessible to communities here in America and around the world."

It comes after Sky News exclusively revealed news of the deal yesterday.

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Kellogg Crunches Numbers On £2bn Penguin Deal

By Mark Kleinman, City Editor

The American food giant Kellogg is examining a £2bn offer for the owner of McVitie's, Penguin and other famous British biscuit brands.

Sky News has learnt that Kellogg has appointed investment bankers at Barclays to assess an offer for United Biscuits (UB) that could presage another trans-Atlantic takeover of a prominent UK-based company.

Kellogg is already a major player in the US through its ownership of The Keebler Company, which it bought in 2001 but which for more than 20 years had been owned by UB.

Blackstone and PAI Partners, the private equity groups, have hired Goldman Sachs and JP Morgan to prepare a sale or stock market flotation of UB, whose other leading brands include Jaffa Cakes, Mini Cheddars and Twiglets.

A public listing is viewed as the likeliest option, although a final decision will depend upon the state of stock markets later in the year and the value of any formal offers received from bidders.

Bright Food, the Chinese majority-owner of Weetabix, and Turkey's Ulker are also expected to form part of a sale process.

Sky News understands that UB's board has engaged Centerview Partners, a leading independent advisory firm, to steer it through the process.

Martin Glenn, the former Pepsico and Iglo Birds Eye executive who was appointed to run UB last year, has begun meeting analysts and prospective institutional investors, from whom feedback is said to have been positive.

Mr Glenn has a strong reputation in the consumer goods industry and has focused in recent months on revitalising the core McVitie's brand with new advertising and products.

"He would make an ideal public company chief executive," a competitor said.

In 2012, Kellogg was linked to a possible bid for UB's snacks arm, which included Skips and Hula Hoops, but a formal offer failed to materialise before it was sold to Germany's Intersnack.

If UB does get sold, it would be the second industry deal in less than a year involving North American and British companies.

Last year, the Ontario Teachers Pension Plan bought Burton's Biscuits, the owner of Jammie Dodgers and Wagon Wheels, in a deal worth £350m.

Since then, Burton's has been in talks about a merger with Fox's, another major UK-based producer.

Kellogg said on Wednesday that it did not comment on rumour or speculation.

Last week, Michigan-based Kellogg announced second-quarter profit of $295m, broadly in line with Wall Street expectations.

A UB spokesman and Barclays also declined to comment.

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Bosses Who Fix Energy Prices Face Prison

Executives who rig wholesale gas and electricity prices face up to two years in jail under Government plans aimed at driving down the cost of household bills.

Those who fix prices at an artificial level would be committing a criminal offence if the Department of Energy (DECC) gets its way.

Such behaviour is currently investigated by regulators, whose powers extend only to fines.

Energy Secretary Ed Davey said: "Manipulating the energy market is absolutely unacceptable, and these proposals provide a much stronger deterrent - more in line with the approach taken in the financial markets.

"The Government is doing everything it can to help consumers by increasing market competition to drive prices down."

The Big Six energy companies

The move is a response to rising consumer bills and widespread mistrust of the so-called Big Six electricity and gas suppliers

Richard Lloyd, executive director of Which?, said: "Anyone found to be manipulating wholesale energy markets deserves to have the book thrown at them.

"Rumours of market abuse do nothing for consumer confidence in the energy market so we support the Government tightening the rules and bringing in stiffer penalties to deter wrongdoing."

Under the plans it would become a crime to make misleading claims or conceal facts about wholesale energy prices in order to manipulate the market - especially if such an act could affect competition.

Anyone who uses insider information to buy or sell on the wholesale market would also be committing a criminal offence.

The proposals are at consultation stage and could come into force across the UK in spring next year.

Their unveiling follows a study this week which showed rising energy bills was the top concern for households.

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Walgreens Shuns Inversion In £5bn Boots Deal

By Mark Kleinman, City Editor

One of America's biggest corporate names is poised to bow to intense US political pressure by retaining its headquarters in the US even as it secures a full takeover of Boots, Britain's biggest pharmacy chain.

Sky News can exclusively reveal that Walgreens, the giant drug-stores group, will announce as soon as today that it plans to acquire the remaining 55% of Alliance Boots that it does not already own in a deal costing in the region of £5bn.

However, sources on both sides of the Atlantic said that Walgreens is likely to disclose as part of its announcement that it intends to remain a US-domiciled company rather than pursuing a so-called tax inversion which would involve moving its corporate headquarters to the UK or Switzerland.

The news will represent a significant victory for President Obama, who said recently that US companies which moved their headquarters overseas to save tax were damaging the country's economy.

"My attitude is I don't care if it's legal, it's wrong," he said in July.

Tax inversions have become a contentious issue in the US in recent months, with Pfizer's ultimately aborted £69bn offer for AstraZeneca the catalyst for a wave of deals involving American companies seeking to take advantage of lower overseas corporate tax rates.

Walgreens' decision will disappoint many of its own shareholders, who have urged the group to exploit the estimated $4bn (£2.4bn) in tax savings over five years that it could reap by moving the company's base to Switzerland, where Alliance Boots is headquartered.

