Icahn’s intrusions hurt worthwhile HP-Xerox deal 28 Feb 2020 The activist shareholder with stakes in both companies has been pushing for a merger since August, according to HP’s account of Xerox’s $35 bln hostile bid. A friendly deal still makes sense. Yet Icahn’s self-interest and influence over Xerox only make it easier for HP to say no.
Lebanon gives Lazard bankers a brainteaser 28 Feb 2020 The debt-strapped nation has selected the firm to advise on a restructuring. But principal haircuts could imperil local banks, austerity would upset ordinary Lebanese, and Hezbollah’s growing power complicates everything. Lazard will be worth its fees if it can solve the puzzle.
Review: Piketty digs deep for fool’s gold 28 Feb 2020 The French economist’s gigantic new book makes some glittering claims, but its few nuggets of insight are surrounded by vast seams of intellectual dross and self-indulgence. Readers of “Capital and Ideology” have to burrow far for some simple half-truths about riches and poverty.
Barclays 2008 gamble has nuanced investor legacy 28 Feb 2020 A jury acquitted three ex-employees of fraud over a Qatari crisis cash call. The money forestalled a state bailout, allowing Barclays’ shares to beat RBS and Lloyds’. But the government may also have hacked back an investment bank which now drags down the lender’s valuation.
Markets confront world economy’s viral unknowns 28 Feb 2020 The spreading coronavirus has knocked over 10% off U.S. and European bourses so far this week. The immediate question is the depth and length of any demand slump. The longer-term one is whether the crisis permanently alters global supply chains, dragging down corporate earnings.
Barclays CEO pick is next activist flashpoint 28 Feb 2020 The choice of Jes Staley’s successor will determine the UK lender’s strategy for years. Executives with investment banking chops, like Bill Winters and Jean Pierre Mustier, would fit. That could spark a new showdown with investor Ed Bramson, who wants to trim the wholesale unit.
Italy SpA’s game of musical chairs grows tiresome 28 Feb 2020 Directors at Eni, Enel and other state-backed firms worth 40% of Milan’s main index are up for renewal. A three-year rotation gives politicians in Rome too much meddling power and inhibits longer-term planning. Italy, and investors, would be served better by longer tenures.
Rolls-Royce takeoff requires disbelief suspension 28 Feb 2020 The engineer made a $1 bln operating loss after issues in its aerospace arm. Shares rose after CEO Warren East said charges related to the Trent 1000 engine were now mostly over. To hit a $1.3 bln free cash flow target, investors used to bruising one-offs must take his word.
Hong Kong property tycoon builds model buyout 28 Feb 2020 Peter Woo wants to take his $19 bln Wheelock empire private using cash and shares in subsidiaries. He’s shrewd to pull the plug on the discounted, thinly traded holding company while an epidemic threatens valuations. The 52% premium is fair, and a pleasant surprise for investors.
Indian markets will resist jolt from riots 28 Feb 2020 Sectarian violence has left at least 32 dead in the capital. The unrest broke out at a time of slowing domestic growth and when global investors are jittery about the risk of a pandemic. Still, the world’s fifth-largest economy is surprisingly alluring for foreign funds.
China’s virus lockdown premieres iQiyi’s next act 28 Feb 2020 Quarantine measures and contagion fears have kept millions at home, giving the country’s $18 bln answer to Netflix a boost. Luring paying subscribers with new movie releases and more looks smart. It’s a test of how the coronavirus might accelerate a shift in consumer habits.
Beyond Meat is sliding down the food chain 27 Feb 2020 The plant-based meat maker’s revenue growth decelerated to 212%. And competitors have only just started to flood the market with their own alt-meat. That threatens to hit Beyond Meat in two ways: the amount it can sell, and the pricing power reflected in its 34% gross margin.
Advent can afford view from Thyssen’s top floor 27 Feb 2020 A consortium led by the buyout group is paying 17.2 bln euros for Thyssenkrupp’s lift unit. It’s spending more than expected after being pushed to the wire by rival Blackstone. But assuming Advent can load up on debt and hike margins, it can just about make the ride worthwhile.
Zoom’s work-from-home bump will lose appeal 27 Feb 2020 The $28 bln video-communications firm’s stock has shot up more than 60% in a month, as coronavirus prompts a surge in telecommuting. That suggests a deluge of new users, but also requires them to stick around. It’s somewhat defensible, until working from home loses its charm.
Virus will finally force politicians to spend 27 Feb 2020 Central bankers don’t have the tools to combat the economic damage. Rather than relying on them again, governments will have to raid their coffers to safeguard public health and prop up growth. That will do short-term good, but could further distract from long-standing problems.
