Tuesday 27 August 2019 ★ 11© The Financial Times Limited 2019 Week 35French media mogul Arnaud
Lagardère accumulated more than
€200m of debt at his private holding
company, more than the value of his
shares in the conglomerate that bears
his name, according to unpublished
accounts seen by the Financial Times.
ReportiPAGE 12Lagardère’s €200m
debt pile revealedLO U I S E LU C A S— HONG KONGMegvii, one of China’s top two facial
recognition companies, is planning to
raise as much as $1bn in Hong Kong,
braving a public market that has been
pummelled by trade tensions and
protests.The Beijing-based company, whose
Face++ technology can detect and com-
pare faces, raised $750m as recently as
May, at a valuation of $4bn. Its clients
last year included the Chinese smart-
phone makersXiaomi,Oppo andVivo
as well as more than 100 Chinese cities.
A filing to the stock exchange puts it
on course to list around November,
though no exact timeframe was given.
Other companies have slowed downtheir plans, after three months of anti-
government protests, fears of recession
and continuing trade spats between
China and the US.
Hong Kong’s benchmark Hang Seng
index has shed 8.4 per cent this month.
Alibaba, which together with its affiliate
Ant Financialowns just shy of 30 per
cent of Megvii, is considering the post-
ponement of its own Hong Kong listing,
according to Reuters.
In its filing, Megvii revealed a net loss
of Rmb5.2bn ($728m) in the first six
months of the year, inflated by a jump in
the value of its share-based compensa-
tion payments.
At the operating level, revenue more
than tripled to Rmb949m and losses
were Rmb115.36m, narrowing from aloss of Rmb139.33m in the same period
last year.
Recent Chinese listings in the US,
Wanda Sportsand esports streaming
siteDouYu, are both sharply below their
IPO prices. “It’s just not working,” said
one Hong Kong banker. “The market
needs a big breather from IPOs.”
But Megvii is keen to press ahead with
its listing, which it hopes will address
criticism of a lack of transparency in its
business.
“We aspire to be transparent and
accountable, and we want to engage
with thought leaders globally,” saidYin
Qi, Megvii’s co-founder, chairman and
chief executive. Megvii’s bigger rival,
SenseTime, is unlikely to tap the mar-
kets this year, said investors.Facial recognition group Megvii aims
for $1bn IPO in protest-hit Hong Kong
because the price was higher than
expected.
Amgen had $21.8bn in cash and
investments at the end of the second
quarter in 2019. “We have been patient
with deploying our capital and I think
this deal rewards that patience,” said
Robert Bradway, Amgen’s chairman
and chief executive officer. Otezla had
sales in 2018 of $1.6bn, and Amgen fore-
casts at least low double-digit average
sales growth over the next five years.
The acquisition should also help
Amgen with its international expansion
plans, as it is approved in more than 50
markets outside the US but launched in
only 32 of them.also announced it planned to buy back
$7bn worth of shares, up from the
previously planned $5bn.
The Otezla deal, which is expected to
close by the end of the year, will also
help Bristol-Myers maintain its invest-
ment-grade rating. The company took
on billions of dollars of debt to finance
its swoop for Celgene, with rating
agency S&P Global yesterday saying it
expected to downgrade the company’s
credit rating one notch to single-A even
with the sale of Otezla.
Geoffrey Porges, an analyst at SVB
Leerink, said the deal was positive for
Bristol-Myers investors but “marginally
negative” for Amgen shareholders,year, more than $700bn of deals have
been agreed in the pharmaceutical and
healthcare sector, according to Refinitiv,
includingAbbVie’s decision to buy the
maker of Botox,Allergan, for $63bn;
Pfizer’s sale of its off-patent drug busi-
ness to Mylanfor $9.5bn; and Roche’s
$4.8bn takeover of gene therapy com-
panySpark Therapeutics.
The dealmaking has been partly
driven by the desire to sell non-core
assets or buy innovative medicines as
their own drugs are close to losing pat-
ent protection. Large pharmaceutical
groups are focusing on becoming one of
the top three players in whichever
category they operate. Bristol-MyersJA M E S F O N TA N E L L A- K H A N , E R I C P L AT T
A N D H A N N A H KU C H L E R— NEW YORK
Bristol-Myers Squibb took a significant
step towards clinching its $90bn take-
over of Celgene, as the two companies
agreed to sell a blockbuster psoriasis
drug to rival Amgen for $13.4bn.
