Tuesday 29/09/20

  1. In RETAIL/RESTAURANT-RELATED NEWS, a PE firm closes in on Asda, Aldi creates more jobs, Côte is saved, Pizza Hut cuts jobs and Deliveroo aims to expand
  2. In EV/TRANSPORT-RELATED NEWS, VW and its Chinese partners pour money into the EV market, Nikola continues to look precarious and Uber wins London back
  3. In TECH NEWS, SMIC shares fall and Epic continues to battle Apple
  4. In INDIVIDUAL COMPANY NEWS, HSBC gets endorsed by Ping An, Caesars closes in on William Hill and Devon agrees to buy rival shale producer WPX
  5. AND FINALLY, I bring you an amusing puppy photo…



So a PE firm closes in on buying Asda, Aldi steps up, Côte gets saved, Pizza Hut cuts restaurants and Deliveroo wants to double its rider numbers…

Private equity firm in the driving seat for Asda deal (The Times, Simon Duke) shows that a consortium led by PE firm TDR Capital is in pole position to buy a controlling stake in Asda from its American parent, Walmart. You may recall that Walmart tried to offload it to Sainsbury’s a couple of years ago, but it failed and has been in talks with other parties ever since because its international expansion strategy has changed. The consortium includes two billionaire brothers who own EG Group, which has a global network of filling stations and convenience stores. The deal hasn’t been finalised but it sounds like we are getting closer…

In Aldi to create 4,000 more UK jobs as sales surge in Covid crisis (The Guardian, Julia Kollewe and Sarah Butler) we see that Aldi is going to create more jobs as it plans to open 100 new stores and expand its online ordering service as part of a £1.3bn investment in the UK. The 4,000 new jobs will be in addition to the 3,000 permanent roles they have created so far this year as grocery sales shot through the roof during the pandemic. * SO WHAT? * Aldi and Lidl have been chomping away at the “Big Four” supermarkets’ market share for years now, but it seems that the coronavirus surge has reinvigorated the latter and helped them to slow this trend given that the discounters’ major weakness has been their relative lack of online capability. Aldi has been trying to address this by

testing out “click and collect” as well as a fast grocery delivery service with Deliveroo in 20 stores. It will be interesting to see whether this helps them take the fight back to the biggies.

Côte Brasserie outlets saved after pre-pack deal (The Times, Dominic Walsh) shows that the French-themed casual dining brand has been saved after a private markets investment manager, Partners Group, bought it out of pre-pack administration. Côte Restaurants will close three outlets operating under its Limeyard and Jackson & Rye brands but the Côte brand will remain intact, securing the future of 94 restaurants and 3,148 jobs. Pizza Hut to shed 29 restaurants after striking creditor deal (Daily Telegraph, Rachel Millard) highlights another casual dining chain in crisis as it has agreed to a Company Voluntary Arrangement (CVA) with its creditors and will close 29 of its 244 restaurants. * SO WHAT? * I hate to say this, but I think that the hollowing out of the high street is going to continue as the prospect of economic torpor looms large with the impending end of furlough. CVA’s just seem to delay things for a while and Partners Group will have a great deal of work on its hands to keep things going. Given social distancing, restaurants can’t even rely on Christmas party bookings to pep things up at the end of the year.

Then in Hot-footed Deliveroo in race to double its riders (The Times, Tom Ball) we see that the delivery specialist is aiming to double the number of its riders by the end of this year due to the massive surge in restaurants signing up to its service. It started the year with 25,000 and wants to end up with over 50,000 as 11,500 restaurants and 16 grocers including Waitrose, Aldi and Morrisons have agreed deals since lockdown in March. Deliveroo got a $575m shot in the arm from Amazon, who got 16% of the company in return, which cleared the Competition and Markets Authority in August after 15 months of dithering – and it is clearly trying to surf the online delivery wave.



VW looks to grow in China, Nikola soldiers on and Uber wins London back…

VW and Chinese partners pour €15bn into country’s electric car market (Financial Times, Christian Shepherd) shows that VW and its Chinese joint venture partners SAIC Motor, FAW Group and JAC Motors will invest $15bn into electric vehicles in China over the next four years. The group aims to design and manufacture 15 electrified models for the Beijing market by 2025. This will be in addition to the €33bn that the company has pledged to move away from fuel-burning engines. * SO WHAT? * This sounds like a great move strategically and I suspect that the presence of local partners will insulate it somewhat from any potential political pressures. Given that China is the world’s biggest car market and that it wants to be at the forefront of EV tech, you would have thought this would be a decent venture to be part of. No doubt rivals will try to make similar moves.

