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Good Time for M&A; Soaring Housing Prices in China, Slump in U.S.

Aired August 23, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: It's a good day for M&A. Corporate wheeling and dealing is making a fast comeback.

In the U.S. a housing slow down, in China soaring prices. Is this the next threat to the global economy.

V-A-C-A-T-I-O-N, we're in the summer sun. All this week, how do get the best out of our holidays.

I'm Richard Quest. Still at work, because I mean business.

Good evening.

Bid battles, mergers and acquisitions, it is the summer story of 2010. In the past 24 hours, two major bids have been launched. We're used to hearing how consumers and governments are heavily in debt. Corporations, though, flush with cash. And tonight we find out what this means about the state of the economy and how they are spending their money.

If you think I'm making it up. Here's some of the M&A action you might have missed in the course of your weekend sunning.

Hewlett & Packard announced they were getting right into the deal, the biggest computer maker of the world in pursuit of 3PAR. It is prepared to pay 1.6 billion for the data storage firm. It is hoping it will be enough to knock rival bidder out of the ballpark. And interestingly, P/E ration and the premium that HP is prepared to pay, lots of Ps some would say, it will-well, you can imagine where that's going.

HP, the bidding war continues.

Europe's largest banking group, HSBC, is looking to buy a gateway to Africa. It is offering to purchase Nedbank for a stake of $7 billion; 80 percent of Nedbank is AFCA (ph). Old Mutual owns a 52 percent stake.

And talk on the trading floors is that SAB Miller and Asahi are moving in on Foster's. Now denials all around and no comments galore. Any potential bid for the brewer could run to more than $10 billion.

It all adds to a whirlwind of M&A activity, whipping through the normally calm month of August. And as you can see, it includes some of the biggest bids this year, already we've seen $200 billion worth of bids, or attempted bids on the table. And there is still a week to go before the end of the month. Pip McCrostie is the head of M&A consulting at Ernst & Young. And Pip joins me now.

Now, when you put it like I have just done, it seems like everybody is out doing a deal. But the truth is August, this August, has been very active. Why?

PIP MCCROSTIE, ERNST & YOUNG: That is a very good question. It is quite a tough question. I think that there are a number of factors that surrounding all of these factors is one word, Richard, and that is, "confidence". I do think we are seeing a little more confidence come back into the market arena and into businesses themselves. From a macro perspective we are seeing, you know, more confidence that there won't be a double-dip recession, for example, in the U.S. and also in the (UNINTELLIGIBLE) with the sovereign debt fallout not as severe as we predicted.

QUEST: But the companies that you are talking to, are these deals that they've had on the back burner, or they've had in their beady little eyes, and they now think, now is the time? Or are they deals that they are just discovering, do you think?

MCCROSTIE: These are pretty strategic deals. And they have got a long tale. So they are not deals that they just thought up on a beach in August. They have been around for a long time and I think the targets, themselves, have been predicting that as well. So they have been there a long time. And frankly, I think August, while we're seeing a lot of activity and a lot of hostile activity, could have occurred in the earlier months as well.

QUEST: But it didn't.

MCCROSTIE: It didn't.

QUEST: It occurred now.


MCCROSTIE: It didn't and I think that is because we have had so many contradictory factors coming into the market in a way that we've never seen before, even in past recessions.

QUEST: Companies are flush with cash. They've had good earnings, they paid down some debt. They leverage is starting to unwind. But are these-are you telling people, think about doing deals with your cash, with your paper, or with leverage?

MCCROSTIE: I think that there are a lot of alternatives, as you say, but from a corporate perspective and a P/E perspective, and I think that the lessons learned in the recession mean that there is less leverage going into these transactions and more cash going in. And in the early days in the recession there was a lot more variety being used. I think we're seeing a move away from that. So cash is very much king here. War chests are being used.

QUEST: At what point, in anticipation of deals do other companies think, you know, the starting gun is being fired. And when you heard the HP/Dell, that is a highly strategic deal for 3PAR. Both companies want it for strategic reasons, same with HSBC/Nedbank. But others are going to start saying, oh, hang on, we'd better get in on the act.

MCCROSTIE: Well, I think this brings into play, two things here. One is sectors, so you've got the sector strategy and the consolidation. So obviously you are going to bring in all the competitors saying, well, look, hang on, if this person is moving, should we be moving. And I think you'll see that play come through in some of the deals that you mentioned earlier.

And I think, also, you've got the geography play, where we have a lot of strong performance coming through in emerging markets, in particular, with China, with Africa, South Africa, etc cetera. So, I think when you put the geographies with the sector hot spots, I think that we will see more deals come through. And also, not necessarily always at the size and the level that we're seeing right now.