The share prices of both companies
rose more than 3 per cent in early trad-
ing because the sale of the drug, Otezla,
is seen as a key part of winning regula-
tory approval for their merger.
“This agreement represents an
important step toward completing our
pending merger with Celgene,” said
Giovanni Caforio, chairman and chief
executive of Bristol-Myers. So far thisDrug sale speeds Bristol-Myers deal
3 Otezla disposal clears way for Celgene merger 3 Amgen pays $13.4bn for psoriasis remedy
‘We’ve been
patient withdeploying
our capitaland I think
this dealrewards
that ’Robert
Bradway,
AmgenCompanies / Sectors / People
Companies
3G Capital......................................................
Alibaba......................................................11,
Amazon..........................................................
Amber Capital...........................................
Ant Financial...............................................
AviChina Industry and Tech..............
Bain Capital..................................................
Birchbox,.......................................................
BlackBerry...................................................
Canal +...........................................................
Cartier............................................................
Cathay Pacific.............................................
China Mobile................................................
Coatue Management.............................
Credit Karma..............................................
Cylance..........................................................
Daily Mail and General Trust..........
Daiwa House..............................................
Danone.............................................................DouYu.............................................................
Dow....................................................................
EDP..................................................................
EazyDiner.....................................................
Engie...............................................................
Equinor..........................................................
Facebook......................................................
Fanuc..............................................................
Funding Circle...........................................
Genscape......................................................
Gourmet Passport..................................
HSBC.................................................................
Hikvision.........................................................
Huawei.............................................................
IHS Markit....................................................
Impossible Foods.....................................
KKR..................................................................
Kosmos..........................................................
Lagardère.....................................................
Lending Club..............................................Lending Tree.............................................
McDonald’s....................................................
Media for Europe....................................
Mediaset........................................................
Megvii..............................................................
Meituan-Dianping...................................
Naspers.........................................................
National Grid.............................................
Nestlé................................................................
Netflix.............................................................
Nike...................................................................
Oppo................................................................
Orsted............................................................
Panasonic.....................................................
PepsiCo............................................................
Pets at Home............................................
Procter & Gamble.....................................
PwC....................................................................
Rakuten.........................................................
Richemont...................................................Royal Dutch Shell...................................
S&P Global...................................................
SenseTime....................................................
Sequoia Capital........................................
Snap................................................................
Standard Chartered.................................
Swatch Group............................................
Swiggy...........................................................
Swire.................................................................
Telecom Italia............................................
Tesla.................................................................
Tiger Global Management.................
Uber.................................................................
Uber Eats.....................................................
Unilever...........................................................
Universal.......................................................
Verisk..............................................................
Viking Global Investors.......................
Vivendi...........................................................
Vivo...................................................................Wanda Sports.............................................
WhatsApp....................................................
Wood Mackenzie......................................
Wu International........................................
Xiaomi.............................................................
Yuhu Group..................................................
Zomato..........................................................
Sectors
Banks..............................................................
Energy................................................10,12,
Financial Services....................................
Financials................................................12,
Health.............................................................
Healthcare...................................................
Media.........................................................12,
Retail...............................................................
Retail & Consumer.................................
Support Services......................................
Technology......................................10,11,Telecoms................................................10,
Travel & Leisure................................12,
Utilities....................................................10,
People
Alonso,Javier............................................
Berlusconi, Silvio......................................
Bolloré, Vincent........................................
Chen, John..................................................
Goyal, Deepinder.....................................
Halvorsen, Andreas................................
Jin, Ning........................................................
Lagardère,, Arnaud.................................
Mikitani, Hiroshi.......................................
Piqué, Gerard.............................................
Poulsen, Henrik........................................
Qi, Yin..............................................................
Robertson, Julian.....................................
Woodford, Neil..........................................
Zwillenberg, Paul.....................................The rise of the electric car was once a boon
for the lithium industry, which produces
the critical raw material for all batteries
used in the vehicles.
But this year has been bleak. Prices for
the core product, lithium carbonate, have
sunk 13 per cent, according to Benchmark
Mineral Intelligence, knocking profits for
the largest producers and wiping out most
of the share price gain since the start of
2016.
