FILOFAX GROUP, the personal organiser company, has agreed a pounds 50.3m takeover from Day Runner, its US rival, which launched a hostile bid on Thursday. Day Runner increased its initial offer of 200p per share to 210p, a 50 per cent premium to the closing share price on Wednesday. Filofax said the offer “fairly recognises the value we have tried to build”. It emerged yesterday that Day Runner discussed a possible deal with Filofax 18 months ago, but could not agree a price. WESSEX WATER, which was taken over by Enron of the US for pounds 1.4bn this week, is to become part of a worldwide water business called Azurix, its new owners said yesterday. For Lloyds, the 1999 estimate has been cut to pounds 3.61bn from pounds 4bn.

NatWest’s forecast is down from pounds 2.23bn to pounds 1.84bn.. He lowered his estimate for Barclays’ 1999 earnings to pounds 2.83bn from pounds 2.98bn, with the 2000 forecast at pounds 2.25bn from pounds 2.95bn. He said that the impact of global market risk, an increasing likelihood of rises in domestic bad debts and weak growth prospects for UK revenues would lower profits at British banks. “LTCM is one of the largest and most highly leveraged, but it would clearly be surprising if there were no other funds in difficulty.”In its note, BT Alex.Brown’s banking expert, Mark Eady, repeated his negative view on the sector.

Since the market’s peak on 21 July, shares in Barclays have more than halved, while NatWest and Lloyds have plummeted nearly 30 per cent as investors deserted the sector. The sector index closed yesterday at its lowest for the year.City analysts said that the crisis at LTCM was set to fuel worries of a worldwide shakeout in global financial markets and deepen the banks’ plight.Richard Coleman, banking analyst at Merrill Lynch, said: “There is clearly a danger of a systemic risk. They forgot that, however big you are, the markets are always bigger.”. BANK SHARES fell sharply yesterday as the turmoil engulfing the US hedge fund, Long-Term Capital Management (LTCM), heightened investors’ fears of a world banking crisis.

This is why we are seeing concerted central bank intervention to bail out LTCM.” He said further funds could be expected to follow suit. UK banking stocks have suffered heavy falls in the past two months, hit by worries over exposure to emerging markets, deterioration in the domestic economy and a gloomy global financial outlook.
They were dealt another blow yesterday when broker BT Alex.Brown slashed earnings forecasts for a number of blue-chip lenders, including Barclays, NatWest, Lloyds TSB and HSBC, owner of Midland Bank.The downgrades triggered a wave of selling, with Barclays ending 6.8 per cent lower at 913p, NatWest closing 42.5p down at 845p, Lloyds 29p off at 661p and HSBC down 33p at 1,069p. Also Mr Meriwether, a former trader, paid generous commissions to those who dealt with him.The huge profits to be made meant that big international banks, including Barclays, Natwest and Abbey National, chose to ignore the fact that they were dealing with a counter-party that never filed accounts and about which next to nothing was known. The big creditors glossed over the fact that LTCM had been technically in breach of its banking covenants and still money flowed in.”What killed them,” said one banker yesterday, “was arrogance, not so much of Meriwether but of his associates.

Much of the lending was on a repurchase or repo basis, where the lender gets possession of the securities bought by LTCM. He said: “Now these people are finally having to pay the bill for what they did to us”.. UNLIKE MORE flamboyant hedge fund players such as George Soros and Julian Robertson of Tiger Fund fame, who relished risk, John Meriwether had a reputation as the safe pair of hands who gave a wide berth to markets like Russia where others came unstuck. Yet ironically it was his specialisation in building portfolios of G7 government bonds and other “safe as houses” instruments such as mortgage- backed securities that led him and his “dream team” of Nobel maths laureates to believe they were bigger than the market.
Mr Meriwether and his backers, which included UBS, Dresdner Bank and even the Bank of China, made billions of dollars from the “euro convergence play” where they bought cheap Italian bonds on the assumption that they would yield the same as the German bund as monetary union approached.Mr Meriwether, in playing one market off against another, relied on the fact that, in all but the most abnormal times, when one market or instrument goes up, another somewhere in the world goes down.You take big bets in one market but they are hedged by mirror positions elsewhere in the world.However, these are not normal times. When the Russian crisis hit, every single market went the same way. Shares crashed in virtually every market around the globe and most bond prices collapsed except for the safest US Treasuries, UK gilts and German bunds.