QUEST: When to premiums become frothy?


QUEST: Because you know as well as I do, it is a small leap from the start of an activity to a gold rush, to a bubble.

MCCROSTIE: Well, I can't say I'm Miss Technique, here. And if I knew the answers to all of these questions, you know, I may be paid a little more than I am right now.


But I think that what we're seeing, you can ask yourself the question, is August a trend? Are we going to see this continue in September, October? I think, you know, historically, that sometimes you have a really frothy, bubbly month, and then is doesn't play out. I think that if the confidence stays with the businesses, and the confidence stays with the winners who have really circled around capital, I think we will see a continuation.

If, however, the confidence withdraws because of one of the macro factors, I think we'll see a return to the uncertainty. So, I think you've got the two sides to balance out.

QUEST: Well put. Finally, I do know that at some point, your phone started ringing.


MCCROSTIE: Very true.

QUEST: And you said, hang on, something is about to happen. There is a sift in the waters.

MCCROSTIE: And I think we really started to see that in July. I think July really started to see the pick up. That is why I say to you, you know, August was getting predictable, but we did need these factors to come around. But if I'm being very clear here, we could have had July and August back in April, because the capacity and the ability to do deals was there. The confidence was missing. So the war chests were there. The net leverage ratios were coming down. All these things were working in the favor of M&A, but it didn't kick off. Why not? For me it is because of the confidence. And, again, we'll see a pattern emerge of more deals, if the confidence remains.

QUEST: And you, hopefully, will come back and help us understand more about it in the future. Many thanks, indeed.

MCCROSTIE: Would love to.

QUEST: Lovely to have you on the program. Many thanks.

Now, what we are already seeing, as you've got an idea. The deal at the top being done, it might be a hostile move with BHP/Potash. It might be a bidding war with Dell and HP. You've got white knights being looked at elsewhere. Poison pills being taken by some companies. It is not a Grimm's fairytale, it is M&A.

Jim Boulden-Jim, look, you and I are of a certain age?


QUEST: We are delighted that we are back in the old language we understand.

BOULDEN: It is always this language of sort of war and battle and good and evil. So, let's go through some of this. It is a very lucrative business of course. If you look at all the done deals, or those pending so far in 2010, it would add up to $1.7 trillion; up from $1.4 trillion this time last year.

And there are so many ways to get a piece of this action. Let's look at, of course, one of the very ones we're talking about right now, which is a hostile bid. This reminds us of what is going on with BHP and Potash, at this moment.

But back in the early parts of this year we had Kraft and Cadbury. Believe it or not, that was 2010. That was a hostile bid that then went friendly. So you can see how we can get to-from hostile to friendly. That could happen with BHP you never know.

Another one is poison pill. Now, the board of Potash has also gone with a poison pill. This is where the board tries many different ways to make it tougher to go around the shareholders. And it makes a company sort of, less-less useful for a company if it is taken over a hostile way. So, poison pills came in, in the early `80s. Not so popular at the moment, so it is really interesting to see that this Canadian company has tried a poison pill to stop BHP from coming in.

Now, my favorite photo of the night, of course, here, this white horse, one white knight. This is the hero that comes in. This is a third party that comes in to do one of two things, either to stop a hostile bid, so they are invited by the board to come in for a takeover, or to save the company from collapsing. A good example of that really would be Fiat coming in as a white knight to save Chrysler, Richard.

QUEST: All in all, many thanks, Jim Boulden, the language that we will learn in the weeks and months ahead. Who would have thought about it?

Now the bustle of deal-making lifted stocks in Europe this session. Look, volumes were derisory. David Buik of PGC Partners was dismissive of what he saw. But anyway, the shares in Old Mutual ended more than 3 percent higher, adding strength to the FTSE, the rest of the insurance sector did well. HSBC's noticed advance, SAB Miller gained around 1.7 percent. Merck lead in Frankfurt. While EADS was the top performer in Paris.

But I do emphasize, volumes are derisory. There are bank holidays all around us in the weeks ahead.

From a flagging Florida housing market, to the battling housing bubbles in Beijing and across the rest of China, we're taking it from the U.S. to Asia, real estate is a worry for governments, investors, and those people who want a roof over their head. QUEST MEANS BUSINESS, good evening.


QUEST: If it seems quiet at the moment don't let the lull fool you. The August soporific time, this time tomorrow night we'll be pouring over a key economic report in the United States, which is due on Tuesday lunch time, Tuesday morning U.S. time. The National Association of Realtors is set to unveil July existing home sales.