Chile’s SQM, the world’s second-largest
producer, last week said its earnings for
the second quarter had almost halved, to
$70.2m, because of lower lithium prices.
In China, Tianqi Lithium, the country’s
largest producer, said profits in the first
half had fallen 85 per cent from a year ago.
The market has been swamped by new
supplies of lithium after rapid expansion
of mines in Australia. At the same time, a
cut in government subsidies for buyers of
electric vehicles in China has hit demand
in the world’s largest electric-car market.
But despite the price rout, the largest
battery companies are still keen on
securing future supplies of lithium to
meet demand from carmakers rolling out
new electric models, especially in Europe.
Tianqi said last week that its Australian
subsidiary had agreed a deal to supply
lithium hydroxide to Korean battery
company LG Chem from 2020 to 2022.
The Chengdu-based company added
that the rush of investment into lithium
over the past few years was “returning to
normal” and uncompetitive producers
would be “eliminated”.Henry SandersonStalled marketLithium knocked by oversupply and cut in electric-vehicle subsidy
Hobbled unicornsJapanese start-ups
held back by funding hurdles— ANALYSIS, PAGE 13
Wind of changeOrsted looks to broaden
horizons for green power— ANALYSIS, PAGE 14
Leo
Lewis
Tail
Risk
For almost two decades, the prospect of Japan legalising
casinos and becoming an estimated $20bn-a-year gaming
market has been mouth-watering, elusive and, in effect,
uninvestable. But statements late last week may have
finally given investors the chance to place some meaning-
ful bets. First, the city of Yokohama said it would bid to
host a casino, then US operator Las Vegas Sands
announced it was no longer interested in building a resort
in Osaka, focusing instead on Tokyo-Yokohama.
On the face of it, the statements seem yet more markers
in a process notable for having never quite given investors
precision on when, and under what rules, Japan’s first legit-
imate roulette wheel would spin. Three years ago prime
minister Shinzo Abe barrelled through parliament legisla-
tion to legalise integrated resorts (IR), but the industry
still awaits the announcement of details on the application
process, maybe in November, and the establishment of a
casino management board, possibly early in 2020.
More critically, it is still not known which three cities will
be given licences to host the
IRs and, once that is known,
which among the many sali-
vating international opera-
tors will secure each prize.
In the meantime, brokers
have had a good stab at pro-
ducing lists of stocks, both
Japanese and global, that
could offer investment expo-
sure to the Japan gaming
story. As well as the big listed IR operators, names range
from producers of gaming machines such as Konami and
Sega Sammy to property developers, hotel operators, con-
struction groups and railway companies.
There is even greater potential upside for whichever Jap-
anese companies — Orix, Sumitomo and others — partner
with the successful foreign operators on the financial side.
Even the brokers, however, will only push so far: they
know that investors need firmer signals before the great
gaming narrative is unleashed.
It has been clear since 2016 that as well as a licence going
to a small regional city in Hokkaido or Kyushu, Osaka —
population 9m — would host the first casino. All the big
operators, including LVS, have talked effusively and with
pledges of multibillion-dollar investments, about how
badly they want to be in Japan’s second city. It has been
nearly impossible to guess the likely winner. But LVS, it
seems, had focused attentions on Osaka because until now
it was unclear whether the larger prizes of Tokyo and its
neighbour, Yokohama, would bid to become hosts at all.
With that uncertainty out of the way, much of the next
few months becomes clearer and the odds on many of the
stocks in brokers’ baskets shorten considerably. MGM, and
partner Orix, are strongest in Osaka while LVS looks well-
placed to win something in or near Tokyo, using its resort
in Singapore as a calling card.Les jeux — enfin —sont faits.[email protected]Brokers have had
a good stab at
producing lists ofstocks that could
offer exposure toJapan gaming
Market turns lukewarm
on lithium* Local currencies
Source: BloombergSolactive Global Lithium index
Stocks sink for the world’s
largest lithium groups
Year-to-date share price falls*
( change)LiventSQMGanfeng
LithiumAlbemarleTianqi
Lithium Parked: Beijing has cut subsidies for electric vehicles including China’s Baojun E100— Qilai Shen/BloombergAUGUST 27 2019 Section:2Front Time: 26/8/2019 - 19: 00 User: jeremy.wright Page Name: 2FRONT USA, Part,Page,Edition: EUR, 11 , 1
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