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Corona Capital

2 February 2021 By Breakingviews columnists

Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– Big Oil’s big dilemma

– Uber’s intoxicating deal

Black tar. Exxon Mobil boss Darren Woods made a rare appearance on the $190 billion oil giant’s earnings call on Tuesday. He artfully dodged questions about the company’s deals strategy following a Reuters report that said it had conversations with peer Chevron about merging. Woods said the company looks “at a lot of things in that whole space” and that it had been “active in that for quite some time.”

A deal between the two companies would help to prop them both up in a market with shareholders that are increasingly hostile towards fossil fuels. Woods knows the criticism well – he’s fending off a group of activists. And yet European oil giant BP is facing another type of scrutiny from shareholders, who have yet to reward its pivot to green power. In today’s oil market, chief executives just can’t win. (By Lauren Silva Laughlin)

Down in a shot. Uber Technologies’ acquisition of Drizly is the M&A equivalent of a tequila slammer – small but punchy. The rideshare-and-delivery firm is buying the online alcohol dispatch service for $1.1 billion, mostly in stock. Liquor retailers may feel the after-effects for years to come, even if the $105 billion Uber doesn’t.

Uber’s shares, aided by soaring food deliveries during the pandemic, are up 50% in a year. Its enterprise value to forward sales is now a more than 40% premium to ride-sharing competitor Lyft. Drizly, which lets shoppers buy branded drinks from local retailers for rapid delivery, has also experienced a bonanza. In May, for example, sales were five times what it says it would normally expect. It makes sense that Uber would use one inflated valuation to buy another.

Yet the deal could be significant. Uber’s delivery service has already brought restaurants into its sphere of influence. Drizly will add convenience stores too, giving them a new sales channel – but also more intense competition. Drizly is an add-on for Uber, but for thousands of small businesses in its target market, it could be the beginning of an altered state. (By John Foley)

Act two. Former U.S. Commerce Secretary Wilbur Ross has found a new gig. He has formed Ross Acquisition Corp II, a blank-check company that hopes to raise up to $300 million in an initial public offering. It remains to be seen whether his term serving in the turbulent administration of President Donald Trump dents his SPAC goals.

It hasn’t hurt others. Another former Trumper, Gary Cohn, raked in 20% more than expected for his special-purpose acquisition company at $720 million. But he had his Goldman Sachs pedigree behind him, too, and left midway through Trump’s term.

Ross, 83, was a respected billionaire who made his fortune in steel companies and auto parts. But as a government newbie, he was often sidelined in economic battles against China and sometimes fell asleep at meetings. At least a SPAC puts him back on familiar Wall Street ground. (By Gina Chon)

Bumble meets its match. The dating app tailored to women is seeking to raise over $1 billion in its initial public offering, according to an updated regulatory filing on Tuesday. At the high end of its price range of $28 to $30 per share, that values Bumble at around $6 billion.

The company founded by Whitney Wolfe Herd may be learning that modesty is a desirable trait. At $30 a share, and factoring in debt, Bumble is worth around 12 times sales of $543 million for the 12 months ending in September. That’s less than already public rival Match, at roughly 18 times sales, which has seen its market value more than double since Blackstone stumped up $3 billion for Bumble back in November 2019. Look for Bumble to find more love when it debuts in the red-hot stock market. (By Jennifer Saba)

Cornucopia. From scarcity to plenty will be the 2021 narrative for Covid-19 vaccines. That’s great for society but less for pharmaceutical firms. Those earliest out of the gates are doing well. Pfizer said on Tuesday it expects revenue of around $15 billion this year from its shots. It splits this with partner BioNTech, but still expects pre-tax margins nearing 30%. Analysts expect rival Moderna to earn $6 billion, its first year in the black.

In the past week, Johnson & Johnson, Novavax and Russia’s Sputnik V vaccine have all published good results. Add production goals for these companies to Pfizer and Moderna, and about 4 billion people could receive shots this year.

Stick in vaccines that have been approved outside the United States, such as AstraZeneca’s and offerings from China’s Sinopharm and Sinovac Biotech, and nearly 7 billion people could be vaccinated. Unless the jab becomes an annual rite, the stream of Covid revenue should dry up by 2022. (By Robert Cyran)

Wishful thinking. What does it take to improve the banking industry’s reputation? Matt Comyn, chief executive of Australia’s largest lender Commonwealth Bank, said on Monday he hopes treating customers properly and helping shield the economy from the worst impact of the pandemic “has gone some way” to doing so.

Two years after a scathing Royal Commission report lambasted the country’s banks, clients are somewhat more satisfied with them than they were in 2019, according to market research firm Roy Morgan. Even so, redemption can take a long time. U.S. watchdogs’ efforts in 2016 to tackle the crummy banking cultures that the 2008 financial crisis laid bare came just as Wells Fargo’s fake-accounts fiasco erupted.

Indeed, Australian banks’ past wrongdoings are still dealing with allegations of laundering drug money and enabling illicit payments to people exploiting children. Comyn may be right that the pandemic cleaned up his bank’s reputation somewhat, but there’s plenty of dirt left to scrub. (By Antony Currie)

We’ll Miss You! Moonpig’s private equity backers are putting a big, fat leaving card in the post. Shares in the e-greetings retailer jumped 24% on its debut on Tuesday. Including debt, that values the group at nearly 19 times 2022 EBITDA, based on its recent growth trajectory. Yet the 350 pence per share listing price means the buyout groups, led by London-based Exponent, that bought Moonpig in 2016 are pocketing 520 million pounds, assuming they sell their full allotment of stock.

At 43% of Moonpig’s post-IPO share capital, Exponent is saying goodbye to an unusually large slice, given the minimum 25% free float typically required by London stock market rules. Nor is Moonpig raising lots of extra cash. The 5.7 million new shares sold will bring in just 20 million pounds. But these are not typical times. Demand for new listings, especially if they come with an online, virus-proof bent, is red-hot. Exponent will doubtless be celebrating with more than a card. (By Ed Cropley)

Blurred vision. A wandering eye can cause problems in any union. It seems to be the biggest gripe Elliott Management has with Finnish insurer Sampo, which gobbled up UK peer Hastings Insurance Services amid the pandemic last year. Paul Singer’s fund, which owns a 3% stake in the 20 billion euro insurer, laid out a list of demands on Tuesday including a call to avoid any new deals outside the Nordics. It also wants Sampo to distribute half its 4.3 billion euro stake in Nordea Bank to shareholders.

The Hastings deal has done little for Sampo’s stock market rating. The property and casualty specialist trades on a 14 times forward earnings multiple versus its peer Tryg, valued at 21 times, according to Refinitiv data. Singer’s group says if Sampo follows its advice it can unlock 8 billion euros of value. The insurer’s board may unveil a new strategy on Feb. 24. Given the shares’ lacklustre multiple, it may struggle to reject Elliott’s demands. (By Aimee Donnellan)


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