Now this can sound a little bit esoteric, but you have got to remember with more than 14 million Americans out of work the numbers could add evidence of a slowing recovery. Because those people can't afford to buy homes and it gives concern to everybody else that there won't be jobs to keep going.

On top of that a report from Washington shows that the government's foreclosure rescue plan is losing its punch; a spike in foreclosures combined could send home prices plummeting again.

Property markets, fueled anxieties won't go away in China. The opposite side of the coin, a real estate group is urging Beijing to postpone moves to cool soaring housing prices. Property sellers charge that higher mortgage rates and tougher lending are killing sales at the moment. The appeal comes as July property prices rose at their slowest pace in six months.

And finally, to Australia, now you'll be well aware, of course, that they've no-well, there is a government, but they are looking at a coalition government and a hung parliament. And the big issue in the election, and indeed among economists, is the property market coming for a soft landing. June house prices were up 18 percent, the biggest annual growth since 2002. Analysts hope for this soft landing. The fear is, though, there will be more of a crash landing.

In Florida, they are waiting for the housing slump to pass into history. Maggie Lake joins us now from CNN in New York.

Maggie, we've been around the world there, from U.S. to China, to Australia. But it was in Florid and places like the U.S. where this crisis began.

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Right, it began, it was the epicenter and it is still playing out, Richard. And what we are focusing on is prices. It is so central to the housing market. Not just in the fundamental way, but also as a sort of barometer and confidence. And just before we came on air, you were moaning about the terrible weather over there. So I bet you love nothing more than to have a nice little vacation spot in Florida. Well, to get a gauge of what prices are doing check out this next piece. You can actually score a condo there for less than it costs for a new car. Have a listen.


KEVIN BERMAN, BANKER'S REALTY SERVICES: We have a one bedroom, one bathroom, about 550 square feet. The kitchen is over here and you have a dishwasher, range and a refrigerator. This property sold for $145, 000 in 2006. And now it is priced at $34,900.

We've been selling them this low, you know, for some time. But they seem to keep creeping down and the value seems to keep getting better. We have people from all over the world, actually, even as far as Mongolia, calling us about real estate in Florida.

People are flying in and in some cases they are also buying them sight unseen. Every week that one property sells, another one, or possibly another two comes on the market. There are 75 properties in this area alone that are priced under $50,000 that are actively available for sale right now.

This is further west. You are in what would be considered suburbia. At $26,900 it is an excellent perceived value. You have 1,000 square feet of living space.

Here we have the master bedroom, also with simulated wood floors and its own private balcony. And also it's own walk-in closet and master bath.

Purchasing this property at 1/6 of what the values were, or what maybe your neighbor paid in the last four or five years, is an opportunity that doesn't come up, you know, everyday. Everyone has got to go back to work. Certainly, everyone needs to start, you know, earning, but the necessity for housing is not going to go away. Everyone needs to live somewhere. And prices, right now, are at the lowest that we have seen, possibly in the last two decades. That being the case, you should take advantage of it.


LAKE: Boy, you know, we knew it was tough in Florida, Richard, but those numbers are absolutely astounding, just how cheap things have gotten. But you know it is not just relevant for Florida, because that was hard hit, this has to do with the overall housing market. I mentioned confidence before.

Existing home sales coming out tomorrow, you can take a look at what the forecast is there. Even realtors that I talked to here, in New Jersey and the New York center, say when buyers come out they go through the process and then at the last minute they get cold feet because they think the price is going to go down again. It is a classic definition of deflation and it is a real problem for housing. People just can't get the confidence that the market is stable. So they are holding back. Even those that have the wherewithal to buy are holding back. It's a real conundrum for the housing market.

QUEST: Maggie, listening to those prices, and some years ago, I must confess, I did actually have a condo in Florida, which I sold-and barely sold at not profit whatsoever. This is a long time ago. But I was wondering, are you tempted?

LAKE: Everyone is tempted when you see those prices. The only thing is, Richard, there is so much supply in the market and if you get into an area or a development where everything is foreclosing, you have to worry about it. But I tell you, if you have a long-term perspective, it is not surprising that he's got people, as this realtor claims, as far away as Mongolia, calling up. I mean, there absolutely giving it away. People will do anything to unload these units. It is astonishing.

QUEST: Maggie Lake, in New York, many thanks, indeed.

Now, from one side of the story, to completely the other side of the world, and a very different tale. Let's go to China, where a crackdown on land holding is gaining momentum. Beijing is stepping up the affordability of housing to the tune of nearly 6 million units. The aim is to stop property speculation in its tracks. Prices are still way out of reach for many ordinary people to just have a home that they can their own, that they own, as Emily Chang now tells us from Beijing.


