Hong Kong’s stock exchange will turn its fire on data provider Refinitiv in an attempt to bear-hug the London Stock Exchange Group (LSE) and win investor support for its hostile £32bn takeover. Hong Kong Exchanges and Clearing (HKEX) is understood to be planning to undermine LSE’s case for buying Refinitiv, owned by private equity giant Blackstone and Thomson Reuters, by branding it a low-growth utility saddled with debt. “We’re looking for shareholders to understand how bad the Refinitiv deal is,” said a source, adding that it would rubbish the rival deal. “Refinitiv is a desk-top service . . . it’s not a data acquisition, it’s a terminal acquisition.” The onslaught is a crucial part of HKEX’s game-plan under chief executive Charles Li and chairwoman Laura Cha, after it made a cash-and-share offer worth £83.61 per LSE share last week.
The aviation watchdog is making contingency plans for the possible collapse of Thomas Cook Group (TCG) as the tour operator races to secure a £1.1bn rescue package. The Civil Aviation Authority (CAA) is on alert over the health of the airline and tour business, which serves about 22m customers a year. Its planning is believed to include the possibility of having to repatriate hundreds of thousands of passengers stranded abroad. Thomas Cook’s Air Travel Organiser’s Licence (Atol), which allows it to sell package holidays, is due for renewal on October 1. The tour operator is understood to have lined up insolvency experts from advisory firm AlixPartners, which is on standby should rescue talks with Chinese conglomerate Fosun and a clutch of lenders fail. AlixPartners has been working with Thomas Cook on tackling its debt pile.
Next (NXT) is expected to remain a bright spot in Britain’s battered retail sector as rising online sales counter tougher trading in shops. The high street bellwether is poised to post a 4% jump in full-price sales when it announces half-year results on Thursday. That rise will be underpinned by a 12% surge in online sales for the six months to July 27, with in-store non-discounted sales dropping 4% over the period. Shares in Next have soared 45% to £60.60 since the start of the year, valuing the chain at £8.1bn, as it has weathered the turmoil engulfing the retail sector better than its rivals. Chief executive Lord (Simon) Wolfson said in July that the decline in its bricks-and-mortar shops “hasn’t been nearly as bad as we thought”.
Metro Bank (MTRO) has scrapped early termination fees for some commercial borrowers as it attempts to shift its lending towards residential property, after a mammoth accounting error sent its shares tumbling. The challenger bank is allowing commercial customers to pay off loans early, as it reduces exposure to corporate lending. In July, the bank sold back a portfolio of mortgage loans to Cerberus Capital Management for £521m. The challenger bank is seeking a new chairman after saying in July that 74-year-old American Hill would step down from the role. However, sources said his continued presence on the board could deter successors. Hill declined to comment.
The American boss of Drax Group (DRX) has made several trips to Louisiana to investigate whether bagasse — a residue from sugar cane — could help fuel Drax’s power station in North Yorkshire more cheaply than the sawdust and tree thinnings that have replaced coal in four of its six turbines. His trips are urgent: the giant power station, which supplies up to 6% of the UK’s electricity, is dependent on subsidies that will end in 2027. While coal plants have been closing apace, Drax has clung on by swapping to wood chips. That may not last. The finite subsidies bring the business some £800m a year — a fifth of its £4.2bn revenue. One of its turbines is guaranteed £100 per megawatt hour (MWh), well above the current electricity wholesale price of £35 per MWh. “Biomass has a long-term role to play,” insists Gardiner, the former finance chief promoted to chief executive at the start of 2018, “but it has to be economically viable”.
The owner of Paddy Power and Betfair has defended itself over accusations that it groomed a problem gambler with football tickets and trips to the Grand National. Flutter Entertainment (FLTR) also said it was a “common occurrence” for deposits to be matched by bookmakers, after it was alleged to have put £20,000 into the account of a problem gambler to encourage him to bet more. Flutter is being sued in the High Court by Amarjeet Singh Dhir, a former business associate of Antonio Parente. Dhir claims he is owed £942,135. He alleges that Parente, a gambling addict, used money for property investments to feed his habit.
Activist fund Elliott Advisors faces a battle to convince investors of the merits of a break-up of insurer and cruise operator Saga (SAGA). The New York hedge fund took a 5% stake in the over-50s-serving conglomerate in July, and is understood to be pushing for the board to explore options that include selling either division. A source with knowledge of the situation said the insurance and travel arms “don’t need to stay together”. However, a top 10 Saga shareholder said a break-up was not the answer: “They need to stabilise the top line and invest in the brand. “They are in a very good population period. If they exploit the opportunities, that could be very powerful.” Analysts at Numis expect Saga to post a half-year pre-tax loss of £56.8m on Thursday, compared with a £106.8m profit last year.
