Ashley on the prowl again with HMV in his sights. Mike Ashley was said yesterday to be in talks to launch a rescue bid for HMV, the bankrupt music retailer. Mr Ashley is one of the biggest names on the high street, as the leading shareholder in and with interests in House of Fraser and Evans Cycles, both of which entered insolvency situations recently, as well as his stalking of Debenhams (DEB). He was reported to be working with music industry figures on an offer for all or part of HMV. The music chain, a long-struggling high street seller of records and DVDs, was launched in 1921. It fell into the hands of administrators at Christmas, the second time in six years that the retailer had entered bankruptcy. It is now in the hands of insolvency accountants from KPMG. According to a report on Sky News, sources close to Mr Ashley, who is also the owner of Newcastle United FC, confirmed that he was serious about an HMV deal and had been speaking to names in the music and entertainment industry.
Activists set to snap up cheap buys, fund managers warn. Brexit leaves companies vulnerable. Fund managers are warning that Brexit could lead to more activist investors circling the UK for opportunities to snap up companies on the cheap. The share prices of many large British companies have fallen because of fears over the global economy and Brexit, making them vulnerable to international investors seeking opportunistic acquisitions, according to several senior fund managers. Alan Custis, head of UK equities at Lazard Asset Management, said: “We could see an influx of activist interest in UK companies in 2019. Several large companies are trading at significant discounts to overseas peers and a difficult Brexit will not help matters.” They include Ferguson (FERG), the plumbing group formerly known as Wolseley, Mr Custis said, a “high-quality international business on the FTSE and trading at a material discount to Home Depot in the US”. Chris White, head of UK equities at Premier Asset Management, said: “Brexit uncertainty has left markets very polarised. While internationally exposed multinationals, especially in areas like consumer staples, are rated highly, domestic UK consumer cyclicals are friendless and valuations have started to look very cheap.”
Consumers rush to switch energy supplier before price cap. A record 5.8 million households changed their energy supplier last year before the introduction of a government price cap on bills that is forecast to deter switching. About one in five households switched their electricity provider in 2018, according to figures compiled by Energy UK, the industry body, with the Big Six suppliers losing a total of 1.7 million customers to smaller rivals. However, switches to small and mid-sized companies fell in the last two months of the year, suggesting that people may have been deterred by the collapse of a string of smaller firms. Separate figures out today from Which?, the consumer group, show that small suppliers in general continue to outperform the Big Six for customer satisfaction. The government and Ofgem, the energy regulator, have spent years trying to encourage people to shop around for better energy deals and seeking to promote competition against the so-called Big Six of British Gas, Centrica (CNA), SSE (SSE), Scottish Power, Npower, EDF and Eon. More than 70 suppliers are now operating in the market, with switching further encouraged by the growth of commercial price comparison websites.
Taking on the big guns in bid to build frigate. A little known Dorset-based German-owned shipbuilder is chasing a lucrative prize. In a new facility outside Winfrith Newburgh in Dorset, four miles inland from the English Channel, five Sea Class workboats out of thirty-eight ordered by the navy are under construction. The vessels can be fitted for various jobs, from military personnel transport to minesweeping to submarine hunting, and are the sort of 11m to 18m boats that can be housed within the new giant Queen Elizabeth-class aircraft carriers. They are being assembled by Atlas Elektronik UK. Unusually, bids to build the Type 31e have come in an open competition, a first for building British naval vessels in a generation. It pitches BAE Systems (BA.), with its capabilities on the Clyde and in partnership with Cammell Laird on the Mersey, against Babcock International Group (BAB), operator of the naval dockyards in Devonport and Rosyth — and against Atlas Elektronik, a third, hitherto unforeseen bidder little known outside the narrow world of defence procurement.
Activist reaps rewards over Barclays (BARC). Sherborne Investors, the activist firm with a 5.5% stake in Barclays, is earning tens of thousands of pounds a week in fees from British fund managers backing its attempt to shake up the high street bank. The payments are in addition to incentive awards likely to be worth a fifth of any gains. That could lead to a payout of tens of millions of pounds if Barclays’ shares bounce back to the levels at which they were trading at about the time of the European Union referendum. Sherborne is led by Edward Bramson, a New York-based investor who previously has targeted F&C Asset Management in Britain. Mr Bramson’s vehicle is also charging the fund he set up to target Barclays £70,000 a year to use the Sherborne name. Mr Bramson is pressing for Barclays to reduce its investment bank, putting him in conflict with Jes Staley, its chief executive, who has pledged to improve the division and invest in its future.
Patisserie backers wait to hear if trading can go on. Patisserie Holdings (CAKE) investors and staff are waiting to be told today if the company will be able to continue trading after emergency talks between Luke Johnson, chairman of the café chain, and its banks to extend a freeze on its loan facilities. HSBC and Barclays, which are owed £9.7 million, are under pressure from shareholders not to demand repayment, which could tip Patisserie Valerie into administration. One City investor who backed a deeply discounted £15.7 million placing in October to save the chain said that the banks should give the company more time to turn itself around after it emerged that they, too, were being investigated over the scandal. The Times reported on Saturday that the Financial Conduct Authority is scrutinising the banks about bounced cheques worth millions of pounds that were paid into Patisserie’s accounts that may have allowed it to hide its true financial position, and about two “secret” overdraft facilities, in which the £9.7 million was run up. About 2,800 jobs at 200 cafés and factories in the UK would be at risk if Patisserie collapses.
