FT : EU to propose new common fundraising to fuel defence splurge

EU to propose new common fundraising to fuel defence splurge

A new common financing mechanism will be proposed to EU leaders as a response to demands for a massive and quick boost to European defence spending, writes Paola Tamma.

Context: Spurred by US President Donald Trump’s demand for Europe to spend more on defence and his rapprochement with Russia, European Commission president Ursula von der Leyen will present funding options for a surge in defence spending today ahead of an extraordinary leaders’ summit on Thursday.

These are set to include a new ad hoc funding instrument of an amount roughly equivalent to €93bn in planned but untapped post-pandemic recovery loans, whereby the commission would borrow on the markets and lend to member states, three people familiar with the discussion said. 

Other options set to be mentioned include repurposing regional development funds for military investments. The commission has also said it will allow countries to spend more on defence without incurring sanctions under EU fiscal rules.

Some more ideas that have been floated include pushing the European Investment Bank to invest more in defence, and setting up new credit lines from the European Stability Mechanism, the bailout fund set up after the global financial crisis.

“I will inform the member states through a letter about the re-arm Europe plan. We need a massive surge in defence, without any question,” von der Leyen said yesterday. EU capitals will ultimately decide which of the funding options are acceptable.

Leaders were going to discuss joint defence needs and resources at a summit later this month, but the timeline has been accelerated after Trump’s initiative to start bilateral peace talks with Russia and his threat to withdraw US support to Ukraine. 

“That logic has now been completely upended by Trump’s overtures to Putin — and the need for Europe to demonstrate it can put its money where its mouth is and now,” said Mujtaba Rahman, Europe director at political risk analysis firm Eurasia Group.

This week the national leaders have to discuss funding as a matter of urgency, one person said, whereas the discussion about what it should be spent on will follow, with input from Nato. “The money discussion is a lot easier than the discussion of what,” they said.

EU Council president António Costa, who convened and will chair the summit, wrote to Hungary’s Viktor Orbán yesterday to politely dissuade him from his threat to veto the meeting’s attempt to find consensus.

“Regarding European Defence, I welcome the fact that no objections are raised in your letter,” Costa wrote. “I note that there is a divergence on the path to achieve peace [in Ukraine] . . . Nevertheless, we agree on the central objective.”


Shifting attitudes to defence priorities and massive market returns have seen ethical investors quietly drop their reluctance to arms companies.

Reporting for duty
Militarily neutral Ireland is preparing to make it easier to deploy troops overseas, as it considers being part of a future European peacekeeping force in Ukraine, writes Jude Webber.

Context: Ireland’s cabinet is today expected to back a draft bill changing how soldiers can be deployed in peacekeeping missions. Currently, under the so-called triple lock, approval from the UN Security Council, cabinet and parliament is needed to send more than 12 troops abroad.

Simon Harris, Ireland’s foreign, defence and trade minister, says “we cannot have a situation” where permanent security council member Russia could veto Irish deployments. 

His bill seeks to change the triple lock to a double lock — requiring a green light from the cabinet and parliament alone — and would lift to 50 from 12 the number of troops that can be deployed without such approval.

Harris insists the move has not been triggered by calls for a peacekeeping force in Ukraine but Ireland, which has taken in one of the highest proportions of Ukrainian refugees per head and has supported Kyiv with non-lethal aid, is also keen to stress it will not avoid discussion of taking part.

Harris stresses his bill does not mean ending Ireland’s long-held policy of military neutrality. But it is contentious: a recent poll showed 46 per cent of respondents rejected changes to the triple lock, versus 41 per cent in favour. Sinn Féin, Ireland’s main opposition party, has said it will oppose the legislation.