Distressed debt collector Arrow Global Group (ARW) has several hedge fund grizzlies shorting its shares, including Lansdowne Partners and Marshall Wace. A total of 8% of its shares are out on loan, according to Markit, making it one of the London market’s most shorted stocks. Among the weaknesses targeted by the bears is Arrow’s debt pile, with net debt levels 3.6 times adjusted earnings. Chief executive Lee Rochford has bowed to this pressure, committing to cut Arrow’s gearing by the end of the year to 3.5 times. The debt collector faces other challenges, including high costs and its attempt to broaden its business model. Arrow said last month that there is a “significant opportunity” for the group to grow in managing money for private equity and hedge funds, with European banks sitting on €800bn (£717bn) of non-performing loans. Analysts say asset management will yield lower profit margins but suck out less capital. The shorting is ominous, but cost-stripping and asset management growth provide hope for Arrow. Hold.
The group behind the London Stock Exchange has rejected the £32 billion takeover bid by its Hong Kong rival, calling it strategically flawed, unattractively structured and priced and with a strong possibility that it could be blocked by regulators. London Stock Exchange Group (LSE) said its board had unanimously rejected the approach from Hong Kong Exchanges and Clearing because of its “fundamental flaws”, adding that it “sees no merit in further engagement”. Don Robert, chairman of the London group, rebuked Laura Cha and Charles Li, chairwoman and chief executive of the Hong Kong group, for going public, in effect making their bid hostile. “We were very surprised and disappointed that you decided to publish your unsolicited proposal within two days of our receiving it,” he wrote in a letter alongside the rejection statement.
Cobham (COB) is on course to fall into the hands of its American suitor next week despite scepticism over the £4 billion offer. Sources said that the takeover by Advent International “looks set to go through” based on proxy voting before an extraordinary shareholder meeting on Monday. Some have been persuaded to accept the bid as Advent’s approach failed to flush out rival bidders. “We’ve voted for the bid, but with a heavy heart. We are surprised it didn’t prompt counter-offers,” a top ten shareholder said.
Aston Martin Holdings (AML) plans to tap the debt markets to bolster its battered balance sheet. The luxury carmaker wants to build up its cash buffers by issuing a junk bond. It is boosting its cash balance before the launch of its DBX sports utility vehicle next April. The financing, first reported by Bloomberg, is the latest setback for Aston Martin, which has lost 70% of its value since its £4 billion stock market debut.
Ovo Energy has clinched a £500 million deal to acquire SSE (SSE) household supply arm, making it Britain’s second-largest supplier. The deal spells the end of the Big Six in their current form and continues the remarkable rise of Stephen Fitzpatrick, Ovo’s chief executive, who founded the upstart supplier a decade ago. Mr Fitzpatrick, 41, predicted the deal would form part of “a wave of consolidation and change across the whole of Europe” as utilities struggle to adapt to radical changes in the energy sector. Ovo will add SSE’s 3.5 million household customers to its 1.5 million. The Bristol company, which has 2,000 workers, will take on 8,000 SSE staff. Ovo is to pay £400 million in cash and £100 million in loan notes in the deal, which is expected to complete this year or early in 2020, subject to approval by the competition watchdog.
Sir Charles Dunstone, executive chairman of TalkTalk Telecom Group (TALK), has increased his stake in the struggling telecoms group while its share price is at a near-record low. The billionaire is Talktalk’s largest shareholder, having spun it out of his Carphone Warehouse retail business a decade ago. After buying £10 million worth of shares in the past few days, he now owns 29.5% of Talktalk’s stock, taking him close to the threshold that would force him to make a formal takeover offer to other shareholders.
The Brexiteer chairman of Wetherspoon (J.D.) (JDW) renewed his attack on “elite Remainers” yesterday as he reported market-leading like-for-like sales growth for the full year but a fall in profits. Tim Martin announced a 7.4% rise in revenues to £1.81 billion in the year to the end of July, with like-for-like sales up 6.8%, which one analyst called “staggering”. Presenting the results he attributed the continuing strength of its like-for-like performance to myriad small measures, including bonuses for its staff, the design of its pubs, low food and drink prices and the introduction of coffee and breakfast. He also pointed to the impact of gin sales. “The bandwagon went past and we got on it — we now have 50 different gins.” he said. “Everyone is drinking gin. Even the guys from the building sites down the road are drinking pink gin with strawberries. It is quite a revolution.”Mr Martin compared the group’s prices with those of pub and restaurant rivals, saying that on a recent visit to a Pizza Express he was charged £13.95 for an American hot pizza and £7.55 for a bottle of Peroni. “In Wetherspoon it’s £6.49, including the Peroni!”
Millennium & Copthorne Hotels (MLC) is to be taken private by its majority shareholder in a £2.23 billion deal, bringing down the curtain on its 23-year stint on the London Stock Exchange. Kwek Leng Beng, its Singapore-based chairman and 65.2% shareholder, declared his recommended 685p-a-share offer unconditional after securing backing from investors speaking for 58.3% of the shares that he does not already own. His offer, valuing the company at £2.9 billion, was launched in June, 18 months after an earlier bid pitched at 620p a share had been rejected by minority shareholders.
