Financial Times Europe - 22.08.2019

Thursday22 August 2019 ★ 11

© The Financial Times Limited 2019 Week 34

Tug boats are about to tow a floating nuclear power plant from Murmansk 5,000km west to the other side of the Russian Arctic coast. The two-reactor barge has sparked safety fears, after a recent botched nuclear missile test at a military site close to Murmansk. Full storyiPAGE 12

Floating Russian nuclear plant raises safety fears

ATTRACTA MOONEY AND MICHAEL POOLER— LONDON

Fergusonhas sounded out top investors over switching its listing from the UK to the US, a proposal that has opened a transatlantic rift among shareholders at the £14bn plumbers’ merchant.

The FTSE 100 business is trying to fend offTrian Partners, the US activist fund run byNelson Peltz, which disclosed in June that it had acquired an almost 6 per cent stake in Ferguson to become one of its largest shareholders. At the time, Trian said the group, pre- viously called Wolseley, was “an attrac- tive business that trades at a discount to comparable US peers”. A top-20 investor said Ferguson had

sought shareholders’ opinion on the back of Trian’s involvement. “We have had discussions about [moving the listing] in a preliminary way.” The shareholder said he backed a move, noting that the US already accounted for about 90 per cent of Fer- guson’s profits. “We think all the empiri- cal evidence shows that a move to the US will give the company a better valuation,” he added. Such a move would prove unpalatable to many UK-based fund managers, whose investment mandates often pre- vent them from holding overseas-listed stocks, raising questions over whether the company could garner the requisite 75 per cent shareholder approval. The potential move will also add to

concern across the City of London over the future of the UK’s stock market, after a series of takeovers and delistings. Last yearRandgold Resources,Shire, SkyandWorldpaywere all bought and left the index. A top-30 investor based in the UK described it as “Unilever2.0”, a refer- ence to the consumer goods company’s attempt to ditch its dual UK-Dutch listing in favour of the Netherlands. The FTSE 100 company dropped the plans after uproar from British investors. But another top-20 shareholder said he would back a relisting. He added, however, that Ferguson would need to prepare for forced selling by UK funds and line up new investors in the US. Lexpage 10

Plumbers’ merchant Ferguson divides

investors with proposal to relist in US

Companies AELANA Holdings....................................................................7........................................... Aflac................................................................ Alcon............................................................... Alibaba.......................................................... Alliance Data Systems......................... Alphabet..................................................12, Amazon......................................................... Amec Foster Wheeler........................... Anheuser-Busch InBev......................... Apollo Global Management................ Apple........................................................10, Arm Holdings............................................ Asahi................................................................ Athene Holding.......................................... Avast.............................................................. BHP.................................................................. BP..................................................................... Banco BPM.................................................. Barclays........................................................... Beam.............................................................. Berlin Hyp.................................................... BlackRock....................................................... Blackstone................................................7, Budweiser..................................................... Bunge............................................................. CK Asset Holdings................................... CK Hutchison Holdings......................... Cairn Energy.............................................. Caldera............................................................. Carlton & United Breweries.............. Carlyle.............................................................. Cathay Pacific.............................................. Charter Court......................................10,

China Merchants Port Holdings...... Coach................................................................ Color................................................................ Convene........................................................ Credit Suisse.............................................. Cruise.............................................................. Deloitte............................................................9Dentsu............................................................ Deutsche Wohnen................................... Disney............................................................ Evercore......................................................... Facebook...................................................1, Ferguson..................................................10, Fiat................................................................... Fiat Chrysler Automobiles............... Fitbit................................................................ Ford.................................................................. Fuller, Smith & Turner......................... GEA Group.................................................. General Motors......................................... Glass Lewis................................................. Global Fashion Group........................... Goldman Sachs.................................7,11, Greene King.................................................. Grolsch........................................................... Groupe SEB................................................ HD Supply................................................... HSBC................................................................ Home Depot.............................................. Honda............................................................. Hong Kong Exchanges........................ Hyundai......................................................... ISS..................................................................... IWG.................................................................. Independent Liquor...............................

Intel.............................................................12, Intesa Sanpaolo..................................12, Itochu.............................................................. JPMorgan................................................11, Jacobs............................................................ Jaguar Land Rover................................. Japan Post................................................... Japan Tobacco..........................................13KKR.................................................................... Kia..................................................................... Kirin.................................................................. Kiva.................................................................. Knotel............................................................. Lebara............................................................. Legend Holdings..................................... Lowe’s........................................................11, Marvel............................................................ Mastercard..................................................... Mercuria........................................................ MetLife............................................................. Microsoft....................................................... Mitsubishi Heavy Industries............. Moelis.............................................................. Morgan Stanley......................................... Mori Trust.................................................... NEC.................................................................. NGK Spark Plug....................................... National Grid................................................ Nestlé.............................................................. Netflix............................................................. Newmark Knight Frank ..................... Nissan.......................................................12, Nomura.......................................................... Norwest Venture Partners................ Nostrum Oil & Gas.................................

