TheChek News Flow

Heir to eyewear giant is one of dozens under investigation by Milanese authorities

EssilorLuxottica has expressed its “full support” to chief strategy officer Leonardo Maria Del Vecchio, the late founder’s son, after Milanese prosecutors placed him under investigation as part of a sprawling probe into the alleged trafficking of illegally acquired private information.

“Leonardo Maria is doing a great job in his role at EssilorLuxottica and he has our full support at this difficult time,” the company told the Financial Times.

Prosecutors told a press conference on Saturday that four people had been arrested and dozens, including Del Vecchio, had been placed under investigation. Milanese investigators are probing whether individuals paid a local business intelligence company, Equalize, to allegedly hack state databases — including tax authorities’ — plant Trojan viruses in people’s phones, and fabricate fake information about high-profile individuals to tarnish their reputation.

EssilorLuxottica is not part of the investigation.

The move by investigators comes at a delicate time for EssilorLuxottica, the maker of Oakley and Ray-Ban sunglasses whose valuation reached more than €100bn last week. Facebook owner Meta has also been in discussions with the group over a multibillion-euro investment as the social media platform intensifies its push to develop smart glasses.

The probe has pushed Del Vecchio to consider whether to temporarily step back from his duties as the EssilorLuxottica’s chief strategy officer, according to people close to the situation. Two others said the company was not pressuring him to do so.

Del Vecchio’s lawyer, Maria Emanuela Mascalchi, said in a statement that her client “seems to be a victim [rather than a perpetrator] in light of the initial allegations”.

She added that Del Vecchio was “eagerly awaiting the completion of preliminary investigations to be able to prove he has nothing to do with the events in question and that charges laid against him have no basis”.

Investigators are probing whether two people who worked for Del Vecchio’s family office instructed Equalize, people close to the investigation told the FT. Investigators have evidence of multiple meetings between Del Vecchio’s family office executives and Equalize staff in 2023, the people said.

The prosecutor’s office declined to further comment on the investigation. It said on Saturday that four Equalize employees, including its founder and chief executive, had been arrested as part of the ongoing probe. There are no formal findings of wrongdoing so far.

Calls to Equalize’s office seeking comment were not answered on Sunday.

A spokesperson for the Del Vecchio family office declined to comment.

Del Vecchio is the son of the late Italian billionaire, Leonardo Del Vecchio. After his father’s death in 2022 Leonardo Maria inherited a 12.5 per cent stake, worth about $5bn, in the family’s Luxembourg-based holding company Delfin, along with his mother and six half-siblings.

Alongside its EssilorLuxottica stake, Delfin also owns shares in financial institutions Generali, Mediobanca and UniCredit.

Del Vecchio has recently made investments through his family office in a series of businesses, including in the hospitality and drinks sectors, and has launched a popular luxury restaurant brand in Italy.

One government figure says Downing Street announcement on Friday was ‘total cock-up with the comms’

Rachel Reeves will not unveil any new freeports in the Budget on Wednesday despite Downing Street saying last Friday that the UK planned to build five more of the tax-free sites, government officials have admitted. 

The chancellor will instead announce only “next steps” on five existing freeports, which will receive official clearance to have custom sites within their boundaries, the officials said. 

Reeves will also approve plans for a separate “investment zone” in the East Midlands that were put forward by the previous Conservative government last year. 

The announcement of “five new freeports” by Downing Street on Friday, while Prime Minister Sir Keir Starmer was in Samoa for the Commonwealth heads of government summit, caused bafflement among port executives, Whitehall officials and local mayors who had no warning of the “plan”.

This was because there was no plan to add to the 12 existing freeports — eight in England and two each in Scotland and Wales — that were a flagship economic policy of the last Tory government.

“It just was a total cock-up with the comms,” said one official. Downing Street did not immediately respond to a request for comment.

Reeves will on Wednesday announce “continued funding” for the existing freeports scheme — a favourite policy of former prime ministers Boris Johnson and Rishi Sunak as a means of attracting investment after Brexit.

The ports have special customs facilities that enable them to import inputs tariff-free and pay tariffs on finished goods only when they are placed on the market. The sites also receive tax breaks on employing new staff and investment in new buildings and machinery.

Seven have operational custom zones at present, and Reeves is expected to confirm that five others are now ready to open their customs facilities, including Liverpool, Humber and the Inverness and Cromarty Firth Green freeport in Scotland.

The Labour government is pushing ahead despite academic analysis showing that the structure of UK tariffs provides limited advantages from such sites.