Retail crisis sparks RICS alert on shopping centres. Valuers ordered to wake up over extent of high street chaos. The valuations of high street shops and shopping centres could be slashed after property agents were ordered to reflect the havoc sweeping the retail industry. The Royal Institution for Chartered Surveyors (RICS) has taken the rare step of instructing valuers to be “aware of the potential for significant changes in value” in retail properties — and to use the widest possible range of evidence to take account of the seismic shifts in shopping habits. The alert could have an impact on big listed landlords such as Hammerson (HMSO), owner of the Bullring in Birmingham, and Intu Properties (INTU), owner of the Trafford Centre in Manchester, which are trading at far below their book value. The RICS warning will heighten the anxiety over the retail sector. Almost a third of clothing and homeware products are now bought online, leaving bricks-and-mortar retailers desperate to extricate themselves from long, costly leases. In the past two months, more than 20 struggling chains have instructed the accountant Deloitte to assess whether they are eligible for a company voluntary arrangement (CVA), which allows them to shut shops and reduce their rents. Among them is Sir Philip Green, whose Arcadia Group is buckling under the strain of its rent bill and a slump in sales. More than a third of listed retailers issued a profit warning last year — the highest level since the financial crisis — according to the accountant EY. Chains including House of Fraser and HMV collapsed while Carpetright (CPR), New Look and others shut shops through CVAs. Marks & Spencer Group (MKS) is halfway through a programme to close more than 100 stores.
Luke Johnson at centre of last-ditch battle to save Patisserie Holdings (CAKE). The scandal-hit cake chain Patisserie Valerie could go bust tomorrow if emergency talks between leading shareholder Luke Johnson and its banks fail. The entrepreneur has been scrambling to extend a standstill agreement on the company’s bank facilities, which expired on Friday. If he fails, HSBC and Barclays could demand repayment of £9.7m of overdraft debt. Johnson could be forced to plough in more cash to stop Patisserie Valerie tipping into administration, with 2,800 jobs at risk. He put in £20m of his own money to keep it afloat after the shock discovery in October of a £40m hole in the accounts and what the company called “significant, potentially fraudulent, accounting irregularities”. Two secret overdrafts had been drawn down by £9.7m.
Superdry founder Julian Dunkerton set for clash. Superdry (SDRY) co-founder Julian Dunkerton has declared his intention to rejoin the fashion brand within four weeks and blasted management for “misleading” shareholders. Dunkerton, who left last March, is embroiled in a row with chief executive Euan Sutherland over who is to blame for a stale autumn/winter range that contributed to several profit warnings and a 75% drop in the share price last year. He is, however, finding it hard to convince investors. One top 10 shareholder said Dunkerton was “struggling to sell his story”.
Virgin Money owner CYBG (CYBG) braced for revolt over bosses’ pay. CYBG bank faces showdown in new wave of discontent. Boardrooms are braced for a string of investor revolts in the coming weeks as shareholders continue to vent their anger over high levels of executive pay. The influential advisory service ISS has issued a “red-top” alert against CYBG, the owner of Clydesdale and Yorkshire banks and Virgin Money, which it bought for £1.7bn in October. ISS warned that long-term incentive payments for CYBG’s chief executive and finance director would almost double this year. This was unwarranted, ISS said, given that it was not clear whether the merger would deliver additional value. David Duffy, CYBG’s chief executive, could receive a bonus of up to 118% of his £1m salary and long-term incentive awards of 177%, giving him a total of £4m. He earned a total of £2m last year.
Hedge fund boss Jeremy Hoskings threatens to block Flybe swoop. A hedge fund tycoon is threatening to block the cut-price rescue deal for troubled budget airline Flybe Group (FLYB). Hosking Partners, run by Tory donor Jeremy Hosking, could seek an injunction to stop the £2.2m sale to a consortium led by Sir Richard Branson’s Virgin Atlantic, Sky News reported. The deal was restructured last week as Flybe fought to stay alive under pressure from its bank. Virgin Atlantic, Stobart Group Ltd. (STOB) and private equity firm Cyrus Capital are set to pay £2.8m for Flybe’s trading assets, and inject £10m of a £20m bridging loan immediately. Shareholders are in line to get about £2.2m, or 1p per share — a huge discount to the 16.38p price the day before the offer on January 11. They are unable to vote on the sale of the trading assets, only on the 1p offer for the company. In a letter to directors, Hosking, who owns 19%, is reported to have raised questions over whether their handling of the sale could have blocked higher offers from rivals, and whether they allowed a false market in the shares to develop.
Bidders Unilever, Kellogg’s and PepsiCo hungry for Graze takeover. A three-way bid battle for the healthy-snack business Graze is set for a finale next month after the deadline for offers was extended. Consumer goods giants Unilever (ULVR), Kellogg’s and PepsiCo have been pursuing the company since it was put up for sale last year. The £300m auction was supposed to close before Christmas, but the company’s US private equity owner, Carlyle, pushed back the date to the end of February.
Consort holds its breath for Trump. The government shutdown in America is having an unintended consequence for the pharmaceuticals industry. Scores of manufacturers are waiting to hear whether their latest treatments or medical devices have won approval from the Food and Drug Administration (FDA). Among those affected by the Washington impasse is London-listed Consort Medical (CSRT), which is awaiting approval for a generic version of Glaxo Smith Kline’s bestselling lung disease treatment, Advair. Consort has linked up with Dutch pharma giant Mylan to produce the new inhaler, called Wixela. They hope to be the first of GSK’s rivals to win approval for a generic version of the drug, allowing them to tap a market worth billions of dollars a year. For Consort, which has a market value of £394.9m, it could be worth £15m a year. Consort’s sell-off has been overdone — and if the shares do remain at this level for much longer, the company could be an attractive takeover target. Just look at what happened to the interventional medicine specialist BTG, which was snapped up by larger American rival Boston Scientific in November for £3.3bn. Whatever the future holds, it is likely to include value for shareholders. Buy.
