Wednesday 15/12/21

  1. In MACRO & CRYPTO NEWS, the IMF pressures the BoE, UK employment rises, BoJo is hit by rebellion and the BoE bangs on again about crypto
  2. In M&A AND IPO NEWS, RTO buys Terminix, National Express buys Stagecoach, KKR buys into PureGym, Hard Rock buys Mirage Casino, Nike buys a virtual trainer designer and we see global ambitions for Wiggle
  3. In EV-RELATED NEWS, Toyota pumps more money into EVs, Tesla shares weaken, Harley-Davidson wants to spin-off electric bikes, Galp and Northvolt go for it in lithium and we see that EV charging still needs a boost
  4. In INDIVIDUAL COMPANY NEWS, Ocado shares rise, but it also suffers supply chain issues along with Joules and BA goes for Gatwick
  5. AND FINALLY, I bring you some unusual Christmas gift ideas…



So the BoE comes under fire, UK employment rises, BoJo gets a pasting and crypto gets attacked…

IMF tells Bank of England to raise interest rates (Financial Times, Chris Giles) shows that the IMF is getting all preachy and telling the Bank of England to raise rates because if it does nothing, inflation will rise to 5.5% early next year. This comes in two days before the Bank of England’s Monetary Policy Committee (MPC) is due to decide what to do with interest rates. The current market assumption is that they will leave it on hold, citing the Omicron spread as injecting some uncertainty. However, Job vacancies at record high as firms fight to find staff (Daily Telegraph, Russell Lynch) cites the latest quarterly employment data from the Office for National Statistics which shows that vacancies are now the highest they’ve ever been, powered mainly by the rise of the public sector. This could swing it for an interest rate rise this week, but the market reckons that it is unlikely at the moment. I think that the IMF sticking their oar in is just noise (the IMF has got its own problems with its leader, Kristalina Georgieva at the moment) and the Bank of England will just do what it wants to.

Meanwhile, Boris Johnson hit by big Tory rebellion on coronavirus restrictions (Financial Times, George Parker, Sebastian Payne and Jasmine Cameron-Chileshe) highlights a major blow to BoJo’s authority as a vote on key measures to reduce the spread of the Omicron variant was only carried due to the backing of the Labour Party. * SO WHAT? * This is the worst rebellion that BoJo has had in his time as PM and shows that he will be up against it in bringing any more measures in. Fears had been rising among the rebels that BoJo could impose further restrictions, now he’s got his approval for Plan B measures, when MPs break up over Christmas on Thursday – but he has since promised that parliament will be recalled if this turns out to be the case.

Then in Cryptocurrency could become ‘worthless’, Bank of England warns (The Guardian, Richard Partington) we see that the Bank of England is wheeling out the usual criticisms again about Bitcoin and that anyone investing in it could lose everything. This time it was the deputy governor, Sir Jon Cunliffe, who stuck the boot in. Interestingly, it seems to me that central banks – and the Bank of England in particular – tend to slag off crypto when it reaches new highs, but it has come back some way in the last few weeks since peaking at the beginning of November. All talk and no action – if they really hate it that much, why don’t they actually do something about it instead of just mouthing off?!



Then there’s some pretty exciting M&A going on at the moment…

Biggest buy for Rentokil creates pest control giant (The Times, Robert Lea) shows that British company Rentokil Initial is on the verge of becoming the biggest pest control company in the world with a $6.7bn takeover of its American rival Terminix. This will be the company’s biggest ever acquisition, will help them to cut $150m of costs from eliminating any overlaps and is the latest of 73 US acquisitions it has made over the last five years. Rentokil/Terminix: ratcatcher sees chance of a killing in $6.7bn US deal (Financial Times, Lex) says that the deal is a decent strategic move, making the most of Rentokil’s strong share price performance in this cash-and-shares transaction. * SO WHAT? * This sounds pretty decent and prospects of chunky cost savings for the enlarged group are pretty good. I guess the new company will just have to keep executing on its core business while cutting out any overlaps.