EMILY CHANG, CNN INT'L. CORRESPONDENT (voice over): The Peng family is on a house-hunting rollercoaster and prices are only going up, up, up.

"This place is $1,000 per square meter last year, now it is almost doubled," she says. "That is way too much."

It is the story of so many middle-class Chinese, being priced out of a booming real estate market. The Pengs have no choice but to continue renting and wonder if they've lost their chance to buy.

"Even people who make more money than us cannot afford a house," Mr. Peng complains.

Since the beginning of 2009, residential housing prices have jumped more than 40 percent in 36 cities across China. This 300 square meter apartment in central Shanghai is selling for $13 million. Developers say that as many as 50 percent of buyers are now purchasing homes not to live in but simply as an investment.

"They buy it and just wait for the price to rise," this development manager says.

To cool the market the government has raised down payments and mortgage rates, tightened financing for developers, and made it harder to buy multiple homes. Prices are still rising but more slowly, up 12.8 percent in April, but just 10.3 percent in July. That sparked concerns that overheating may have turned to overcooling. Either way analysts say it's a market in confusion.

PATRICK CHOVANEC, ANALYST: These are all the typical signs of a housing bubble. But it has persisted for years, and it could persist for a long time, as long as people are willing to buy and hold empty properties to restore value.

CHANG (on camera): Despite prices going up wealthier Chinese continue to buy. Some are speculating, but others are using property as a homegrown savings account, saying it is a better than an unpredictable stock market.

(Voice over): The Ye family got lucky without even trying.

"When we bought our place prices were just starting to rise," she says. "If we had waited two months we might not have been able to afford it."

They bought this modest apartment just last year. It's value has since shot up more than 50 percent, when all they wanted was a place to call home. Emily Chang, CNN, Beijing.


QUEST: Next after the break, we're in New Delhi for our "Future Cities". Now, in New Delhi pollution is posing a major problem. We're going to look at what is being done to clean up the act of a city ahead of the 2010 Commonwealth Games. And to make it more livable for the people who live there.


QUEST: Today it is six weeks and counting for India's capital to host the Commonwealth Games. New Delhi has been hard at work on its infrastructure, transportation. Tonight we look at its battle against air pollution. As India makes its bid to be the world's next super power, the affluent residents of its capital are keen on their cars. One fifth of New Delhi's land mass is road, and all that translates into smoggy skies. Our special edition of "Future Cities" now looks at how Delhi is going clean and green.


QUEST (voice over): What could be more precious than the very air that we breath? Yet as big cities get even bigger, we pay the price for growth, air quality gets worse. Air pollution levels here in Delhi have been described as daunting. The biggest polluter, of course, is traffic; 70 percent of air pollution comes from the exhaust fumes and emissions associated with vehicles.

ANUMITA ROYCHOWDHURY, CENTER FOR SCIENCE & ENVIRONMENT: To date the most rapidly growing source of pollution are the vehicles. Take Delhi, here where we already have more than 5 million registered vehicles. And Delhi is adding about 1,100 vehicles a day. This is the kind of explosion that we're seeing on our roads. How do we manage our mobility? Now this is the future challenge for us. And that is where we will have to focus.

QUEST: Air quality is measured by how many, and crucially, how much dangerous substances there are in the air, nitrogen oxide, sulfur dioxide, and harmful particles which can damage the lungs. The central pollution control board says that in more than half of India's cities, the amount of dust particles in the air has hit critical levels.

But here's a funny thing, in Delhi things are improving.

ROYCHOWDHURY: Delhi has relocated its polluting industries. It is not expanding its power plants and even the few that we have, have been converted to natural gas. We have capped the age of the commercial vehicles. We have got rid of the older vehicles and emission standards have been improved.

QUEST: If cars are part of the problem, then electric vehicles and Naveen Munjal may well be part of the solution. His company, Hero Electric, is manufacturing battery powered scooters.

NAVEEN MUNJAL, MANAGING DIRECTOR, HERO ELECTRIC: This is the model called the Wave, which is 25 kilometer and high (ph) speed, 2 volt motor. This is the charger that we use to charge the vehicles. And this is the set of batteries here, which are right inside. Another way you can start it, see you can actually see the wheel rotating and there is no there is no sound, there is no emission, nothing at all.

We do need an alternate means of transportation. The only means of transportation, alternative means of transportation from fossil fuel right now is either pedal power, or we go for electric at this point. That is where the technology is.

QUEST: These bikes can travel up to 70 kilometers on just one unit of power. That is roughly the power it takes to make 35 cups of tea. And you can charge it using a normal electric wall socket. Nothing fancy here.