So far, just six businesses are using customs sites at the eight freeports in England, according to data shared with Whitehall departments by HM Revenue & Customs, the tax agency.

Starmer said on Friday that Labour did not take an “ideological view” of the ports, which will now be aligned with the party’s industrial strategy. Set out this month, it promises to offer state backing to key high-growth sectors.

“We looked at them, they are working well, I think they could work better, so rather than stand them down we’re going to go with it, we’re going to make some improvements so they could work even better,” he said. 

Starmer added that ministers would look to “maximise the potential” of the freeports by linking them more deeply into the Local Growth Plans that the government has requested from local authorities as part of its plan to boost growth.

Each freeport has an area of specialisation. Humber is intended as a rare earth metals processing hub, while Teesside is to be a new offshore wind turbine manufacturing facility. The Plymouth and South Devon site is looking at testing autonomous maritime vehicles.

Freeports have to date attracted £6.4bn in investment and created an estimated 7,000 jobs, according to figures provided by the government. Low-tax investment zones in England are on track to create about 90,000 additional jobs by 2033 while attracting £10bn in private investment, it added.

However, economic analyses of similar schemes in the UK and overseas have found freeports tend to shift investment away from other parts of the country, rather than generating new inward investment.

When the policy was launched in 2021, the Office for Budget Responsibility, the independent fiscal watchdog, said it expected the impact of freeports on UK GDP to be so small that it would be “difficult to discern even in retrospect”.

Business may be tough for the leading luxury brands but players in the second-hand market feel optimistic about the future. Vestiaire Collective and eBay are top players in the field. The French online luxury market has just received an extra cash injection from its main private equity backer. The U.S. firm, a veteran of the “we sell anything” style of e-commerce, is enjoying solid trading. Interviews with these two leaders in the sector shine a light on an increasingly confident market.

Eurazeo, a global investment group, has just put €13 million in cash into the company. “It’s a very small sum compared to the money we raised,” Vestiaire CEO Maximilian Bittner told Miss Tweed, referring to the hundreds of million euros the company has raised since a small group of entrepreneurs launched it in 2009. Also, he said it “shows how much closer we are to profitability.”

Vestiaire Collective aims to be profitable as of the second half of next year, Bittner said.

The company’s gross merchandise value (GMV) -- the total value of goods bought and sold on its online platform -- is growing now 25 percent year on year. New listers, or the number of people posting items for sale, are up 25-30 percent compared to last year, he said. The company’s GMV was about €1 billion last year, he told Miss Tweed at its Luxury at the Summit in Val d’Isère. Staff now totals 600 people, including around 200 developers, compared to 650 employees last year. Vestiaire had no plans for a brick-and-mortar boutique. “That’s not the business I am in,” Bittner said. “We have 5 million products on the platform. You cannot duplicate what we have in any store.”

Bittner is keen to quash recurring industry chatter that Vestiaire is struggling to become profitable. He resents the fact that many people associate his company with online fashion retailers such as Yoox-Net-A-Porter (YNAP) and Farfetch, which have been battling for survival, and MatchesFashion, which was brutally shut down last summer. Flannels, the fashion retail arm of the Frasers Group that bought MatchesFashion out of bankruptcy last year, has absorbed it. The business model of these companies has nothing in common with Vestiaire Collective’s. These retailers allow brands to sell to consumers, while Vestiaire helps consumers trade fashion and luxury goods among themselves.

Specialized in luxury fashion, Vestiaire carefully selects what is sold and gives its sellers statuses such as “expert vendor” or “recommended vendor” to build trust among buyers. Some sellers have no tag. The platform offers previously owned luxury items such as a $362 Gucci Marmont leather handbag and $229 Balenciaga trainers. On average, the seller pays a commission on the price and the buyer pays for shipping and authentication fees. Sellers get their money only once the transaction goes through. The company declined to give details about average commissions taken.

In 2022, Vestiaire bought its U.S. rival Tradesy, its most important acquisition to date. The deal, whose financial details were not disclosed, helped the French company to build a major presence in the United States. With higher interest rates in recent years, consumers in one of the world’s most important secondhand markets have become thriftier and even more eager to buy and sell pre-loved items to both make and save money.

“All in all, our business has been quite resilient,” Bittner told Miss Tweed. “We are optimistic about the future. Our order economics are at an all-time high and we don’t lose money on any order.” Also, he said he felt that the company had made great strides in marketing and building its customer base. “We’ve gotten very good at magnifying the storytelling and making people understand how unique Vestiaire is,” Bittner said.

