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☆ Spotify’s awkward three-way dance leads to slip-up
▼ + stars: | 2023-07-25 | by ( ) www.reuters.com time to read: +2 min

LONDON, July 25 (Reuters Breakingviews) - Spotify (SPOT.N) is caught between the expectations of investors and major music labels. One bullish argument for Spotify’s stock is that higher prices will mean higher margins over time. First, some of Spotify’s customers pay annually, which means the price hike might take a while to come through. He’s locked in a long-term standoff with major labels like Universal Music Group (UMG.AS), which currently grab the overwhelming majority of Spotify’s revenue. In other words, Spotify’s future may be rosier than Ek is willing to let on.

Persons: Daniel Ek, Ek, coy, He’s, Karen Kwok, Liam Proud, Oliver Taslic Organizations: Reuters, Spotify, Universal Music, Twitter, Thales, Thomson Locations: Spain

☆ NatWest goof is a boon for sketchy bank clients
▼ + stars: | 2023-07-21 | by ( Liam Proud | ) www.reuters.com time to read: +5 min

LONDON, July 21 (Reuters Breakingviews) - A row between right-wing talking head Nigel Farage and UK bank NatWest (NWG.L) could have much broader consequences. Last November, a reputational risk committee of NatWest’s exclusive private bank Coutts decided to ditch Farage by summer 2023. After closing the Coutts wealth account, NatWest offered Farage a standard one at the parent group instead, for example. But for now the biggest winners from the Farage-Coutts row seem to be sketchy UK bank customers. Briefing papers presented to Coutts’ wealth reputational risk committee said Farage was “considered by many to be a disingenuous grifter”.

Persons: Nigel Farage, Alison Rose, Farage, Coutts, didn’t, Rose, Andrew Griffith, Coutts ’, “, ” Farage, George Hay, Oliver Taslic Organizations: Reuters, NatWest, Conservative, Treasury, Financial Ombudsman Service, Twitter, UK Independence Party, Thomson

☆ UK is in danger of becoming the Nigeria of wind
▼ + stars: | 2023-07-20 | by ( George Hay | ) www.reuters.com time to read: +3 min

LONDON, July 20 (Reuters Breakingviews) - Britain is supposed to be the Saudi Arabia of wind power. Vattenfall’s decision on Thursday to halt the 1.4 gigawatt (GW) Norfolk Boreas project is just the latest sign that Britain’s most appropriate fossil-fuel comparator may not be the biggest and most efficient producer. Vattenfall, a state-held Swedish power company, has gone cool for reasons that are well-discussed in the wind sector. The obvious move for UK Prime Minister Rishi Sunak would be to allow developers to charge more for power, to make up for higher costs. Follow @gfhay on TwitterCONTEXT NEWSVattenfall is stopping the development of its 1.4 gigawatt (GW) Norfolk Boreas offshore wind project off the coast of Britain, the state-owned Swedish utility said on July 20.

Persons: Boris Johnson’s, Vattenfall, Rishi Sunak, Liam Proud, Oliver Taslic Organizations: Reuters, Siemens, UK, FTI, Norfolk, Thomson Locations: Britain, Saudi Arabia, United Kingdom, Riyadh, Norfolk Boreas, Swedish, Norfolk, Orsted, Nigeria

☆ European earnings add weight to economic bear case
▼ + stars: | 2023-07-20 | by ( ) www.reuters.com time to read: +2 min

LONDON, July 20 (Reuters Breakingviews) - It’s only early in the financial-reporting season for European companies. But macro bears will already be able to find all the doom and gloom they could ever want. But pricey recipe kits and premium toilet paper are relatively easy ways for pinched consumers to save money. Before the results, all three companies were priced at a premium to the STOXX Europe 600 Index (.STOXX) using 12-month forward price to earnings multiples, suggesting possible shareholder complacency. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Persons: napping, Liam Proud, whir, Neil Unmack, Oliver Taslic Organizations: Reuters, Twitter, Thomson Locations: Europe

☆ Next Gucci CEO may have toughest job in luxury
▼ + stars: | 2023-07-19 | by ( ) www.reuters.com time to read: +2 min