NMC mess implies London needs fiercer watchdogs 27 Feb 2020 The Gulf hospital operator fired its CEO after revealing undisclosed debts. Its poor governance and disclosure sit awkwardly with the UK’s aim to be the world’s top venue for foreign companies and capital. Keeping that reputation requires tougher penalties for bad behaviour.
Breakdown: Coronavirus goes global 27 Feb 2020 China’s draconian efforts have slowed the new disease, but it’s now spreading worldwide. Competent and open government is the best defense against hospitals and society being overwhelmed. Nations may have to deal with recurring outbreaks. Breakingviews explains what to expect.
Heathrow ruling reflates sagging UK green stature 27 Feb 2020 Judges have grounded plans for a third runway at Europe’s busiest airport, saying the government ignored obligations to cut CO2 output. As host of a major climate change summit in November, it’s critical Britain has the credibility to push for emissions curbs. This should help.
Supply chain “tiger traps” demand better signposts 27 Feb 2020 The centuries-old business of lending to companies’ suppliers has become a 2.8 trln euro playground for financial and technological innovation. Tools that help firms to better use capital can flatter debt levels and exacerbate a liquidity crunch. Investors need more transparency.
StanChart leaves investors secure in their gloom 27 Feb 2020 Boss Bill Winters scrapped a year-old target of lifting return on tangible equity to 10% by 2021, citing low rates and the coronavirus. A $500 mln buyback helps, but there is little sense of when profitability might reach the cost of capital. That cements a cut-price valuation.
New Reckitt Benckiser boss embarks on deep clean 27 Feb 2020 Laxman Narasimhan is making up for past neglect at the Dettol maker with a major overhaul. The pain of a 5 bln pound write-down on baby-food group Mead Johnson is only partly soothed by ambitious medium-term growth goals. Splitting the health and hygiene units will have to wait.
Viewsroom: Hong Kong in the time of Covid-19 27 Feb 2020 Small businesses are hurting, while bankers sit idle and families struggle with school closures and other containment efforts. Despite having only some 80 coronavirus cases, life – as well as retail, tourism and real estate – feels noticeably different in the Asian financial hub.
South Africa’s spending cuts border on hara-kiri 27 Feb 2020 The government wants to lop 6% annually off public sector wages to rein in the biggest deficit since the apartheid era. That’s heroic and points to a dangerous showdown with powerful unions. Even if it prevails, widespread protests will darken an already grim economic picture.
Budweiser gets a bitter taste of breakups 27 Feb 2020 Covid-19 may cost AB InBev’s Asia spinoff $170 mln in EBITDA from China for January and February. That’s some $3 bln of implied enterprise value, before factoring in the rest of the year or the region. There’s a price to pay for sprawl, but a narrower focus brings its own risks.
Companies will be first line of U.S. virus defense 26 Feb 2020 The White House is downplaying the spread of the coronavirus, perhaps to calm markets. If there’s an outbreak, it may be up to CEOs to make calls that would hurt the economy, like closing factories. It would follow the trend of firms stepping up where government has left a void.
Apple scores another unwanted first on China 26 Feb 2020 After sounding the alarm earlier than peers on the impact of coronavirus on manufacturing, the $1.3 trln iPhone maker just got a clear warning from shareholders on human rights. CEO Tim Cook has kept divergent stakeholders onside pretty successfully, but that’s becoming harder.
Pandemic bonds are the sick man of finance 26 Feb 2020 They’re supposed to harness market power to help in a health crisis. Yet pandemic bonds are ill-suited to the task. Complex restrictions and the need to lure buyers mean creditors tend to get the upper hand – and recipients of the funds may benefit little even if they win.
CEO turnover shows even bosses are human 26 Feb 2020 Corporate chiefs are leaving their posts in record numbers, including at Disney, Mastercard and DuPont. Anything from longevity to internal disputes is behind it. But with a possible pandemic and political and economic uncertainty, there are plenty of other reasons to chill out.
Virgin’s galactic valuation 26 Feb 2020 Richard Branson’s space-tourism enterprise is worth nearly $7 billion. That’s high even based on the company’s rosy projections, and it’s stratospheric on more realistic assumptions.
Virgin Galactic’s valuation looks stratospheric 26 Feb 2020 The space-tourism outfit is up eightfold in enterprise value in three months to $7 bln. That’s some 25 times the company’s forecast EBITDA in 2023. A more realistic outlook makes that multiple, and the valuation, look hyperstretched, as a new Breakingviews calculator shows.