The fact that Vestiaire Collective was mentioned a few months ago in the popular Netflix series Emily in Paris gave a huge boost to the brand’s profile and traffic on its website. Vestiaire has also conducted closet sales by celebrities such as actresses Jessica Chastain and Laura Dern. Another useful marketing initiative was the anti-fast fashion campaign Vestiaire published last year, featuring piles of used clothes on Times Square.

Bittner said business was growing fast in the United States, where he moved with his family last year. “It was a very good move for me to go to the U.S.,” Bittner said. “You cannot succeed in the U.S. if you are not in the U.S. So it was natural for me as a CEO to go there.” There were no plans to move a large part of Vestiaire’s staff to the United States, he added, as salaries there tended to be higher than in Europe.

In Europe, Vestiaire has signed partnerships with Richemont’s Chloé and Kering’s Gucci and Alexander McQueen to allow customers to buy second-hand items from those brands on its platform. Kering is one of Vestiaire’s shareholders. Vestiaire also receives stock from online fashion retailer Mytheresa, which just signed a deal to acquire YNAP. In exchange for items they no longer want to keep in their closets, Mytheresa customers get vouchers to purchase new items on Mytheresa. The partnership with Vestiaire has been working quite well, Mytheresa said.

These partnerships may represent a small part of Vestiaire’s business but they are important for the future. Customers increasingly expect brands to offer them the opportunity to resale their goods, industry analysts say. It’s part of the growing realization that fashion is a major polluter and it’s better to resale your clothes, bags and shoes than leave them in your closet or throw them away.

Once market conditions allow, Vestiaire Collective is aiming for an initial public offering (IPO) at some point. Every employee at Vestiaire is a shareholder. Holding shares that could soon be traded in the market has helped the company attract talent. The last round of funding with Eurazeo on Aug. 1, valued the Collective at $1 billion. That compares with a valuation of $1.7 billion when Vestiaire did a fund-raising in Sept. 2021, led by Japan’s SoftBank Group and Generation Investment Management. The latter investor is the sustainability fund founded by former U.S. Vice President Al Gore, a self-proclaimed fighter against climate change.

For now, Bittner said he’s not thinking about the company’s IPO. “I don’t spend even one percent of my time thinking when I can do an IPO. We are in an uncertain macroeconomic environment and it’s going to be like that for at least another year.”

eBay and Vestiaire compete with companies such as Lithuania’s Vinted and America’s The RealReal, as well as other resale websites. Vinted, which tends to be more specialized in affordable items than high-end fashion, is invading Vestiaire’s territory by offering more and more luxury items. However, there is growing concern among consumers about the authenticity of the goods sold on Vinted. No-one from Vinted would answer emails from Miss Tweed, from the CEO to the press service to financial backers – which is odd.

“Some people say that they sell more and faster on Vinted than on Vestiaire,” one senior industry source. That may be because there is also less scrutiny on Vinted regarding the authenticity and quality of the goods sold.

This week, Vinted completed another round of fund-raising led by asset investment firm TPG valuing the company at €5 billion, compared with €3.5 billion during its previous funding round, carried out in 2021.

“We’ve seen that consumers are increasingly choosing second-hand as a core part of their wardrobe, as sustainability and flexibility become top of mind for many people,” Andy Doyle, TPG Partner said in a statement issued on Thursday. “Vinted’s customer focus, leading product experience, and sophisticated approach to logistics have made this market accessible to an even broader population.”

Vinted and eBay’s success give Vestiaire hope regarding profitability and growth. eBay has been in the pre-loved fashion and luxury business for nearly three decades now and continuously invests in these categories. Recently, it acquired companies that help authenticate goods and allow for the digital transfer of products. The Silicon Valley giant said it was currently moving into new markets such as Japan and the Asia-Pacific region. “Our goal is to continue to expand the luxury resale market, making authentic designer fashion more accessible, especially to younger consumers who are increasingly drawn to pre-loved and sustainable options,” Mari Corella, GM of Global Luxury at eBay told Miss Tweed. The company said it recently held its first pre-loved fashion weeks, two shows during New York and London Fashion Week, in partnership with the Council of Fashion Designers of America and the British Fashion Council.

“Whether it be accessories or apparel, there is an ever-growing demand for unique, pre-loved fashion items that are difficult to source,” Corella said. “Across eBay’s breadth of inventory and millions of active users, our shopper data gives us unique insights into the most prominent trends in the world of fashion and how they are showing up across our priority categories. For example, the top watch brands Gen Z is shopping for on eBay based on year-over-year comparisons are Cartier, Omega, Panerai, Rolex and Tudor. In handbags, the Margaux bag from The Row, reportedly coined the ‘New Birkin’, has had a search surge of 400% by global eBay users in the past year.”