Elsewhere, Nikola’s business model relies on big leaps in technology, large declines in costs (Wall Street Journal, Katherine Blunt and Charley Grant) highlights the cratering of Nikola’s share price since the summer highs when it became bigger than Ford – it’s now 80% down from those heady levels following the ongoing scandal following the

revelation of founder Trevor Milton’s constant stream of 🐂💩. It also looks at the Nikola business model which depends heavily on sorting out a viable hydrogen fuelling network. Nikola plans to use batteries initially to power its trucks, but aims to transition this towards making its engines hydrogen-powered – something that requires a lot of money, a lot of backers and a massive leap of faith in terms of the company being able to reduce the costs of using green hydrogen. * SO WHAT? * The concept sounds great, but the execution will be made even more difficult as investors – who must surely be wavering given the current newsflow on this company – may be more reluctant than they were to accept the company’s projections. The drama continues…

Then in Uber wins the right to stay open in London (Daily Telegraph, Michael Cogley) we see that Uber will be able to continue its business in London after a nigh-on three year battle with TfL, which decided not to renew its operating licence following concerns about imposter drivers. Uber wins one battle but the road ahead has many pitfalls (Daily Telegraph, Michael Cogley) observes that this is a step forward for the ride-hailer but there is still the thorny problem of classifying its drivers as contractors rather than employees hanging over its head and it is still struggling to make a profit against the backdrop of poor trading conditions. It had aimed to be profitable by 2021, but that is looking increasingly unlikely given current circumstances.



SMIC shares weaken and the Epic/Apple battle continues…

Following on from what I said recently about China’s biggest semiconductor manufacturer, Shares in China’s top chipmaker SMIC fall after US blacklisting (Financial Times, Ryan McMorrow and Nian Liu) highlights further share price weakness as Washington imposed export restrictions that could cut the company off from key US equipment and software in its latest blow to the Chinese semiconductor industry following the ostracism of Huawei. * SO WHAT? * Although this is all part of Trump trying to appeal to voters, SMIC: wrong bargaining chip (Financial Times, Lex) contends that the administration may be shooting itself in the foot by pursuing this action as it will damage American companies as well as Chinese ones. Given that a third of SMIC’s suppliers are American, things could get tricky. This 

move will no doubt strengthen SMIC’s resolve to invest in its own technology so that it can free itself of potential American problems in the future. No doubt the Chinese government will be more than happy to throw money at this as well. Meanwhile, the likes of Qualcomm get cut off from a massive market…

In Hearing in ‘Fortnite’ maker’s Apple lawsuit tests antitrust claims (Wall Street Journal, Sarah E.Needleman) we see that judges are now hearing the claims of Epic Games who are objecting to practices by Apple and Google, who operate the world’s two biggest app stores. Epic is arguing that they are behaving in a monopolistic manner but Apple disputes this and the judge in yesterday’s hearing noted the compelling arguments on both sides. A trial is scheduled to take place next year. * SO WHAT? * The longer Apple can drag this out, the more damage it will do to Epic. As I have said before, I just don’t think Epic can do this on its own and Apple will be able to last way longer IMO.



HSBC gets support, Caesars looks to buy William Hill and Devon agrees to buy a rival shale producer…

Following all the recent scandal around allegations of money laundering, HSBC shares rebound after China’s Ping An increases its stake (Financial Times, Primrose Riordan, Hudson Lockett, Henny Sender and Stephen Morris) highlights a 10% jump in the bank’s share price as it turned out that its largest shareholder, China’s Ping An Asset Management, increased its stake in a vote of confidence in the lender. This is going to be a welcome development given the sensitivities of the current environment and the possibility that was mooted last week of HSBC being put on the “unreliable entities” list, which would have been a real threat to its mainland China and Hong Kong business.

Caesars in advanced talks on £2.9bn William Hill takeover bid (The Guardian, Julia Kollewe) shows that the operator of Las Vegas casino Caesars Palace confirmed that it was in advanced talks to buy UK bookmaker William Hill for cash. If everything went smoothly, the deal would be

expected to complete in the second half of next year. It is looking to combine its land-based casinos with William Hill’s sports betting expertise and online gaming. Betfred ‘eyeing up 1,400 shops’ after building stake (The Times, Dominic Walsh) shows that rival Betfred is waiting in the wings to buy William Hill’s UK outlets if the deal goes ahead as Caesars Entertainment doesn’t want them. Befred currently has 1,500 outlets in its portfolio. * SO WHAT? * I can see the value in Caesars/William Hill combo as Caesars will no doubt want William Hill’s expertise in sports betting (all the UK betting companies have been vying for a piece of the action in the US since sports betting has been legalising state-by-state over the last year or so). However, I’m not sure why Betfred would want all those shops when everyone else seems to be offloading them. No doubt the company is getting them dirt cheap – that’s the only reason I can think of!

Devon agrees to buy rival shale producer WPX (Financial Times, Derek Bower) shows that US oil producer Devon Energy is going to by rival WPX in a $12bn deal – the biggest in the industry since the collapse of crude oil prices earlier this year. Devon/WPX: no premium, no problem (Financial Times, Lex) contends that this all-paper deal makes sense given the current environment and cost savings potential.



…in other news…

I thought I’d leave you today with the amusing photo in Woman laughed until she cried over her puppy’s ‘chunky’ bum in hilarious snap (The Mirror, Courtney Pochin). Cute puppy alert 😍!

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)