Wednesday 01 May 2019
BUSINESS DAY
47
FINANCIAL TIMES
COMPANIES & MARKETS
@ FINANCIAL TIMES LIMITED
Russian oligarch Alexei Mordashov declares victory on Lenta Severgroup buys 42% of its retail rival, seeing off bid by Magnit MAX SEDDON
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ussian oligarch Alexei Mordashov’s Severgroup declared victory in his battle to acquire control of hypermarket chain Lenta, after buying a 42 per cent stake in the company and launching an offer to minority shareholders. Severgroup’s offer comes after it agreed to buy a large stake in Lenta from US private equity group TPG and the European Bank for Reconstruction and Development. Some minority shareholders in Lenta had urged its board to consider an eleventh-hour nonbinding bid by rival retailer Magnit for 100 per cent of Lenta’s stock at a slightly higher price. Mr Mordashov, who made his $13bn fortune through his controlling stake in steel producer Severstal, is using Severgroup to diversify his holdings away from commodities. Analysts have pointed to strong potential synergies between his company Utkonos, Russia’s largest online food retailer, and Lenta’s distribution network and purchasing power. Mr Mordashov said in a statement that Lenta would remain a public company after the tender offer to minority shareholders at $3.60 per global depositary receipt closes. “We are convinced that our expertise in technology and online retail will enable us to contribute significantly to unlocking the great potential of the company, which is unique both in terms of its business model and the strength of its professional team,” he added. The deal had been criticised heavily by minority shareholders, who accused TPG and EBRD of ne-
gotiating in secret with Severgroup and undervaluing the retailer. In a letter earlier this month, a group of minority investors — including Aberdeen Standard Investments and Prosperity Capital — urged Lenta’s board to consider Magnit’s offer at the slightly higher price of $3.65. Magnit had been in unofficial discussions for months over a potential deal, but only went public with its proposal after Severgroup had agreed its deal with TPG and EBRD and never made a formal offer for Lenta, said people familiar with the talks. The news is a further blow to Magnit, which hired longtime Lenta chief executive Jan Dunning in January in a newly created role as president to turn its fortunes round after ceding top spot to rival X5 and a steep fall in its stock price in recent years. Magnit on Tuesday reported net income fell by 52.5 per cent year-on-year to Rbs3.5bn ($54.1m) in the first quarter of 2019, significantly missing market expectations. Revenue grew 10.1 per cent to Rbs310bn, boosted by an aggressive store growth programme that led to a 15.2 per cent increase in floor space, but like-for-like sales grew by a weak 0.6 per cent after a 3.5 per cent decline in traffic. The sluggish growth and a rise in operating expenses saw Magnit’s earnings before interest, debt, tax, and amortisation fall 6.6 per cent year-on-year to Rbs19.1bn. The company also paid more interest on debt and a higher tax rate, eating heavily into its net profit. Mr Dunning said the results “reflect the stage of transformation we are in, as we dismantle and rebuild the whole customer value proposition”.
Whitbread leads FTSE 100 fallers over Brexit uncertainty BRYCE ELDER
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hitbread led the FTSE 100 fallers after the Premier Inn owner warned that Brexit uncertainty was having an increasingly severe effect on corporate demand outside London. Pub operator Greene King slipped after revealing that sales growth had slowed in recent weeks, in spite of favourable weather over Easter. Glencore led the mining stocks lower after its first-quarter production update showed the effects of bad weather in Australia and problems at its Katanga copper mine in Democratic Republic of Congo. Mixed
Chinese manufacturing sector data weighed elsewhere, with Antofagasta and Anglo American retreating. Sirius Minerals hit a threeyear low after the developer of a Yorkshire fertiliser mine launched a discounted share placing as part a package to raise $3.8bn of project financing. Chemicals maker Elementis fell after cautioning that price rises had led it to lose market share. DS Smith dropped after the packaging maker flagged up volume weakness in export-led markets including Germany. The update weighed on sector peer Smurfit Kappa, which has an update scheduled for Friday. www.businessday.ng
Bart Chilton spoke out against rampant ‘Ponzimonium’ in financial markets © Bloomberg
Cable operator Altice USA gobbles up Cheddar for $200m Deal gives Altice deeper foothold among young professional audiences MAMTA BADKAR
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able operator Altice USA on Tuesday said it agreed to buy millennial-focused video streaming news service Cheddar for $200m. The company behind networks like News 12 Networks and i24NEWS, has been an investor in Cheddar since 2017. The all-cash acquisition extends Altice’s portfolio of news offerings to hyperlocal, national, business and overseas content and helps it tap the young professional market that Cheddar serves.