Novartis......................................................... OneSavings Bank..............................10, Pandora......................................................... Pareto Securities...................................... Paytm............................................................. Peroni............................................................. Pilsner Urquell........................................... Pixar................................................................10PwC.................................................................... Randgold Resources.............................. Renault.....................................................12, Rosatom........................................................ Rosneft........................................................... Royal Dutch Shell................................... SABMiller...................................................... Salesforce..................................................... Saudi Aramco.........................................4, Schincariol.................................................... Secure Design KK................................... Shire................................................................. Sinopec............................................................ Sky..................................................................... SoftBank....................................................... Sophos........................................................... Spotify............................................................... Suntory.......................................................... Super Dry..................................................... Swire................................................................. Symantec..................................................... Target........................................................11, Tesla................................................................ Office Group, The................................... Trian Partners............................................ Tullow Oil..................................................... Twitter...........................................................

UBI.................................................................... UBS Securities........................................... Uber..............................................................1, Uhuru.............................................................. UniCredit.................................................12, Unilever....................................................10, Vale.................................................................. Versace............................................................ Victrex............................................................ Visa..................................................................... Volkswagen................................................. Walmart.......................................................... Waymo........................................................... WeWork......................................................... WhatsApp....................................................... Wood Group............................................... Worldpay....................................................... Wow Air......................................................... Yamaha......................................................... Yamazaki...................................................... Sectors Aerospace & Defence............................. Airlines........................................................9, Automobiles..........................................12, Banks.......................................10,12,14,17, Energy........................................................8, Financial Services.................................... Financials..................................1,10,11,13, Food & Beverage.........................13,14, Healthcare................................................... IndustrialGoods....................................... Industrials.........................................10,11, Media.............................................................. Mining.........................................................8,

Oil & Gas............................................11,12, Personal & Household Goods......... Property........................................................14Retail....................................................10,11, Technology.............................1,10,12,14, Tobacco......................................................... Travel & Leisure........................................ Utilities.......................................................8, People Belardi, Jim.................................................... Bhat, Nish.................................................... Black, Leon.................................................... Brito, Carlos................................................ Cernich, Stephen........................................7Diamond, Bob.............................................. Gil, Elad......................................................... Grande, Trond........................................... Harris, Josh................................................... Heckman, Greg......................................... Hogg, Rupert............................................... Izumiya, Naoki........................................... Li, Ka-shing................................................... Koji, Akiyoshi.............................................. Laraki, Othman......................................... Paulson, Henry.......................................... Peltz, Nelson.........................................10,11Rowan, Marc................................................. Sarva, Amol................................................. Schwarzman, Stephen............................ Sechin, Igor.................................................. Shingai, Yasushi....................................... Siddiqui, Imran............................................ Sittler, Taylor............................................. Solomon, David......................................... Son, Masayoshi.........................................

ahead of any formal pitching process, said several people familiar with the matter. That follows the bank’s role as a bookrunner for the bond and its involvement in sovereign issuance. Saudi officials have said that a Saudi Aramco IPO remains a priority for the kingdom. They added that it would take place in 2020 or 2021, after the company had completed the acquisition of a majority stake in Saudi chemicals company Sabic from the Saudi sovereign wealth fund. Goldman advised the Pub- lic Investment Fund in the Sabic deal. Reporting by Anjli Raval and Andrew England in London, James Fontanella-Khan in New York and Simeon Kerr in Dubai

Saudi Aramco nominated banksinclud- ingJPMorganChase,Morgan Stanley, Moelis,EvercoreandHSBCto advise on what could be the world’s largest listing. The initial public offering was postponed following the failure to achieve the $2tn valuation for the oil group sought by Crown Prince Mohammed bin Salman, but banks are now preparing their pitches for a flotation. The launch of a $12bn international bondby Saudi Aramco this year renewed momentum for the IPOafter the condemnation that followed the killing of journalist Jamal Khashoggi. Goldman is conducting preparatory work for the Saudi Aramco flotation,

doing what she did for Trump for Gold- man,” the person said. “She is opening doors to win business.” Ms Powell, an Egypt-born Arabic speaker, was instrumental in organising Donald Trump’s trip to Saudi Arabia in 2017 — his first foreign visit as president — when she was deputy national secu- rity adviser for strategy. A person close to Goldman stressed that the strides made by the New York bank in Saudi Arabia were part of a team effort, which included a trip to the kingdom this year byDavid Solomon, the bank’s chief executive. Goldman had failed to secure a top role in the public offering in 2017 when