MUNJAL: You charge it at home, you go to your work, and you come back home. You don't have to go to gas station, you don't have to go for servicing, nothing. So it is a very simple vehicle. So in a city like Delhi, which is highly polluted, when you have a lot of respiratory problems, and you have a lot of breathing issues that happen because of air pollution. It is a perfect vehicle.

QUEST: There are 40,000 of these silent bikes humming around Delhi, where the technology is still relatively new. But for a sign of where this may be headed, last year in China, sales of electric bikes hit 20 million.

MUNJAL: The Delhi government is very gung-ho about this, because the Delhi government has clearly seen a benefit on the roads by introduction of these vehicles. But the population of these vehicles in Delhi is way too low right now.

QUEST: City air is a priority in Delhi, in anticipation of the Commonwealth Games next month. Power plants will close for the event. Open fires will be banned. And vehicles arriving from outside Delhi will be checked for pollution levels. All this to preserve the air being breathed by the world's athletes.

ROYCHOWDHURY: We have seen our city government investing for the first time the city where they are going to do minute-by-minute air quality monitoring, with capacity to forecast pollution for the next 48 hours. This is happening for the first time in this country.

QUEST: In the 1990s Delhi was described as the most polluted capital city in the world. A decade on things have changed. Compressed natural gas became the fuel of choice in Delhi's public bus network; pumping fewer pollutants and less greenhouse gasses into the air.

SHEILA DIKSHIT, CHIEF MINISTER, DELHI: Our cities have the largest CNG fleet anywhere in the world. All our public transporters are CNG. That has made a huge difference, otherwise you could hardly breathe in Delhi and your eyes used to smart.

QUEST: Despite the vast improvement air pollution levels here are creeping back up. The efforts to reduce emissions are suffering from the very success of the city. Rising income levels are bringing extra cars to the road. With more than 1,000 vehicles added each day.

ROYCHOWDHURY: Over the last two years now, we are noticing that the pollution levels are rising again. In Delhi what we are seeing is that whatever we gained with the first generation action, we are almost on the verge of losing it.

QUEST: So, back to the ideas. Look at this -- it's a giant air purifier in the middle of the city. Still in the experimental stage, this machine sucks in the air around it, cleans it and sends it back out to the citizens to breathe. Delhi's authorities are waiting to see how it works.

For now, Delhi must continue to push forward with its commitment to clean air if future generations want to breath in this city.


QUEST: The problems and the situations in Delhi.

As Britain and the U.S. open their wallets wider to help the people of flood-ravaged Pakistan, the IMF is sitting down with the country's finance chief to figure out how to get Pakistan back on its financial feet.

We'll talk about that after the break.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And here, the news always comes first.

Philippine officials say eight passengers were killed at the close of an 11 hour hostage stand-off on a bus in Central Manila. Now, police say the hostage taker was shot dead. He was a former police officer who was angry about being fired. Police rushed the bus after he began shooting passengers. The passengers were tourists from Hong Kong.

Rescue workers in Chile are packing tubes with food and medicine and supplies to sustain 33 miners who are trapped underground. Officials say it could take up to four months to drill an escape shaft. The country was ecstatic to hear that the miners are alive and well almost three weeks after their copper and gold mine caved in. The miners attached a note to a probe Sunday saying they are fine.

A traffic jam to beat all the fact jams -- this is National Expressway 110 near Beijing. And traffic is backed up 100 kilometers. It's been going on for nine days. Small accidents and broken down vehicles are compounding the problems. Some drivers say hawkers walking through the traffic are gouging them. Construction is blamed as the culprit.

Officials say a teenaged suicide bomber killed 26 people at a mosque in Northwest Pakistan on Monday. Thirty others were wounded. It happened in Avana, which is the biggest town in the tribal district of South Waziristan, near the Afghan border. A former lawmaker was amongst those killed and he's believed to have been the target.

Obviously, the concern has been of the weather in Pakistan and whether or not further floodwaters are likely to help push down through the rivers and make a bad situation -- well, a disastrous situation cataclysmic, if it wasn't already.

Guillermo Arduino is at the CNN World Weather Center -- Guillermo, the pictures I've been seeing suggest that it's a battle between ferocious heat but then these intense monsoon rains.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes. And you -- you nailed it when you said the relationship with the river -- the rains and the river, because now the weather is not that bad in Pakistan concerning rain. Of course, the heat is the trouble. But the Indus River is taking the water downwards. And south of Sukkur is where we see the problem now. So the waters are going up and -- and you can say, hey, it's not raining, what's going on?