LONDON, July 19 (Reuters Breakingviews) - Gucci is getting a new look. Gucci took a harder hit during the pandemic than some mega-brand rivals, then struggled to bounce back. That’s way below the 10% and 15% rise brokers are pencilling in for Louis Vuitton and Christian Dior (DIOR.PA) respectively. All of that makes Gucci CEO job one of the most interesting in the luxury sector – but also possibly the toughest. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Persons: Gucci, Marco Bizzarri, Jean, François, Kering’s, Bizzarri, Roberto Eggs, Louis Vuitton, Christian Dior, Karen Kwok, Xavier Niel’s, Liam Proud, Streisand Neto Organizations: Reuters, Tuesday, Gucci, JPMorgan, Revenue, Alpha, Louis, Hermès, Barclays, Bain & Company, Twitter, Xavier Niel’s GAM, Commonwealth Games, Thomson Locations: Milan, Italian, Kering’s Paris, China, People’s Republic

☆ Bayer crop spinoff would be tricky but bountiful
▼ + stars: | 2023-07-10 | by ( ) www.reuters.com time to read: +2 min

LONDON, July 10 (Reuters Breakingviews) - Bayer’s (BAYGn.DE) new CEO may be considering some valuable crop rotation. The 49 billion euro seed-to-drug maker’s shares rallied 3% on Monday after a Friday report by German news service Platow Brief said the company may spin off its troubled crop science division. The crop science division was born of Bayer’s disastrous takeover of Monsanto in 2018, and the German conglomerate is still grappling with lawsuits alleging that its weedkiller caused cancer. If it offloads the crop science division, Bayer could indemnify the new owners against the cost of future litigation up to a certain point. Currently, the crop science division throws off a lot of the combined company’s cash.

Persons: maker’s, Bill Anderson, Bayer, Anderson, Aimee Donnellan, Liam Proud, Pranav Kiran Organizations: Reuters, Monsanto, Twitter, Thames, Thomson Locations: China

☆ UK bank’s 25% drop adds further investor wildcard
▼ + stars: | 2023-07-07 | by ( ) www.reuters.com time to read: +2 min

LONDON, July 7 (Reuters Breakingviews) - Being a bank investor was already hard enough in 2023. Shareholders who thought rising interest rates were a one-way bet realised otherwise when losses on long-term bonds helped sink Silicon Valley Bank. In it, OSB said it will take a roughly 170 million pound hit to revenue because customers were refinancing home loans quicker than expected. That, in turn, involves predicting how long customers will stay on higher variable-rate tariffs after their fixed-rate deals expire. Central banks’ inflation fight has changed the dynamics here, since rising rates incentivise borrowers to switch more quickly.

Persons: OSB, Liam Proud, Lisa Jucca, Oliver Taslic Organizations: Reuters, Bank, Twitter, Thomson

☆ How UBS can cling on to its Swiss purchase
▼ + stars: | 2023-07-06 | by ( Liam Proud | ) www.reuters.com time to read: +6 min

The Swiss bank is under pressure to offload Credit Suisse’s local business to ease a political backlash in its home market. UBS acquired the subsidiary known as Credit Suisse (Schweiz) AG as part of its rescue of the ailing lender in March. Many lawmakers and voters dislike the tie-up, in part because taxpayers provided $10 billion of insurance against possible losses on Credit Suisse assets. Ermotti, who previously ran UBS between 2011 and 2020, now favours keeping the business, according to Swiss media reports. If Ermotti can avoid large-scale job losses in the coming years, he may be able to hang onto his Swiss purchase.

Persons: Sergio Ermotti, Ermotti, Ralph Hamers, Lukas Gähwiler, GRACE, Peter Thal Larsen, Katrina Hamlin Organizations: Reuters, UBS boss’s, UBS, Credit Suisse, AG, Swiss National Bank, Reuters Graphics Reuters, Credit Suisse Schweiz, Suisse, Reuters Graphics, Credit, JPMorgan, Schweiz, Thomson Locations: Swiss, Schweiz, Switzerland’s, Switzerland, Europe, Ermotti

LONDON, July 3 (Reuters Breakingviews) - Canary Wharf may be in trouble once again. While CWG’s average tenancy agreement still has 10 years left, the risk is that itself and the wider Canary Wharf area slip into a vicious circle. Rental incomes on apartments are roughly on a par with offices, per square foot, according to a person familiar with the matter. The 45-storey skyscraper in Canary Wharf has been HSBC's home for more than 20 years. Canary Wharf Group, which runs the east London financial district, declined to comment.