>>> Stoxx 600 Pre-Market Indications

  • Dassault Aviation (DAU0 TH) +8.6%
  • Thales (CSF TH) +8%
    • Thales 2025 Sales Forecast Beats Estimates
  • BAE (BSP TH) +7.7%
  • Saab (SDV1 TH) +6.4%
  • Leonardo (FMNB TH) +5.2%
  • Rolls-Royce (RRU TH) +5.1%
  • Rheinmetall (RHM TH) +4.7%
  • Kion (KGX TH) +2.1%
    • Kion Raised to Buy at Citi; PT 60 euros
  • Safran (SEJ1 TH) +2.1%
  • Raiffeisen (RAW TH) +1.6%
  • Nemetschek (NEM TH) -2%
  • Equinor (DNQ TH) -2.1%
  • Vodafone (VODI TH) -2.4%
  • LVMH (MOH TH) -2.5%
  • ASML (ASME TH) -3%
  • BP (BPE5 TH) -3%
  • Stellantis (8TI TH) -4.2%
  • Continental (CON TH) -4.5%
    • *CONTINENTAL SEES 2025 ADJ EBIT MARGIN ABOUT 6.5% TO 7.5%
  • TAG Immobilien (TEG TH) -4.9%
    • EQS-Adhoc: TAG Immobilien AG to launch new convertible bond offering
  • Fresenius Medical Care (FME TH) -6%
    • Fresenius Seeks €1.1 Billion for Stake in Dialysis Company

>>> TradeGate Pre-Market Indications

DAX:
  • Rheinmetall (RHM TH) +4.8%
  • Mercedes (MBG TH) -1.4%
  • Infineon (IFX TH) -1.4%
  • Siemens Energy (ENR TH) -1.7%
  • Porsche SE (PAH3 TH) -1.8%
  • Fresenius Medical Care (FME TH) -6%
    • Fresenius Seeks €1.1 Billion for Stake in Dialysis Company
MDAX:
  • Hensoldt (HAG TH) +14%
  • Thyssenkrupp (TKA TH) +4.2%
  • Kion (KGX TH) +3.1%
    • Kion Raised to Buy at Citi; PT 60 euros
  • Bilfinger (GBF TH) +1%
    • Bilfinger Sees 2025 Ebita Margin 5.2% to 5.8%
  • United Internet (UTDI TH) -1.4%
  • Puma (PUM TH) -1.4%
  • TeamViewer (TMV TH) -1.4%
  • Delivery Hero (DHER TH) -1.7%
  • Nemetschek (NEM TH) -2%
SDAX:
  • RENK Group AG (R3NK TH) +12%
  • Medios (ILM1 TH) +4.3%
  • AlzChem Group AG (ACT TH) +3.8%
  • Salzgitter (SZG TH) +2.1%
  • Fielmann (FIE TH) +1.6%
  • Eckert & Ziegler (EUZ TH) -2%
  • Heidelberger Druck (HDD TH) -2%

FT : Chinese EV maker BYD raises $5.6bn in share sale to drive overseas expansio

Chinese EV maker BYD raises $5.6bn in share sale to drive overseas expansion
Tesla rival says follow-on Hong Kong offering is the biggest in the global automotive sector in a decade

China’s electric vehicle champion BYD said on Tuesday it had raised $5.6bn in the biggest share sale in Hong Kong in four years and the largest equity follow-on offering in the global automotive sector in a decade. 

The Warren Buffett-backed company sold 129.8mn shares at HK$335.20 apiece in the deal, according to a stock exchange filing, representing an 8 per cent discount to its Monday closing price, The share offering had been increased from 118mn, according to term sheet details learned by the Financial Times. 

Its Hong Kong-listed shares fell nearly 7 per cent on Tuesday, but they had still risen by more than 30 per cent so far this year. 

The offering reflected Tesla’s main rival’s growing hunger for funds to fuel its overseas expansion and the trend this year of share sales by mainland-listed companies in the city that marks a recovery in market sentiment and investor interest in H shares — those of Chinese mainland companies listed in Hong Kong.

“BYD has a lot of free cash flow and net cash in China, but it costs a lot to transmit the [renminbi] into the currency outside China,” Citi analysts wrote in a research note. “[It] also lacks flexibility to get regular approvals during the initial overseas capital expenditure cycle fulfilment period.”

The share placing will strengthen BYD’s “capacity to further advance its technological capabilities and accelerate its overseas expansion”, the company said in the filing. 

Shenzhen-based BYD has been making an aggressive push into major markets across the globe, with plans to build localised production lines in Hungary, Turkey and Brazil under way.

China’s foreign investment curbs have prompted some homegrown companies with international ambitions to seek offshore H-share issues. The world’s largest EV battery maker CATL and China’s biggest vehicle exporter Chery both filed for a Hong Kong listing last month. 

BYD’s share sale was the biggest in Hong Kong since food-delivery platform Meituan raised $10bn in 2021.