Well, what's going on is that all that rain that fall in the northern sections now is going downwards. And it is flooding those towns in the south. One more element that we need to take into account in here. The tidal currents pushing that stream northward now sort of blocking the exit of the water. And that creates a backup in the flowing of the river, especially here in the south.

It seems as though everything is -- there is sort of a complot to complicate things in Pakistan right now, because we have the winds, we have the rains, we have the heat and on top of that, the wakes that are coming from the south.

If you look at the satellite picture, Richard, you don't see much in the way of precipitation.

Good, right?

Then we have to take -- to talk about the heat -- 55 Celsius in Sibi, Sukkur that we talk about so much, 54. And the floods are south of Sukkur right now.

Now, if the water -- the rain starts all over again, it will create more stress on that river and then as it goes south, the -- the situation will get complicated in the south, as well. But fortunately, in terms of precipitation, we don't see much. We saw a little here in the southern parts of India. We see a lot in Nepal. This is monsoonal flow induced, but not in Pakistan, where we are dealing with the heat. And remember, that water is there, Richard, the water is there. And with the high temperatures and the mosquitoes around, it is very, very dangerous, indeed -- back to you.

QUEST: Many thanks, Guillermo, bringing us up to date in many ways, importantly, on what the meteorological position is, because that is the cause of the problem.

Thanks, Guillermo.

But on the financial front, Pakistan is facing scrutiny tonight from the International Monetary Fund, where officials are assessing the damage done to the economy by those floods and working out how they can help.

CNN's Reza Sayah is with me now from Islamabad -- Reza, look, the finance minister and others have gone to Washington. They're disappointed with the international response and the money that they're getting.

But what do they hope the IMF is going to do?

REZA SAYAH, CNN CORRESPONDENT: Well, they -- they need help from as many places as possible, Richard. And one of those places is the IMF. Of course, two years ago, Pakistan and the IMF agreed on a big $11 billion loan to try to jump start Pakistan's economy. But these floods have delivered a huge blow to Pakistan's economy and its productivity. Other economic factors will be affected, as well.

The IMF, with that big loan, it put some very difficult conditions on Pakistan. Among them, that as Pakistan decreased its budget deficit to get rid of food and energy subsidies and to raise taxes and -- but these floods, it is almost a certainty that it's going to be impossible for Pakistan to meet these conditions. And that's why you have Pakistani government officials meeting with IMF officials in Washington this week. The meetings started today. They will continue through Friday. Because something needs to change. And analysts are discussing a couple of options.

But one of them is for the IMF to simply ease these difficult conditions. Another option that analysts are discussing is the possibility of the IMF completely scraping this loan and replacing it with a disaster relief loan -- Richard.

So something has got to give, because based on how this deal -- the $11.3 billion deal stands right now...

QUEST: All right...

SAYAH: -- there's absolutely no way Pakistan, with the ordeal that it's facing right now, is going to meet those conditions.

QUEST: Reza, outside, I mean what -- what's never quite clear when viewed from afar is the extent of the devastation vis-a-vis the whole country. So, for instance, you're in Islamabad, where, you know, commerce continues, shops still open, buses still run.

SAYAH: Yes, look, I'm closer to the disaster area than you are and it's still not clear to me unless -- and we've done this several times -- you take an aerial tour of parts of the flood zone that extend all the way from Northwest Pakistan through Central Pakistan. And now you're talking about Southern Pakistan. Much of this area is Pakistan's agriculture sector. Pakistan depends on the agriculture sector for its economic growth. This IMF loan, this agreement a couple of years ago was depending on Pakistan to grow economically with the agriculture sector. And much of it is wiped out.

But you're right, if you're not here with an aerial view, if you don't fly over these areas and see these -- these vast crop lands, you don't have a grasp of what's been destroyed here -- Richard.

QUEST: Reza Sayah, who is watching matters.

When there's more from the IMF, Reza, come back to us help us interpret what it would mean for the Pakistan economy.


We'll be back in just a moment.


QUEST: Welcome back.

Now, I do need to update you with some news that's come into us.

Tiger Woods and his wife Elin Nordegren have divorced. Their divorce is now final. After months of speculation, the marriage between the two has been announced on Tiger Woods' Web site. And they put out a joint statement: "It's sad that our marriage is over and we wish each other the best for the future," they said. "Whilst we're no longer married, we're the parents of two wonderful children. Their happiness has been of paramount importance," so on and so forth.

The rumors have been around for a long period of time about how much Ellen is getting. No one knows. You pays your money, you takes your choice. I've seen numbers from $100 million to $750 million. We'll have that in just more massive details in the days ahead.

So, it is Monday. It is the 23rd of August. And if you're trying to do business in the Northern Hemisphere, especially Europe and the United States, you'll be finding people on the planet, they're away on holiday, but not here. Not at QUEST MEANS BUSINESS, because we're making your summer break our business.