Then in National Express to buy Stagecoach in bet on buses (Daily Telegraph, Howard Mustoe) we see that the struggling coach/bus companies are going to huddle together in an attempt to surf the wave of people wanting to make their commute greener by taking public transport. The combined group will be worth about £1.9bn but Stagecoach/National Express: defensive bus deal needs more axle grease (Financial Times, Lex) says that the all-share acquisition is a defensive move that has been made in response to the massive collapse in passenger numbers last year. However, it could yet yield fairly decent cost savings that would suggest the current price offered by National Express might be a bit low.

Elsewhere, KKR acquires £300m stake in PureGym (Financial Times, Ian Johnston) shows that the US private equity firm has just splashed some cash on the UK’s biggest gym operator to make it a significant minority investor. The cash injection gives PureGym an implied valuation of over £1.5bn and will come in handy for the company’s plans to expand in Europe. * SO WHAT? * This is just the latest in a string of US private equity acquisitions

of British companies in the leisure space: Bain Capital bought posh bakery Gail’s in September, Blackstone bought Bourne Leisure (of Butlin’s and Haven holiday parks fame) and PureGym itself has had another private equity firm, CCMP Capital, on board since 2013. PureGym had been considering a flotation in August, but this latest investment means that the company already has the money it needs.

Over in the US, Hard Rock to buy Mirage Casino on Las Vegas Strip for $1.1billion (Wall Street Journal, Katherine Sayre) highlights Hard Rock International’s agreement to buy the casino from MGM Resorts International (which also owns the Bellagio, MGM Grand, Luxor and New York-New-York), with plans to make a massive guitar-shaped hotel. * SO WHAT? * The famous Strip has seen quite a lot of deal activity since Covid decimated its business last year and MGM Resorts put the casino up for sale in November, saying that it wanted to focus more on growth areas such as sports betting and a new casino in Japan. I guess that now is a good time to sell as we enter a period of Omicron nervousness, which is taking the edge of tourist numbers that were showing signs of recovery.

Then in Nike buys designer of virtual trainers to target NFT collectors (Daily Telegraph) we see that Nike is buying RTFKT (pronounced “artifact”), which makes digital trainers and sells these digital items as NFTs. Interestingly, RTFKT sold 600 pairs of physical trainers in March for $3.1m, but it turns out that the items that had more “real” value were the NFT versions sold with each pair. Hype or future boom?

Meanwhile, back home, New Wiggle owner aims to be world champion (The Times, Callum Jones) shows that the new owner of the world’s second-biggest online cycling retailer, Germany’s Signa Sports United , wants to “conquer the world” as it completes a blank-cheque merger with the Yucaipa Acquisition Company. Signa is dominant in Europe and Wiggle is the same in the UK – and it is hoped that the combined entity will be able to make inroads into the US. * SO WHAT? * This sounds great from a strategic point of view and will no doubt throw up decent cost saving opportunities. As a consumer, I really like Wiggle and it is pretty exciting to think that the company that started as a shop in Portsmouth in the 90’s now has a decent crack at breaking America!



Toyota commits, Tesla has a few issues, Harley-Davidson wants an e-bike spin-off, Galp and Northvolt invest in lithium and we point out that there’s still a way to go on charging…

In a quick scoot around some of the more interesting developments regarding electric vehicles at the moment, Toyota to spend $35bn on electric push in effort to take on Tesla (Financial Times, Eri Sugiura and Leo Lewis) shows that Toyota is putting more money where its mouth is as it gives its electric ambitions a major boost in terms of commitment – a change in stance because it has in the past argued that the future will be a mix of hybrids, EVs and hydrogen-powered vehicles rather than just battery-powered vehicles. Meanwhile, the main rival in the field of EVs has hit a bump in the road in Tesla shares dip as Musk sells more of his stake (Daily Telegraph), which shows that the EV company’s share price dipped further below the $1tn market cap level yesterday as founder Elon Musk continued to sell down his stake. Meanwhile, Tesla to take digital coin as payment (The Times, Callum Jones) keeps the company in the news for other reasons as it said it would now take Dogecoin as payment for some of its branded merchandise. The value of Dogecoin shot up by almost 20% on the news! Then in Harley-Davidson to spin off electric motorcycle division (Financial Times, Nikou Asgari and Claire Bushey) we see that the motorcycle maker is going to spin-off its electric bike division, LiveWire, and list it on the stock market via a SPAC. * SO WHAT? * This should be quite interesting as LiveWire has more

