Capital calls: SXSW – Breakingviews
Concise overview of global finance in the Covid-19 era.
– SXSW investment
Driving south. The South By Southwest arts and technology festival is selling a 50% stake to publisher Rolling Stone Penske Media, The Wall Street Journal reported on Sunday. This provides a lifeline for the annual Texas-based hipster confab and further proof that live events are about to rebound in 2022.
The investment is part of a larger media theme of brand owners branching out into in-person events – including Breakingviews parent company Thomson Reuters. Penske is the owner of the Hollywood trade magazine Variety and Music Industry bible Billboard. The idea is that media brands get additional publicity through events, and businesses expand their revenue beyond just relying on ads and subscriptions.
Whether the price also makes sense is a bigger question. SXSW did not disclose financial data for the deal. But the recovery prospects for event planners aren’t exactly a secret. Live Nation Entertainment, which runs the Lollapalooza festival, saw its shares drop 70% when Covid-19 struck last year. Now they’re worth more than they were before the pandemic. Cheap tickets are again hard to find. (By Jennifer Saba)
Large chair. Think about your office chair. The one in the office, not the one bought online with your own money so you can work from home. Although it may have faded from memory, it has not been replaced and will be there when you return. Every time it is.
Workplace closures have meant no new chairs or desks on order from large companies. This has been dismal for office equipment manufacturers like Herman Miller and Knoll. So they announced a merger: Welcome Big Chair. Miller will pay $ 1.8 billion, a hefty 45% premium over Friday’s closing prices. If this sounds cushy, it is not compared to expectations before the pandemic.
Prior to the lock-up, Knoll’s shares were trading above $ 26, below Miller’s current offer. But there is a cushion to consider. Miller sees $ 100 million in synergies over two years. Their net present value is almost double the premium she pays. Since Knoll investors receive part of their consideration in inventory, they can accept this transaction. (By Rob Cox)
Scaly. Global regulatory stacking is growing for Nvidia’s acquisition of UK-based chip designer Arm. UK Digital Secretary Oliver Dowden said on Monday he was intervening in the $ 40 billion reconciliation on national security grounds. Microsoft and Google have also complained about the deal, which is under intense scrutiny in the United States. The chip shortage gives regulators more reason to take a break.
The public interest logic of the British watchdog places the agreement on uncertain grounds. The government has only intervened on national security grounds a dozen times since 2002, according to Arnold & Porter, a law firm. The Competition and Markets Authority has until the end of July to publish a report on the implications of the transaction, which will help the digital secretary in his review.
The in-depth review comes amid an unprecedented semiconductor shortage. Arm, owned by SoftBank, is a major supplier to Qualcomm, Apple and others. This is part of the reason the U.S. Federal Trade Commission is taking longer to investigate the deal. Nvidia and Arm need to prepare for regulators to move further apart. (By Gina Chon)
Make up a sentence. The country that gave the Britpop to the world is now looking at ‘Britcoin’. UK Finance Minister Rishi Sunak tweeted the nickname on Monday after asking the Bank of England to look into the case of a central bank-backed digital currency. It’s a cute branding, but others are further down the road.
China, which launched experiments last year in several cities including Shenzhen and Chengdu, is a leader. In the meantime, the European Central Bank has organized a public consultation. ECB President Christine Lagarde told Breakingviews last week it showed the wisdom of the crowd: people want privacy but not anonymity which could facilitate illegal activity.
Sunak, who is on a mission to make London more attractive after Brexit, has at least one consolation. As Federal Reserve Chairman Jerome Powell said last year, when it comes to a central bank digital currency, getting it right is more important than being first. (By Swaha Pattanaik)
Retreat of the white knight. A group of wealthy people who want to buy Tribune Publishing lost key funding when Swiss businessman Hansjoerg Wyss pulled out of the process over the weekend. Choice Hotels International President Stewart Bainum must now raise more money to fund a plan to buy out the American newspaper chain for at least $ 18.50 a share, in order to beat rival hedge fund Alden Global Capital . It’s a blow to the White Knights’ efforts to find trophy buyers for local newspapers such as the Orlando Sentinel and the New York Daily News.