All this week, a long holiday special. And we'll be finding out where you're going, what you're doing when you're there and how businesses cope back home when workers head off en masse to the beach.

Now, when it comes to holiday entitlements, look at this. Some countries are far more generous than others. According to a study by the H.R. consulting firm Mersa (ph), they found that France, Finland and Brazil gave the most leave. The study found that full-time workers there get roughly 30 days paid holiday. And you can add in annual holidays, as well, up to 40 in some cases.

For Hong Kong and Singapore, it's less than half that, just about 15 days plus public holidays. Technically, though, the U.S. comes at the bottom of the pile. In the U.S., there is no legal mandatory holiday requirements, but most employers do allow annual leave and, of course, they give public holidays. And, on average, they get about 15 days paid leave.

All this week, we'll be hearing CEOs take you on holiday time. Some think you need to take at least some of your work with you.

Ditlev Engel, the chief executive of Vestas, the CEO of the turbine maker, thinks it's more important to totally let go.


DITLEV ENGEL, CEO, VESTAS: One of the rules is to spend time with the family and really enjoy it and try to -- to get away. But I think in today's world, it's very difficult to get 100 percent away. You have to act as where you are. And that, of course, to pay, goes to holidays, it goes to everything else. I think most importantly, one thing is to follow up on the holiday, but it's very important to make sure that the people are happy at work.


QUEST: The CEO of Vestas.

Manpower is an employment agency that operates in 82 countries and territories.

Barbara Beck is president for Europe, India and Africa.

She joins me now from the company's global headquarters in Milwaukee, Wisconsin.

Barbara, look, explain -- help me understand this.

Are the U -- is the U.S. just mean?

Is the rest of the world -- is Europe just overly generous?

Or are we lackadaisical?

Has our work ethic gone down the toilet?

BARBARA BECK, MANPOWER: The U.S. employers are less generous than their European counterparts in giving mandatory vacation time, as you said, Richard. On average, after working for a corporation for 10 years, you probably have 15 days of paid leave. And then in addition, you will have public holidays. The work ethic in the U.S. has always been very much geared around your time off. So there is a debate about earned versus entitlement. The European employers feel that their employees are entitled to more time off. And I think that most employers would agree taking time off is absolutely essential for the well being of the employees.

QUEST: But there's a con...

BECK: You're going to have higher productivity...

QUEST: But hang on.

BECK: -- better health.

QUEST: Hang on. There's a contradiction here, isn't there, particularly in the U.S., between employers paying lip service -- we want you to have more time off.

So why don't they give more time off?

BECK: Well, number one, even with the 15 days of holiday entitlement that most companies will give an employee after 10 years, here's an interesting twist. The consultative arm of Manpower, Wright Management, recently did a survey and found out that in 2009, two thirds of Americans didn't even use the 15 days that they were given. That is fueled by the recession and fear...

QUEST: Right.

BECK: -- and concern that they will not be viewed as highly productive workers.

Now, in addition, we've also, as you know, around the world, experienced massive layoffs. We have many employees who feel as if they are doing the work of two or three people.

QUEST: Right.

BECK: They have been burdened with additional work because so many employees around them have lost their jobs. So there is a bit of that creeping into these statistics, as well.

QUEST: Barbara, how important -- if -- if we take the European aspect, where vacation is conceded to be so much more po -- important -- when you go from one job to the next, is it an important part of a package that you put together that you maintain your holiday entitlement?

None of us want to go back to zero.

BECK: Well, I think you just said it, Richard. No one wants to backward. So when an employee is negotiating their employment package it is critically important that they maintain the same level of holiday entitlement that they have had previously. And from the European perspective, of course, when we're talking about statutory, we're really talking about what companies are obligated by law to give their employees.

QUEST: Right.

BECK: As you know, those packages can widely vary. If you look at the U.K., for instance, 28 statutory days of holiday, many employers will say, well, we're going to give you those days and they include your public holidays. Other employers in the U.K. could say we're going to give you 28 days and on top of that you're going to get an additional eight days of public holiday.

So -- so the numbers can wild -- wildly vary depending on who the employer is.

QUEST: Barbara, many thanks, indeed, for joining us.

I will be -- I -- I will not be indelicate and ask how many days you get, but I'll put it out there, since we're going to be talking a lot about this in the weeks ahead.

Barbara, many thanks, indeed.

I actually get, I think it's four-and-a-half weeks now or something like that.

And some of your views, by the way, Laura the Expat says: "The U.S. unwillingness to mandate a minimum vacation time is short-sighted. Rested workers are productive workers. Join me at the library."