Persons: Paul Reichmann’s Olympia, Morgan Stanley, CWG, Knight Frank, Hong Kong’s Cheung, Bear Stearns, that’s, Liam Proud, Pranav Kiran Organizations: Reuters, Docklands, HSBC, York, Saudi Arabian, Canary Wharf Group, Barclays, Estates, Brookfield Property Partners, Qatar Investment Authority, Brookfield, Canary, QIA, Moody’s, Reuters Graphics Reuters, Hong Kong’s Cheung Kei Group, Churchill, NYK, Transport, BT, Thomson Locations: London, Canary, Canadian, Saudi, U.S, Brookfield, That’s, Docklands, Stratford, Wharf, QIA, Canary Wharf, Europe's

☆ Italy’s hottest financial saga gets new twist
▼ + stars: | 2023-07-03 | by ( ) www.reuters.com time to read: +2 min

MILAN, July 3 (Reuters Breakingviews) - Italy’s most gripping corporate soap opera has entered a new chapter. Delfin, the holding company of the family of late eyewear billionaire Leonardo Del Vecchio, won regulatory approval to raise its stake in Assicurazioni Generali (GASI.MI) above its current holding of about 10%. The saga also involved a failed attempt by a broader anti-Mediobanca coalition to replace Generali CEO Philippe Donnet last year, but seemed to quiet down after Del Vecchio passed away in June 2022. Despite the market rally, there is no sign that the Del Vecchio clan wants to increase its Generali presence right now. The family could nonetheless still increase its bet at some point in the future, but the next Generali plot twist may take time to materialise.

Persons: Delfin, Leonardo Del Vecchio, Assicurazioni, Del Vecchio, Philippe Donnet, Lisa Jucca, Liam Proud, Oliver Taslic Organizations: MILAN, Reuters, Delfin, Del, Twitter, KKR, Thomson Locations: Mediobanca, Generali, China

☆ Private equity risks gorging on its secret sauce
▼ + stars: | 2023-06-14 | by ( Liam Proud | ) www.reuters.com time to read: +7 min

Investors prefer pedestrian but steady management fees over the lumpy share of fund profit that is the industry’s special sauce. Private equity firms with a public listing funnel some of the carry to employees and some to shareholders. TPG (TPG.O) last year went public with a similar strategy of paying around two-thirds of performance-related revenue to employees. Assuming the general idea is to keep overall earnings steady, then higher fee-based income for shareholders must be matched by lower cash compensation for employees. It suggests that for KKR, TPG and the rest, there is a limit to just how much of their own secret sauce employees can eat.

Persons: Steve Schwarzman, Carlyle, Blackstone’s, Schwarzman, Henry Kravis, George Roberts, EQT, Blackstone, Harvey Schwartz, Rowe Price, Thoma Bravo, Jeffrey Goldfarb, Sharon Lam, Oliver Taslic Organizations: Reuters, Blackstone, KKR, Apollo Global Management, JPMorgan, Reuters Graphics, TPG, Apollo, Reuters Graphics Reuters, Alpha, Bain Capital, Thoma, Ares Management, Thomson Locations: BlackRock

☆ SoftBank’s Arm IPO set for double stroke of luck
▼ + stars: | 2023-06-13 | by ( Karen Kwok | ) www.reuters.com time to read: +3 min

LONDON, June 13 (Reuters Breakingviews) - SoftBank Group (9984.T) boss Masayoshi Son must be breathing a sigh of relief over the forthcoming float of his chip designer Arm. In April it announced plans to work with Arm to ensure that Intel’s factories can produce chips based on the UK group’s designs. The second, and perhaps more important, stroke of luck is the ongoing valuation frenzy for companies linked to artificial intelligence. Follow @karenkkwok on TwitterCONTEXT NEWSIntel is in talks with SoftBank Group’s Arm to be an anchor investor in the chip designer’s initial public offering, Reuters reported on June 12, citing a source familiar with the matter. Shares in SoftBank, which bought Arm in 2016, rose 5% to 6,310 yen on June 13.

