Money Week - UK (2021-10-08)

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MoneyWeek 8October 2021 moneyweek.com

Shares

lThecarmanufacturer

Volvohasgivendetailsofits

“long-awaited”initialpublic

offering(IPO),saysStephen

WilmotinTheWallStreet

Journal.Whileithasn’t

formallystatedavaluation,

alltheindicationsarethatit

willpressforaround$25bn,

hopingthatinvestorswill

ascribea“fairvaluetoits...

strategytoshiftfromgas-run

carstoelectricvehicles”.

Thisimpliesaprice/earnings

(p/e)ratioof 1 2,whilemost

carstockstradeatmid-single-

digitp/es.However,Volvo’s

partownershipofadedicated

electric-vehiclebrand,

Polestar,givesita“$10bn

asset”onitsbalance

sheet, with the restoft he

firm on ap/e of seven. All

this suggests that other

companiesmightbenefit

from the“strategicclarity”

Volvohas gained fr om

splittingpetrol-powered

cars from electric ones.

lSincethe “Shareholder

Spring ”of2012, “investors

have been waging awar on

high pay”with limited

success, says BenMarlowin

TheDaily Telegraph.

However,FrasersGroup boss

MikeAshley’s decision to

awarda£100m bonusto

Michael Murray, “his future

son-in-law andsoon-to-be

boss of Ashley’s chaotic

traineremporium”, is so

“eye-wateringand egregious”

that it su ggestsshareholders

have“capitulated” on this

issue. Thedecision to give

such ahugesum to aman

“whose primar yqualification

appearstobethe fact that he’s

abouttomarryAshley’s

daughter” is also astonishing

giventhatthe companytook

£80m of furlough cash and

nearly£100mofbusiness-

ratesrelieffromthe

governmentduring the

pandemic. Worstofa ll,it

reinforces a“long-standing

impression”thatAshley is

“running Frasersasa

personalfiefdomratherthan

aFTSEcompany”, hardlya

good si gn forthe long-term

health of thecompany.

Citytalk

Private-equityfirmClaytonDubilier&Rice

(CD&R)haswona“months-longbattle”forWm

Morrison,saysDeirdreHipwellonBloomberg.

ItbeatFortressInvestmentGroupinanauction

witha£7bnofferforBritain’sfourth-largest

supermarket.Notonlydoesthedeal,worth 287 p

ashare,“representa 6 1%premiumtoMorrisons’

sharepricebeforetakeoverinterestwasrevealed”,

butitisalsoBritain’sbiggestdealtotakeafirm

private“inmorethanadecade”.Ifshareholders

approveitlaterthismonth,whichseemsa

formality,itwillend“morethanhalfacentury

onthepublicmarketforthegrocer”,whichwas

foundedin 1899 byWilliamMorrison.

Someshareholdersmayfindthefinalprice

“underwhelming”,saysOliverGillinTheSunday

Telegraph.CD&Ronlyhadtoraiseitsoffer“by

acoupleofpence”andthefinalfigurewasfar

lowerthanthe 297 pasharethemarketshad

pricedin.Still,whiletheauctionmayhavebeen

a“dampsquib”,CD&R’swinningbidwasstill

“beyondthewildestdreams”ofWmMorrison’s

shareholdersatthestartoftheprocess,sothe

private-equityfirmwill“needtoworkhard”

tojustifytheprice.Ifitdoesn’t,“wecouldbe

lookingatascenariowhereMorrisonsisflipped

backonthepublicmarketsinshortorder”.

WhileCD&Rhassaid“itwillnotpillagethe

Morrisons’estatenormakedeepcostcuts”,itis

likelytocontemplateraising£2.5bnormoreby

sellingassets,saysLexintheFinancialTimes.

Itcouldjettisonpetrolstations,although“most

areattachedtostores,makingthemtrickytosplit

off”.Anotheroptionwouldbetoexploittherise

indemandfromspecialistwarehousescausedby

theonline-shoppingboomby“sellingsomeof

Morrisons’six distribution centres”.

Whowill b enext?

CD&R’s rivalFortressmay have left “empty-

handed”after losing theweekend auction, but it

hasdeliveredan“unambiguoussignalofi ntent”

that it is lookingfor othe rBritish acquisitio ns,

Morrisons leaves the market

Britain’sfourth-l argest grocer is being gobbled up byaprivate-equity firm.

Could Tesco orJSainsburybenexton the menu? MatthewPartridge reports

On Monday, shares in

Facebook fell by over5%asthe

social-mediasitedisap peared

from theinternetfor sixhours,

says Josh Taylor in The

Guardian.However ,while the

outage highlighted“just how

siloed theinternethas become

into such asmallnumberof

companies”,atemporary

problem with itsservers isn’t

the onlything causing“major

headaches ”for CEOMark

Zuckerberg (pictured).

Facebook hashad to pause

planstobuild “Instagram for

kids”after “leakedinternal

rese arch showed the company

wasaware the appcould affe ct

girls’ mental health”. Former

civic-integrityproductmanager

FrancesHaugen hasalso

accused Facebook “of

prioritisinggrowthand profit

overthe publ ic good”.

Haugen’s allegations

threaten more than Facebook’s

reputation,which has“taken

repeatedhits sincethe

Cambridg eAnalyticascandal

three yearsago”, says Lexin

the FinancialTimes. Haugen

has“filedatl easteight

complaintswiththe US

Securitiesand Exchange

Commission”accusing

Facebook “ofmisle ading

investors with publ ic

disclosures”.Still,such

casesare hardtoprove.And

Facebook “has repeated ly

provedthatscandalsdolittle to

deter usersand advertiser s”.

Netincomeis settoi ncrease

by athird this year to more

than $40bn.

Butthistime“might be

differen t”,saysLaura Forman

in TheWallStreetJournal. All

this badpublicitycouldmean

that anynew regulations“will

be tailored to it specific ally”.

Theshares havealready lost

9% sincethe latest roundof

allegationsafew weeksago.

Facebook’sheadaches become amigraine

saysAshleyArmstronginTheTimes.Fortress

financierJoshuaPackstatedthattheUKremains

a“veryattractiveinvestmentenvironment”.

Withthedealsuggestingthatthepreviously

“unloved”supermarketsectorisnowinplay,

sharesinSainsbury’sandTescohavejumped

“amidspecu lation that they co uldbethe next

targetsfor buyout firms”.

Of thetwo,Sainsbury’s is probablythemore

likely target,asTescoisont he “chunky” si de,

says Dasha Afanasieva on Brea kingviews.

Granted, it “doesn’tproduce some of it sown

food”and hasa“smaller freehold-property

portfolio”.Still ,ithas a“bigger marketshare”

anda“better online offering” than Morrisons.

Andthe fa ct that it sshare price“hasslipped

back from the342ppeakinAugust” meansthat

“evenwiththe same buyout premium”,it“ could

generate passable returns”. ButAsdalosersApollo

Global Management andLone Star “may also

be interested”. AnotherUKsupermarketauction

“could be around thecorner”.

©M

orrisons

Couldthegrocerbeflippedback

ontothepublicmarketssoon?

©G

etty

Image

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lestar