LauraJ55 (ph) says: "I get 10 paid vacation days, no sick/personal, have to work most holidays."

Moonslider (ph) says: "Perhaps the U.S. way may be right in this recession."

This is all atrichardquest.

And Jordoga (ph) says: "Americans are severely overworked. I had 20, got down to 15, not enough."

These are some of the pictures that while we're stuck at work, you made us jealous with your summer picks. First of all, this is Lee Qui (ph), I believe, Lee Qui is on holiday in Tenby in Wales. The beach is lovely. He's having a good time. Rather nice for Wales, frankly.

Meg Montez sent us this from her holidays. She's at the Buddhist Monument of Borobudur in Indonesia. I'm not sure I pronounced that right.

And Kanami Awaga (ph), this is him with his son on a horse. Now, I mean you can tell it is the horse.

Anyway, you've also been sending us videos, too. This report was sent to us from Larena (ph), a QUEST MEANS BUSINESS viewer in Acapulco, Mexico. It is her nephew Sebastian looking like a hamster on wheels in the water.

Thrill seekers will love this. It was sent to us by a family on holiday in Costa Rica.


QUEST: You have got to be joking.

All right, we will have more. It's atrichardquest. It's I'll show you the e-mail addresses where you can send us your holiday pictures this week.

It's a camera, it's a music player and even a guide book -- the Smartphone is an essential kit for the holiday makers. And on the apps, the power can be a gold mine for developers, in a moment.


QUEST: Rumors are swirling that Apple will soon have its apps store in the living room. Tech blogs are reporting a revamp of the Apple TV box. You download the app just like on the iPhone, the iPad and the I this, that and the other.

In Hong Kong, Pauline Chiou met one developer whose part-time hobby is now paying his mortgage.


PAULINE CHIOU, CNN CORRESPONDENT (voice-over): Try your hand at playing an ancient Japanese string instrument or let loose by imitating animal sounds like a monkey and getting graded.


CHIOU (on camera): Oh, wow!

(voice-over): These are just the latest iPhone apps Simon Lui has created. His first app was for commuters who take Hong Kong's subway, the MTR. His most popular is a game called Kinha War (ph), with 9,000 downloads.

LUI: You know, my photos become more powerful and I can more immediately try the basis of animation.

CHIOU: The 28-year-old computer science instructor creates apps in his free time. He may be an amateur, but he's making more than you might expect. He's earned nearly $40,000 in the past two years as fans have downloaded his paid apps.

LUI: When I developed an app for a half a year, it is so much pain. But then after that, I don't need to do anything and then the cash keeps coming in. After a month, I think, oh, it's sweet.

CHIOU: Lui is using the extra cash toward his mortgage and to help pay his brother's college course fees.

Musician Tenpat Wa (ph) would like to see the money roll in soon, too. He's collaborated with software programmer Luma Fung to develop a one month old app called Track Rider. This app plays videos of Hong Kong indy bands and allows you to tap along to the beat as if you're part of the band.

LUMA FUNG, AMATEUR APP DEVELOPER: You get to play along with your songs or you can check for the music.

CHIOU: The two friends won't reveal how many paid downloads they've gotten since Track Rider is still relatively new. They will say advertising needs to be part of the process to break out of a densely packed app store.

FUNG: I market in Facebook and also I market in lots of local forums to -- to -- to about the iPhone games forum.

CHIOU: These amateur app developers all taught themselves the computer code for writing aps, called Objective C.

Their advice to other amateurs?

Keep practicing the code.

LUI: It is much easier than three years before. There are lots of good tutorials. I think they can have a clear mind and to know what they are doing.

CHIOU: Simon Lui is now planning his next app -- interactive games for the elderly.



QUEST: Tonight's Profitable Moment.

When it comes to the amount of vacation time around the world, we've shown you tonight startling differences.

In Lithuania and Brazil, the total amount can be more than 40 days a year. In the United States, it's the only major country to have no statutory entitlement and the average public holiday is just 25 days per pay.

Today expect -- today employers expect so much of us and yet I constantly wonder how can bosses demand we keep going when many of us are exhausted, gasping for a vacation?

In this information revolution, we are bombarded by the incessant call of digital tyranny. So getting away from it all, well, it's never been more important.

Oh, and by the way, I'm a hypocrite. I have more than three weeks of leave left to take before December. And yes, if I don't use it, I may well lose the lot.

And that's QUEST MEANS BUSINESS tonight.

I'm Richard Quest in London.

Whatever you're up to in the hours ahead, I hope it's profitable.

"WORLD ONE" -- it starts now.