Persons: Masayoshi, he’d, Jefferies, Arm’s, SoftBank, Liam Proud, Pranav Kiran, Oliver Taslic Organizations: Reuters, SoftBank, Intel, Nvidia, Bloomberg, Philadelphia Semiconductor, Nasdaq, Thomson Locations: U.S, New York, SoftBank

☆ Embracer’s standalone pitch hits the right buttons
▼ + stars: | 2023-06-13 | by ( ) www.reuters.com time to read: +2 min

The $3 billion video-game holding company announced on Tuesday that it would slash costs and investments to achieve a more “stable future”. The new strategy is to rely on its own free cash flow, rather than partnerships or capital hikes, to fund the business. Wingefors wants to cut overhead costs by at least 10% compared to the last quarter’s annual run rate. At least Wingefors’ new standalone survival strategy gives him a stronger negotiating hand if a bid comes along. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Persons: Lars Wingefors, it’s, Wingefors, Oliver Taslic, Liam Proud, Pranav Kiran Organizations: Reuters, Investors, Twitter, Thomson Locations: India, Teck, China

☆ UBS’s state aid is a disaster insurance policy
▼ + stars: | 2023-06-09 | by ( ) www.reuters.com time to read: +2 min

LONDON, June 9 (Reuters Breakingviews) - Sergio Ermotti has a taxpayer safety net, but it only kicks in if things get really bad. The state will eat 9 billion Swiss francs ($10 billion) of losses on certain assets once UBS has swallowed an initial 5 billion Swiss francs. The actual contract, despite being 94 pages long, is missing the most important number: how many assets are covered by the agreement. UBS in mid-May said it would write down the value of Credit Suisse’s assets by $10 billion. To breach its initial loss threshold, the assets would have to fall 11% below their already discounted value.

Persons: Sergio Ermotti, Liam Proud, Xavier Niel, George Hay, Oliver Taslic Organizations: Reuters, UBS, Credit Suisse, Finance, Suisse’s, Twitter, Toyota, Thomson

☆ Telegraph’s $750 million price implies vanity contest
▼ + stars: | 2023-06-08 | by ( Pamela Barbaglia | ) www.reuters.com time to read: +4 min

That’s the only way to explain a possible 600 million pound ($748 million) price tag for the Britain’s Telegraph Media Group (TMG). EBITDA hit 40 million pounds, up 5%, based on UK filings, while borrowings were minimal. Lloyds reckons the price tag could be as high as 600 million pounds, according to media reports. On that basis, TMG’s value including debt would be just over 100 million pounds. Japanese media group Nikkei bought the Financial Times in 2015 for 2.5 times the previous year’s revenue.

Persons: Liz Truss, Hannah McKay, Nick Hugh, EBITDA, Barclay, Sir Frederick Barclay, David, TMG, AlixPartners, Italy’s Agnelli, B.UK, Liam Proud, Oliver Taslic Organizations: Sunday Telegraph, British, Conservative Party, REUTERS, Reuters, Britain’s Telegraph Media, Spectator, Lloyds Banking Group, Lloyds, Daily, Nikkei, Financial Times, Economist Group, Telegraph Media, Telegraph, Sky News, Thomson Locations: Birmingham, Britain, Bermuda

☆ Telegraph’s $750 mln price implies vanity contest
▼ + stars: | 2023-06-08 | by ( Pamela Barbaglia | ) www.reuters.com time to read: +3 min

That’s the only way to explain a possible 600 million pound ($748 million) price tag for the Britain’s Telegraph Media Group (TMG). EBITDA hit 40 million pounds, up 5%, based on UK filings, while borrowings were minimal. Lloyds reckons the price tag could be as high as 600 million pounds, according to media reports. Japanese media group Nikkei bought the Financial Times in 2015 for 2.5 times the previous year’s revenue. Follow @pamela_msg on TwitterCONTEXT NEWSReceivers chosen by Lloyds Banking Group could put the Telegraph Media Group up for sale after its Bermuda-based parent company B.UK failed to repay bank loans.