substance behind it in the form of Harley-Davidson than other EV start-ups listing via the SPAC route, which tend to be a bit smoke-and-mirrors. We’ll just have to wait and see whether this works, but on balance I think that it should, given its association with the company that spawned it and it will give investors a purer play to invest in, which they often like as it makes things easier.

Meanwhile on the charging side of things, Galp and Northvolt to build Europe’s biggest lithium plant (Financial Times, Peter Wise and Neil Hume) shows that Portuguese oil and gas company Galp is teaming up with Swedish battery start-up to develop the biggest lithium processing plant in Europe as it attempts to wean itself off fossil fuels. The new 50-50 joint venture will be called Aurora and will be located in Portugal. It will source lithium from the Iberian peninsula and will use renewable energy to power the operation that is due to go into operation in 2026 once the final go-ahead is given. * SO WHAT? * Given that the use of lithium is expected to skyrocket over the next few years as it is a key ingredient in rechargeable batteries, this sounds like a sensible move! I wonder whether they will have enough lithium, though, to meet this demand!

Then I thought it was worth mentioning Electric car drive needs more charging competition (Daily Telegraph, Ben Wright) because it is a useful summary of why more people aren’t buying EVs (range anxiety caused by the lack of charging points). The government wants the equivalent of almost 1,000 ultrarapid charging points on the UK’s 158 motorway service stations over the next 12 months, but there are actually only less than 100 at the moment, so this is going to be a massive mountain to climb. It says that more needs to be done to encourage competition between charging providers, which would ultimately help to increase the numbers available.



Ocado shares jump but the company suffers, like Joules, with supply chain problems and BA moves into Gatwick…

It’s a mixed bag for Ocado as Ocado shares jump on legal victory in patent dispute (Financial Times, Jonathan Eley) show that the online grocer has made an important step forward in the legal case brought by Norwegian rival, AutoStore, which is accusing it of infringing its patents. The case is ongoing around the world, but this was the cause of some investor relief as the shares rose by 10% on the news. On the other hand, Driver shortage puts brakes on Ocado sales (Daily Telegraph, Laura Onita) shows that

driver shortages was one of the factors that hit Q4 sales for the company and Joules issues profit warning amid supply chain problems (The Times, Tom Howard) shows that the clothing retailer was hit particularly hard by similar supply chain problems.

Elsewhere, BA enters dogfight with easyJet over new budget Gatwick flights (Daily Telegraph, Howard Mustoe) shows that British Airways is going to take the fight to easyJet as it announced plans to launch budget short-haul flights (under the name “BA Euroflyer”) from Gatwick. This has been under discussion for a while, but I have to say that I am sceptical of its prospects given that BA has tried and failed before to do budget – whereas the likes of easyJet and Ryanair are experts at it.



…in other news…

I thought I’d leave you today with some interesting Christmas gift ideas. We try the new Cup Noodle Humidifier from Nissin (SoraNews24, Oona McGee) would have quite a subtle presence in any room, and be a potential conversation starter for sure, while Ex-McDonald’s worker ‘disturbed’ after discovering raunchy Ronald McDonald toy (The Mirror, Emma Rosemurgey) is just plain hilarious, if somewhat concerning. Think – Ronnie Mac the Stripper…

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Some of today’s market, commodity & currency moves (as at 0745hrs 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 **
7,219 (-0.18%)35,544.18 (-0.3%)4,634.09 (-0.75%)15,237.64 (-1.14%)15,454 (-1.08%)6,895 (unch)28,448 (+0.05%)3,648 (-0.38%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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