We have updated our Terms of Use.
Please read our new Privacy Statement before continuing.

Capital Calls

3 September 2021 By Breakingviews columnists


– U.S. jobs

– Renaissance settlement

– Technip Energies


Delta damper. The Covid-19 Delta variant slowed U.S. jobs growth to just 235,000 in August, the Labor Department said on Friday. Economists surveyed by Reuters projected an increase of 750,000 positions. Payrolls for restaurants and bars fell by 42,000 while the Black unemployment rate rose 0.6 percentage points, to 8.8%. Those are good reasons for the Federal Reserve to reassess paring its $120 billion in monthly asset purchases.

The more contagious Delta strain was bound to hurt hiring. With that in mind, Fed chief Jerome Powell said a week ago that he still supported reducing bond purchases by the end of this year. Most officials on the Fed’s rate-setting committee believed in July that its goal of price stability had been met.

But the disappointing jobs report warrants caution. Inflation data still supports tapering soon but it would be logical for central bankers to see if Delta has a more lasting effect on the economy. The Fed’s goal of maximum employment is a ways off, so an interest-rate hike is still on the back burner. (By Gina Chon)

Second birth. A $7 billion potential tax settlement with U.S. hedge fund executives isn’t just reassuring for the millions of Americans who actually pay what’s due. It’s also a helpful advertisement for two proposed policies from President Joe Biden.

The deal between the Internal Revenue Service and executives at Renaissance Technologies comes seven years after Senator Carl Levin first raised the alarm. He argued that funds like Renaissance misleadingly treated some profit as long-term capital gains, rather than the short-term kind that are taxed at the higher regular income rate.

Biden already wanted to effectively wipe the distinction away. His sweeping proposal to reform the tax system would set the same, 39.6% rate for investments and income alike. For now his plan is stuck – even some Democrats prefer a long-term rate of 28%.

Separately, Biden talked of giving $80 billion to the tax authorities to conduct better audits . That, too, is problematic – Biden reckons it spells $700 billion of extra revenue over a decade, but the independent Congressional Budget Office says $200 billion. More wrangling is inevitable. But a chunky win for the IRS can only help the White House’s case. (By John Foley)

Going Dutch. Technip Energies has found a valuable friend. Dutch investment fund HAL is buying a 9% stake in the 2 billion euro French oil services player from parent TechnipFMC. It’s an important vote of confidence after being launched on public markets in February into the teeth of a selloff gale for renewable energy stocks. The 10% premium HAL is paying to Technip Energies’ July low draws a firm line under the stock. Technip Energies shares climbed 5%.

Even though Technip Energies’ current expertise lies in servicing traditional oil and gas rigs, much of its promise comes from renewable technologies, such as harnessing wind and wave power to make offshore “green” hydrogen. In that sense, its initial public offering came at the worst possible time. Danish offshore wind giant Orsted lost 40% of its market value from mid-January to May. HAL’s decision to clamber aboard may mean the worst is over. (By Ed Cropley)

Fresh ingredient. Dutch Royal DSM is slow-cooking a transformation. The 30 billion euro chemicals company is buying First Choice Ingredients, valuing the dairy-based savoury flavourings business at $453 million, including debt. That’s almost 20 times an estimated adjusted 2021 EBITDA, in line with peer Corbion. The U.S. company flogs enzymes and cultures-based flavourings – an idea likely to be popular with proponents of “clean” food.

It also helps DSM’s efforts to focus on nutrition while slowly cutting materials, which contributed around a fifth of net sales in the first half, from its diet. Last year the company sold its resins and functional materials businesses to Covestro for 1.6 billion euros. This makes sense. Stuff like thermoplastics has limited synergies with perishables. Industry leader Givaudan trades at almost 30 times forward EBITDA compared to DSM’s 17 times, according to Refinitiv. Finalising its breakup could boost DSM’s valuation. (By Dasha Afanasieva)


Email a friend

Please complete the form below.

Required fields *


(Separate multiple email addresses with commas)