Greg Wasson, Walgreens' chief executive, and Stefano Pessina, a board member who orchestrated Boots' corporate expansion during the last decade, met investors including Jana Partners and Och-Ziff Capital Management, two influential hedge funds, to discuss the issue in April.

Sources close to the deal said that Walgreens' takeover of the rest of Alliance Boots would take place next year, probably during a previously agreed window between February and August 2015.

The remaining purchase price of $9.5bn (£5.6bn) is likely to adhere to a formula struck during the original 45% stake purchase in June 2012, which itself cost the American retailer $6.7bn (£4bn).

In a statement on Monday announcing the recruitment of Timothy McLevish, a former Kraft Foods executive, as its new chief financial officer, Walgreens said that he would "lead all of Walgreens finance functions as the company prepares to move forward with the proposed second step of its strategic partnership with Alliance Boots".

Analysts speculated that his background at companies which had moved their corporate headquarters offshore meant that Walgreens was leaning in favour of pursuing an inversion deal.

The company which owns most of the remaining 55% of Alliance Boots that Walgreens will be purchasing is KKR, one of the titans of Wall Street's private equity industry.

Walgreens is one of the US's biggest retailers, operating more than 8,200 shops in 50 states, and by fully combining with Alliance Boots it will create a behemoth of the global drugs and consumer products industries.

Insiders said Walgreens' board had decided that the intense political pressure on companies examining inversions could have a significant impact on its reputation among American consumers.

Walgreens and Alliance Boots declined to comment on Tuesday.

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L&G Sees Profit Rise On Pension Reforms

Legal & General (L&G) saw its pre-tax profit rise by 7% for the first half of the year.

The life insurance and pensions provider reported a profit of £636m, up from £594m for the same period last year.

The company credited an increase in demand for retirement products and said that Budget reforms to pensions would help boost earnings further.

In March Chancellor George Osborne made changes to allow people to access their pension pots when they turn 55, without having to buy an annuity.

L&G said the reforms would give greater flexibility to retirees as the company develops new products around the changes.

Group chief executive Nigel Wilson said: "These are strong financial results with dividends once again growing over 20% and a return on equity of 17.6%.

"Strong business performance across a well-diversified range of insurance, savings and investment markets underpins consistent earnings quality and dividend growth and enables us to respond positively to the ever changing political and regulatory landscape."

It comes after Sky News last week revealed that L&G is in talks about creating a £500m investment vehicle that will be used to finance major UK urban regeneration projects.

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Ex-William Hill Chief Backs Scottish Yes Vote

By Mark Kleinman, City Editor

The former boss of Britain's biggest bookmaker will declare his support on Tuesday for an independent Scotland, arguing that pro-union campaigners have been guilty of "political posturing" whose arguments lack economic logic.

Sky News has learnt that Ralph Topping, who stepped down as chief executive of William Hill last week, is to become one of the most prominent business leaders so far to back a 'Yes' vote in next month's referendum.

Sources said that Mr Topping, who commuted to William Hill's head office from his home in Scotland until he stepped down on July 31, would disclose his support for secession in an opinion piece for a national newspaper.

He is understood to argue in the article that Scotland's largest financial institutions would be unlikely to move their headquarters south of the border if there was a vote in favour of independence.

Mr Topping is also expected to make a case for the "business sense" of a currency union and criticise the "political posturing" of George Osborne, the Chancellor, who has insisted that Scotland would forfeit the right to have sterling as its currency.

"Statistics show that Scotland is fiscally stronger, and investment flows are stronger, even without North Sea oil. We are not talking about South Sudan here and that's what he wants to argue," a friend of Mr Topping told Sky News.

His support will come ahead of Tuesday's inaugural televised debate between Alex Salmond, the Scottish First Minister, and Alastair Darling, the former Chancellor, who is spearheading the Better Together campaign.

The encounter is being depicted as a crucial staging-post in the pre-referendum battle, with the latest opinion polls showing support for the 'Yes' campaign at around 40% and opponents at approximately 46%.

Mr Topping, who began his career at a Glasgow bookie in 1970, had been with William Hill for 29 years, including six as chief executive.

His declaration of support for Scottish independence will be made in a personal capacity, with his former employer maintaining a steadfastly neutral position on the vote, which will take place on September 18.

Mr Topping, who is also a director of the Scottish Football Association, is understood not to be a member of any political party.

William Hill operates hundreds of outlets in Scotland, accounting for a significant proportion of its UK-wide estate of roughly 2400 betting shops.

The company is understood to have been keen for Mr Topping to delay making his views public until after his retirement.

Few leaders of major British companies with operations on both sides of the border have hinted at personal views about the independence vote.

However, some businesses - including Royal Bank of Scotland (RBS) and Standard Life - have used annual reports or results statements to flag potential risks, particularly in the absence of confirmation that a currency union would exist on day one in the life of an independent Scotland.

On Monday, Sir George Mathewson, the former RBS chief executive, wrote in the Financial Times that warnings that the size of Scotland's banking system would make independence impossible were "unionist scaremongering".

The emergence of Mr Topping's support for the 'Yes' campaign comes weeks after William Hill took a £400,000 bet from a customer on a 'No' vote at odds of 1/4.

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