FT REPORTERS

Goldman Sachshas clawed its way into contention for a role inSaudi Aramco’s planned stock market listing, after a months-long charm offensive by top executives, including former Trump administration official Dina Powell, said several people briefed on the matter. Ms Powell, who left Goldman in 2017 to work at the White House andcame backto the Wall Street bank a year later, has leveraged her knowledge of the region and relationships with the kingdom’s highest authorities to seek business for Goldman, said one person close to the Saudi state energy giant.“She’s

Goldman joins race for Aramco IPO

3 Charm offensive pays off 3 Initial listing postponed 3 $12bn bond sale renews momentum

Blowout quarters from US retailers TargetandLowe’ssent their shares up sharply as Americans continue to spend despite the gloom hanging over the global economy. Shares in Target were up 20 per cent to ahigh of $102.70, close to their best day on record. Home improvement chain Lowe’s added 12 per cent. Both posted stronger-than-expected sales growth in the second quarter. Same-store sales rose 2.3 per cent at Lowe’s, ahead of estimates of 1.7 per cent. Target said sales at established stores were up 3.4 per cent, topping forecasts for a 3 per cent advance in the closely watched measure. The results boosted the consumer sector, which climbed 1.6 per cent, leading the benchmark S&P 500 higher. They provided more evidence that spending by US consumers is proving one of the global economy’s few bright spots, as investors worry about recession risks and the Trump administration’s trade war with Beijing. Last week Walmartsaid US consumers were in “solid” financial health as it raised its outlook, and Washington released data showing retail sales remained robust. Mamta Badkar in New York Marketspage 18

Shopping therapy

US retailers bask

in spending surge

Dina Powell ‘is doing

what she did for

Trump for Goldman

... opening
doors to win

business’

Companies / Sectors / People

Beer battlesJapan’s Asahi grabs M&A

mantle from AB InBev— ANALYSIS,PAGE

Buckle upItalian business braced for a

stormy political autumn— RACHEL SANDERSON, PAGE 12

Robert

Smith

Tail

Risk

The hysteria over negative interest rates has been hard to ignore. As central banks have abandoned plans to tighten monetary policy, bond yields have plunged below zero, meaning investors are effectively paying for the privilege of lending to countries and companies. More than a quarter of the global bond market carries a sub-zero yield. The trend reached a new peak — or nadir, depending on your perspective — yesterday, when Ger- many sold 30-year debt at a negative yieldfor the first time. It is not just the idea of a lender paying a borrower that seems paradoxical, there is also anxiety that central banks are doing more to boost asset prices than the under- lying economy. The fear from some quarters is that investors will have to back evermore speculative borrowers, if they want to get hold of a decent yield. Fund managers in London and Frankfurt only need to look north to see what might happen. Negative rates have been a fact of life in the Nordics. Sweden was a pioneerof sub-zero rates in 2015, while Danish bank Jyske this week imposednegative rates on high cash balances. Against this backdrop, the regional corporate debt market has developed a reputation as the last refuge of the scoundrel, a place where dubious borrowers that are unable to raise financing elsewhere can find willing buyers for their bonds. The latest casualties are the bondholders of Iceland’s Wow Air, who on Tuesday discovered that they are likely to recover precisely nothing from the airline’s bankruptcy. An investor presentation from Wow last summer described a €50m Swedish-law bond sale as “a bridge to an envisaged IPO”. Instead, it rapidly became a bridge to nowhere. Less than two weeks after the sale of the debt in September, Wow breached the terms of the bonds, as its debt-to-earnings ratio rose above agreed limits. Six months later, the low-cost carrier defaulted. The failed airline was waved to the Swedish debt mar- kets by Pareto Securities, a Nordic broker that has built a niche in serving international companies. The firm’s head of compliance told the Financial Times it is “unfortunate” that the bond defaulted so soon after it was issued. But those unhappy accidents have become common. Earlier this month bondholders were forced totake con- trolof the UK-headquartered telecom company Lebara, for example, which managed to raise a €350m Norwegian- law bond in 2017 and then missed multiple deadlines to file its annual audited accounts the following year. In the case of Wow Air, warning signs were clear for any- one who glanced at the investor presentation, which laid bare the company’s negative earnings and hefty lease lia- bilities. But Wow offered something in short supply in the cold climes of Scandinavia — a 9 per cent yield.

[email protected]

The regional

corporate debt

market has won a reputation as

the last refuge of the scoundrel

Bill Sikes/AP

Blowout results from US retailers send shares soaring Share price ()

Aug

Lowe’s

Aug

Target

Source: Bloomberg

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Financial Times Europe - 22.08.2019

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