As part of the deal Cheddar founder and chief executive Jon Steinberg will lead Altice’s news unit, including Cheddar, News 12 and i24NEWS. “Cheddar has demonstrated an innovative approach to live news while building an engaged audience, solid followership and a strong brand,” said Altice USA chief executive officer Dexter Goei. “As one of Cheddar’s early investors, we have enjoyed our partnership with Jon and admire the entrepreneurial spirit, energy and smart disruptive mentality that he brings to the news business.” Cheddar’s streaming viewership is
most concentrated in ages 25 to 34. Its networks are available in about 40m homes through multichannel video programming distributors (MVPDs) like YouTube, Sling, Hulu Live and DirectTV Now. The company currently broadcasts live news for 19 hours a day through two networks: Cheddar Business and Cheddar News. The transaction, which is subject to regulatory approval, is expected to close in the next two months LionTree Advisors served as exclusive financial adviser to Cheddar, and Cooley served as legal counsel to Cheddar.
UK pound zips higher with Brexit angst receding Bank of England meeting later this week also in focus ADAM SAMSON
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ritain’s currency rallied against its main counterparts on Tuesday with concerns over Brexit continuing to ease. Sterling rose 0.7 per cent against the US dollar to $1.3029 — leaving it on track for the biggest rise in more than a month. It rose 0.6 per cent against the common currency to €1.1632. Investors in recent weeks have taken a more constructive view on Brexit, particularly after an extension in the date of the UK’s divorce from the EU to the end of October. “The near-term downside risks
to sterling have declined with the deadline extension, but Brexit uncertainty remains and should keep it range bound over the next six months,” Dean Turner, economist at UBS Wealth Management said. The fund manager expects the pound to appreciate further to $1.38 over the next 12 months, mostly due to dollar weakness. Echoing that sentiment, Paul Meggyesi, currencies strategist at JPMorgan, noted that he remained “constructive for the pound” even if factors that yanked it below $1.30 earlier this month from highs above $1.33 in midMarch have “room to extend”.
Beyond Brexit, investors are also keenly awaiting the latest Bank of England policy decision and inflation report, due on Thursday. Stephen Gallo, analyst at BMO Capital Markets, noted that while policymakers are broadly expected to keep rates unchanged, they may decline to “fully echo the dovish postures adopted by other major central banks in recent months”. He said part of the reasoning for taking a slightly more hawkish approach would be to help keep downward pressure on sterling under control. Typically more hawkish policy is associated with a stronger currency.
Brake specialist Knorr Bremse shares drop on abrupt chief executive exit PATRICK MCGEE
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erman brake specialist Knorr Bremse suffered a 6 per cent share price fall on Tuesday after chief executive Klaus Deller abruptly resigned owing to “different views regarding leadership and co-operation.” The resignation comes just half a year after the group — founded in 1905 — went public by selling a 30 per cent stake in the company worth nearly €4bn. The other 70 per cent is still held by Heinz Hermann Thiele, the honorary chairman who purchased a controlling stake in
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the mid-1980s, before becoming sole owner and chief executive. Mr Deller, CEO since 2015, joined Knorr Bremse as a board member in 2009 and has generally been viewed with favour. Since the IPO in October, shares have risen from €81.64 to €102.80 — before the 6 per cent drop on Tuesday — fuelling speculation that a personal rift must have occurred between Mr Thiele and Mr Deller. In a statement to shareholders the supervisory board said it “fully supports the successful strategy” of management, adding that “current business is fully in @Businessdayng
line with expectations.” The company declined to offer details on the resignation, though a spokesperson acknowledged it was unexpected and that the search for a successor only begins now. Knorr had 30 manufacturing plants across 100 countries. The company is a leader in compressed air or “pneumatic” brakes used in commercial vehicles and railway vehicles. It claims a global market share of 50 per cent in braking systems for rail vehicles and 42 per cent in pneumatic braking systems for commercial vehicles.