Persons: Nick Hugh, EBITDA, Barclay, Sir Frederick Barclay, David, TMG, AlixPartners, Italy’s Agnelli, B.UK, Liam Proud, Oliver Taslic Organizations: Reuters, Britain’s Telegraph Media, Sunday Telegraph, Spectator, Lloyds Banking Group, Lloyds, Daily, Nikkei, Financial Times, Economist Group, Conservative Party, Telegraph Media, Telegraph, Sky News, Thomson Locations: Bermuda

☆ Tiny tech bank defies US massacre of the minnows
▼ + stars: | 2023-06-08 | by ( John Foley | ) www.reuters.com time to read: +6 min

One example is $1 billion Live Oak Bancshares (LOB.N), which flouts many preconceptions about what it means to be a tiny U.S. bank. But if those failures demonstrated that rapid growth brings escalating risk, Live Oak is a counterexample. Because of the way that programme is structured, around 40% of Live Oak’s lending carries a government guarantee. The company spun out its cloud-based banking software division nCino (NCNO.O) in 2014; that firm is now worth $2.8 billion, more than twice Live Oak’s value. That more earthly valuation might reflect Live Oak’s biggest risk: that it starts to look more like the rest of the pack.

Persons: it’s, Chip Mahan, SVB, It’s, Huntley Garriott, Goldman Sachs, reckons, ’, Keefe, Mahan, Liam Proud, Streisand Neto Organizations: YORK, Reuters, Wachovia, Valley Bank, U.S, Regional, Silvergate, Reuters Graphics Reuters, government’s, Business Administration, SBA, Federal, Truist, PNC Financial Services, redwoods, Twitter, Thomson Locations: United States, North Carolina, U.S

☆ Xavier Niel offers risky alternative for sick GAM
▼ + stars: | 2023-06-08 | by ( ) www.reuters.com time to read: +2 min

LONDON, June 8 (Reuters Breakingviews) - French billionaire Xavier Niel is asking investors to have one last flutter on GAM (GAMH.S). GAM investors will receive shares in Liontrust worth around 0.5% of the target company’s assets under management back in May, and even less now. If all goes well, GAM’s current investors could still keep a much larger share of the upside than they would with the Liontrust deal. The risk, however, is that GAM’s turnaround proves hard, cost cuts are more expensive and damaging, and the group keeps losing assets or staff. Moreover, it’s plausible that Niel wins enough backing to block the deal, but not enough to replace the board, leaving GAM in limbo.

Persons: Xavier Niel, Niel, Bruellan, manager’s, Neil Unmack, Liam Proud, Streisand Neto Organizations: Reuters, Liontrust Asset Management, Twitter, Toyota, Thomson Locations: Liontrust

☆ UBS’s $10 bln state guarantee is a useful fantasy
▼ + stars: | 2023-06-07 | by ( Liam Proud | ) www.reuters.com time to read: +4 min

LONDON, June 7 (Reuters Breakingviews) - UBS (UBSG.S) and the Swiss government have negotiated a state backstop that neither side wants to use. The scheme, designed to sweeten the Credit Suisse (CSGN.S) rescue, would see the government cover $10 billion of losses on former Credit Suisse assets after UBS swallows the first $6 billion. One option could be for the state to guarantee only a limited subset of former Credit Suisse assets – just the ones that UBS plans to get rid of, for example, like fixed-income derivatives. The government could also insist on dividend or buyback restrictions if the Swiss bank ever taps the scheme. The guarantee would only kick in after UBS has swallowed 5 billion Swiss francs ($6 billion) of losses.