The transaction attracted long-only funds, sovereign wealth funds and the United Arab Emirates-based Al-Futtaim family office as a strategic investor, with the order book covered multiple times, the group said. The Al-Futtaim group distributes BYD cars in the UAE and Saudi Arabia. 

Middle Eastern investors have been playing an increasingly important role in China’s fast-growing vehicle sector. In late 2023, New York-listed EV maker Nio secured $2.2bn from CYVN, an Abu Dhabi investment group, following a $1bn injection from the same investor earlier that year. Around the same time, Pony.ai, a Chinese self-driving start-up listed on Nasdaq, scored $100mn from Saudi Arabia’s Neom. 

In China, BYD’s cars account for about one-third of all new EVs sold, including pure battery cars and plug-in hybrids. Last year, the company sold 433,000 vehicles in overseas markets, accounting for more than 10 per cent of its total sales volume.

>>> US After Hours Summary: OKTA +15.9% up big on earnings; GCT -13.8% and EBS -

After Hours Summary: OKTA +15.9% up big on earnings; GCT -13.8% and EBS -8.5% head lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: OKTA +15.9% (also announces milestone related to AWS), DAVE +8.9%, NFE +8.4%, NATL +5.9%, HSII +5.5%, RPAY +5.3% (also files stock offering), RILY +4.6% (also completes sale of Atlantic Coast Recycling, suspending going private transaction), CON +4.4%, ADMA +4.2% (also delaying 10-K filing), GTLB +2.4%, SMR +2.4%, ASTS +1%, WTI +0.3%

Companies trading higher in after hours in reaction to news: WMB +2.6% (to invest $1.6 bln to provide power generation), PAAS +2% (NCIB renewal), ACMR +1.9% (tool qualified by manufacturer in China), CIFR +1.8% (stock offering), CORT +1.2% (FDA files NDA for Relacorilant), TXG +0.9% (secures injunction against Parse Biosciences), NABL +0.8% (to delay 10-K filing), DNUT +0.8% (names new COO), RKLB +0.6% (schedules first of multiple launches for iQPS), AJG +0.6% (acquires RMA General), BWMX +0.4% (appoints new CFO), CLS +0.4% (files mixed shelf), AXP +0.2% (increases dividend), SRPT +0.1% (files mixed shelf), YEXT +0.1% (introduces AI agent), ANIP +0.1% (FDA approval of Purified Cortrophin Gel), IRWD +0.1% (to delay 10-K filing), RWT +0.1% (files mixed shelf), BMO +0.1% (files $75 bln mixed shelf)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: GCT -13.8%, EBS -8.5%

Companies trading lower in after hours in reaction to news: DSP -11.4% (acquires Lockr), ATEC -9.5% ($300 mln convertible offering), PLUG -3.3% (path to profitability), ICFI -2.8% (two big contracts of over $210 mln), SJM -1.6% (closes on transaction to divest Cloverhill and Big Texas brands), ACI -1.5% (COO assuming role of CEO), RGEN -1.2% (to delay 10-K filing), LOGI -1% (COO transitioned to President of Logitech for Business), DOMO -0.3% (partners with Koantek), CTO -0.1% (acquires Lifestyle Center), RLGT -0.1% (acquires Transcon Shipping), VRE -0.1% (stock offering)

FT : Bayer’s turnaround man faces ‘crucial’ 12 months at ailing conglomerate

Bayer’s turnaround man faces ‘crucial’ 12 months at ailing conglomerate
Bill Anderson ‘stands and falls’ with direction of European group’s flagging share price, investor says

When Bill Anderson, the US-born chief executive of Germany’s Bayer, last year set out what he called a “radical new operating model” for the conglomerate, he embarked on a wholesale cull of management layers. The drive to introduce the new “dynamic shared ownership” management model is due to cost the jobs of around half of managers at the company, which employs about 94,000 people.

Yet a year after Anderson set out the plan for Bayer — whose products range from over-the-counter painkillers to industrial chemicals — its share price has not recovered. The shares on Monday were changing hands for €23.96, less than half the €52.61 on the day that Anderson took over in June 2023.

The company is due to set out progress on the reorganisation on Wednesday, alongside its annual results.

But Anderson has still, according to investors, to demonstrate that he can tackle a range of challenges. They include legal battles in the US costing billions of euros over claims — which Bayer denies — that the pesticide ingredient glyphosate can cause cancer. It is also suffering from the loss of patent protection on some drugs in its pharmaceutical division and weak demand for its agricultural products.