Bainum deserves props to get involved in the process and gain a better insight into Tribune’s finances. They may not have liked what they saw. Metro newspapers are particularly challenged because they do not have a national audience to tap into. The New York Times, which targets a global readership, generated $ 1.2 billion in subscription revenue last year with its flagship article – more than three times what Tribune did. Even bosses with good intentions need big war chests. (By Jennifer Saba)
Neo-payment. Goldman Sachs has doubled its UK retail banking business. The Wall Street group’s private equity unit invested £ 50 million in British digital start-up Starling Bank on Monday. It is an extension of Starling’s funding round in March, which valued the lender at more than £ 1.1bn, and brought the total amount raised to £ 322m.
Goldman’s interest is striking given that his own Marcus unit already offers accounts to UK savers. In addition, UK retail banks are facing a series of headwinds that are making life difficult for new entrants. The pandemic has undermined the creditworthiness of some borrowers, while the squeeze on ultra-low interest rates is particularly painful for challengers like Monzo and Revolut. New players with deep pockets include JPMorgan, which announced plans to launch a digital-only bank in January. Yet Starling has broken even since October and is looking to go public as early as 2022. Goldman may have spotted a silver lining. (By Karen Kwok)
Sliding doors. Danske Bank tears off the bandage, replacing Chris Vogelzang. The chief executive of the Danish lender resigned on Monday after being appointed by Dutch authorities to investigate money laundering at ABN Amro, his former employer, even though the bank settled its problems with a settlement of 480 million euros . Vogelzang’s exit stands in stark contrast to Ralph Hamers, who remains CEO of UBS even though a Dutch court in December ordered a criminal investigation linked to his tenure as boss of ING. Dutch prosecutors say the largest Dutch bank has failed to crack down on possible money laundering.
Danske is certainly a special case. Given its 2018 scandal over illicit cash flows in Estonia, the Danish group must keep their hands very clean. Still, UBS has its own historical issues, including a French tax case. UBS FINMA’s board and regulator performed due diligence before hiring Hamers last year and found no cause for concern. Vogelzang’s exit, however, creates an uncomfortable parallel. (By Liam Proud)
Bitter taste. Spirits maker and brewer Thai Beverage has scrapped plans to spin out $ 2 billion of its beer business, citing market uncertainty and the Covid-19 outbreaks. Handling a record caseload, Thailand closed bars this weekend, even though Vietnam, Thai Bev’s crown jewel growth market, is doing well. Most stock valuations have also changed little since the launch of the initial public offering in February. A better explanation for the abandoned deal is that the pandemic wiped out the chances of a frothy assessment.
Peers Budweiser Brewing Company APAC, Heineken and Kirin are trading 27 times the mixed profit, which would have valued BeerCo at $ 8 billion. Selling 20% for $ 2 billion required a multiple closer to the 40 times Bud got back, which was always going to be a bit of a stretch. BeerCo’s 7% net margin, while improving, is only half that of its formidable rival. (By Jennifer Hughes)
Nuclear option. The diplomatic crisis between Prague and Moscow will hit Russia’s wallet. The Czech Republic expelled 18 Russian diplomats on Saturday after saying two Russian spies accused of a nerve agent attack in Britain in 2018 were also responsible for an earlier explosion at a Czech ammunition depot that killed two people . Prague added that Russian nuclear giant Rosatom is now unlikely to participate in the construction of a new power plant in the European state, worth at least $ 7 billion.
The state-owned company has $ 140 billion in overseas orders and relied on foreign projects for nearly half of its $ 15 billion in sales in 2019. Sales in countries like Finland and Hungary could also be under pressure due to Russian misconduct, although projects in countries like India Bangladesh are less likely to derail. Still, the fallout could still be enough to wriggle Rosatom and President Vladimir Putin. (By Dasha Afanasieva)