Persons: Sergio Ermotti, Karin Keller, Sutter, Ermotti, that’s, ”, Neil Unmack, Oliver Taslic Organizations: Reuters, UBS, Swiss, bank’s, Credit Suisse, Switzerland’s Social, –, RBC, AG, U.S . Securities, Exchange Commission, Thomson Locations: Swiss

☆ Knocked-down EQT pet buyout will get over the line
▼ + stars: | 2023-06-02 | by ( ) www.reuters.com time to read: +2 min

Private equity firm EQT (EQTAB.ST) on Friday announced a new deal that values the Cheshire-based company at 4.9 billion pounds ($6.1 billion) including debt. The offer took a 5% bite out of the original bid from April, mainly because Dechra subsequently released a poor trading update. Shares in the target, led by company veteran Ian Page, shot up on Friday but are 6% below the EQT takeout price. For starters, board directors have backed the deal and committed to tender their, admittedly small, slither of shares. Breakingviews calculated in April that the buyer would earn a so-so 17% gross return at the original price, even using very generous growth assumptions.

Persons: Dechra, Ian Page, Liam Proud, Aimee Donellan, Streisand Neto Organizations: Reuters, Dechra Pharmaceuticals, RBC, Twitter, Toyota, Thomson Locations: Cheshire, Saudi, East

☆ Telco tycoons’ UK bets look stuck underwater
▼ + stars: | 2023-05-25 | by ( Pamela Barbaglia | ) www.reuters.com time to read: +5 min

Set those complications aside, however, and his stake-building may have cost about 4.2 billion pounds overall since 2021. That’s according to Breakingviews calculations which use the share price from the day before each stake increase became public. The holding is now worth 3.6 billion pounds, implying a nearly 560 million pound or 13% loss. That’s mild compared with some of Vodafone’s investors. But UK consolidation would hardly move the needle as Vodafone is haggling to retain control of the merged entity.

☆ How risky bank debt makes customers safer
▼ + stars: | 2023-05-25 | by ( Liam Proud | ) www.reuters.com time to read: +6 min

LONDON, May 25 (Reuters Breakingviews) - Bank watchdogs are mulling changes to deposit insurance schemes after a string of lenders failed. That’s a problem for depositors, since long-term debt acts as a buffer for customers too. Forcing the issuance of more long-term bank debt could make them cheaper too. The trickier part is figuring out who ultimately bears the cost of loss-absorbing debt. Relying more on loss-absorbing debt could make such giant ad-hoc bills less likely in the future.

☆ Mediobanca dips toe into tech M&A shark tank
▼ + stars: | 2023-05-18 | by ( ) www.reuters.com time to read: +2 min

Mediobanca (MDBI.MI), the 8.5-billion-euro financial group run by veteran CEO Alberto Nagel, said on Thursday it had agreed to buy London-based Arma Partners, an advisory boutique that specializes in technology deals. With revenue in excess of $100 million, or about 90 million euros, Arma should add more than 10% to Mediobanca’s annual net fees and commission of 850 million euros. The French boutique’s contribution, although a record, stood at 63 million euros in the financial year that ended in June 2022. Buying Arma allows Mediobanca to gain expertise in growing areas like cloud services, software and cybersecurity, which are outside the Italian bank’s core strengths. Star banker Erik Maris left Mediobanca a year after Nagel clinched the purchase of a 66% stake in the boutique.

☆ UBS kitchen sink has protection from further leaks
▼ + stars: | 2023-05-17 | by ( Liam Proud | ) www.reuters.com time to read: +4 min

UBS (UBSG.S) late on Tuesday released a regulatory filing showing what the bank’s accounts may look like after its roughly $4 billion acquisition of Credit Suisse (CSGN.S). For starters, the filing is peppered with caveats, including that UBS still hasn’t managed to complete detailed valuations of the assets. At roughly 2% of Credit Suisse’s overall loans and financial assets, the haircuts do seem rather modest. The filing’s risk factors note that UBS might inherit future court cases that could stem from the cancellation of Credit Suisse’s Additional Tier 1 bonds, for example. Ermotti might not have performed a total kitchen sink, but his investors needn’t be too concerned.

☆ GAM’s takeover rebels have a weak hand
▼ + stars: | 2023-05-16 | by ( ) www.reuters.com time to read: +2 min

The billionaire has a good track record in activism, having agitated to block a rights issue at Unibail-Rodamco-Westfield (URW.PA). But getting a better deal at GAM looks hard. NewGAMe, backed by Niel, and its partner Bruellan are right that the Liontrust offer is far from appealing. The agitators hope to exceed a 10% stake, enough perhaps to stop Liontrust from taking full ownership of GAM. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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