Ingo Speich, head of sustainability and corporate governance at Deka Investment, said Anderson had not yet been able to present any “groundbreaking successes”.

While Speich said the executive was “still firmly in the saddle”, he issued a warning.

“The next 12 months will be crucial,” Speich said.

Recent years have been humbling for Bayer, which as recently as 2015 was one of Germany’s most valuable listed companies, with a market capitalisation of more than €120bn. That figure has fallen more than 80 per cent and stood at less than €24bn on Monday.

The company has been transformed by its ill-fated $63bn acquisition of the US’s Monsanto in 2018 and a series of spin-offs. The process has left it with three divisions — pharmaceuticals, crop science and consumer health.

Bayer insists that the management reform is progressing better than expected. In a staff survey this quarter, 76 per cent of staff said they were working within the new management structure, according to figures seen by the Financial Times. That compares with just 12 per cent in the second quarter of 2024.

Anderson said in his last update in November that Bayer had cut 5,500 jobs from a previous total of about 100,000 through the reorganisation, mainly shedding management positions. The transformation has happened largely without public resistance from the trade unions.

As well as leaving 95 per cent of decisions to lower-level employees, dynamic shared ownership seeks to accelerate decision-making by evaluating progress on projects every 90 days. Anderson announced the plan at a time that some investors were demanding Bayer break itself up into three separate companies based on the main divisions.

However, the proposal has divided investors.

One fund manager, Union Investment’s Markus Manns, said he supported the focus on the reform because of the anticipated cost savings, expected to amount to €2bn annually by 2026.

Manns said Bayer “urgently” needed to reduce its net financial debt. The consensus forecast from analysts is that, despite a radical dividend cut in 2024, debt declined by only €1.2bn to €33.3bn at the end of 2024. The actual figure will be published as part of Wednesday’s results.

Manns said he had shelved his previous demand for a spin-off of the consumer health division until the reform was complete. However, he said he would put it back on the agenda if Bayer’s share price had not improved by then.

Anderson has ruled out splitting up Bayer until he has made sufficient progress on his four priorities: his management reform, the pipeline of new pharmaceutical products, the litigation situation, and debt levels. All of this might still take at least a year.

“It is very unsatisfactory that the company cannot show any growth,” Manns said. Analysts expect Bayer’s revenues — which were €47.6bn in 2023 — to fall to €46.1bn for 2025. They expect adjusted earnings before interest, taxes, depreciation and amortisation, which were €11.7bn in 2023, to fall to €9.4bn for 2025.

Deka Investment’s Speich, meanwhile, said Anderson should have tackled the other issues facing the company before embarking on a revamp of the entire organisation.

Among those are the difficulties at the pharmaceutical division, where Bayer is struggling to replace Xarelto, a blood thinner that once accounted for more than 10 per cent of the division’s revenues. The product’s patent expired last year and cheaper generic versions are taking over the market. Even though sales of prostate cancer drug Nubeqa and chronic kidney disease medicine Kerendia are picking up, they are not as profitable as Xarelto.

The crop science division is suffering from cheaper competition in plant protection as well as weak demand, especially in Latin America. Bayer also still has €6bn in provisions set aside for litigation in the US over the effects of glyphosate in its Roundup weedkiller. Litigants have claimed the ingredient can cause cancer, which it is disputing.

Bayer is lobbying the administration of Donald Trump and state governments to legislate to protect it from further claims. It is also hoping that the US Supreme Court will admit an appeal in the next few months and will rule that federal authorities’ approval of the product protect it from claims in individual states.

On top of the glyphosate litigation, Bayer is facing claims that polychlorinated biphenyls, a Monsanto product used in building materials, caused illness in staff and students at a school in the Seattle area. While Bayer has not so far taken any provisions over that issue, analysts have warned that a ruling in favour of the claimants by the Washington state Supreme Court could produce billions of dollars in additional lawsuits.

Analysts predict that an unfavourable ruling could put further pressure on Bayer’s cash flow and share price, forcing it to sell assets.

However, analysts and Speich hope that, if the litigation is resolved through settlements or another avenue, both Bayer’s share price and Anderson’s hold on his job could benefit.

“His fate stands and falls with the stock price,” Speich said.