Mari Corella added: “We've seen a significant shift towards circular fashion and pre-loved purchasing - the number of listings featuring the word 'thrifted' has increased by over 400% in the past year. As circular fashion becomes more central to the future of the fashion industry, eBay is working to make it easier to participate in the growing market for circular fashion.”

Polymarket said that it had linked a single trader to accounts that have wagered heavily on the Republican to win, pushing up his odds on the prediction market.

With the presidential race so tight, election watchers have become increasingly fascinated by political prediction markets, especially as the odds implied by wagers on their platforms suggest that Donald Trump is more likely to win the election.

Questions have arisen about a group of four accounts on Polymarket, one of the most popular platforms, and whether they artificially inflated Trump’s odds there. The start-up told DealBook’s Michael de la Merced that it didn’t believe that to be the case, and provided more information about who’s behind the bets.

The company said that one person was responsible, confirming online speculation. It said that a French national with “extensive trading experience and a financial services background” was the whale behind the accounts — Fredi9999, Theo4, PrincessCaro and Michie — dominating a particular bet about who will win the election. The collective size of the trading positions of the accounts was about $28 million as of Thursday morning, according to data on Polymarket.

Polymarket added that it had made contact with the trader as part of an investigation that was being carried out with the help of outside experts. (DealBook understands the platform worked with Nardello & Company, an investigations firm.)

DealBook hasn’t independently verified the details in Polymarket’s statement, though others have concluded that the four accounts are linked.

Polymarket said it had found no evidence of attempted market manipulation. Instead, it said the trader was “taking a directional position based on personal views of the election.” By spreading out relatively small bets on Trump’s odds, the trader’s goal appeared to be buying up the contract but not suddenly pushing up its price. (Bloomberg Opinion’s Matt Levine has made a similar argument.)

That said, Polymarket added that the person had agreed “not to open further accounts without notice.”

Polymarket said that its contract’s performance was “generally consistent with the price movements on other prediction market platforms.” The contract shows the odds of a Trump victory at over 60 percent Thursday morning. By comparison, similar contracts on PredictIt and Kalshi reflect a slightly tighter spread between Trump’s and Harris’s odds.

Worth noting: Polymarket doesn’t have a primary regulator. The company has been barred from allowing bets by Americans since 2022, as part of a settlement with the Commodity Futures Trading Commission. A Polymarket representative said it hoped to be allowed back in the United States and to be regulated by the agency.

Wagers on the presidential election have taken off in this cycle, especially after claims that these markets are better predictors of the White House race than traditional polls. More money has poured into them after a federal court cleared Kalshi to open up to American bettors.

But the seeming disparity between polls, which show a neck-and-neck race, and the odds on prediction markets has raised questions about potential manipulation to paint an overly rosy picture about Trump’s prospects.

Polymarket stressed in its statement that political prediction markets, which track the odds of a candidate’s victory implied by bets on a platform, aren’t the equivalent to polls, which show how people intend to actually vote.

Japan’s corporate reforms make for a target-rich environment

A rare takeover battle has broken out in Japan between two American private-equity firms. For Japan, it is the clearest sign yet of a new era.

KKR KKR -2.37%decrease; red down pointing triangle and Bain Capital are wrestling for control of Japanese software company Fuji Soft 9749 0.11%increase; green up pointing triangle. KKR made the initial bid, winning the support of the company’s board and some large shareholders. But Bain then came out with an offer that is 7.4% higher, valuing the company at nearly $4.2 billion.

Fuji Soft’s stock now trades above KKR’s offer price, indicating hopes that either Bain will prevail or KKR might come out with a higher bid.

That is the latest example of the increasing presence of global private-equity companies in Japan. The total value of private equity-backed deals in the country amounted to 5.9 trillion yen, equivalent to $39 billion, in 2023—nearly doubling from the previous year. It averaged less than ¥1 trillion a year between 2011 and 2020. According to data tracker Preqin, total assets under management in Japan-focused private-equity funds amounted to $62 billion as of March this year, more than double the amount at the end of 2019.

Japan became the largest private-equity market in Asia-Pacific last year, accounting for 30% of the deal value in the region, compared with around 5% to 10% historically, according to Bain.

Japan’s push to improve corporate governance is the key reason behind the rise of private equity. Companies are being encouraged by the government, as well as stock exchanges, to slim down their balance sheets and improve shareholder returns. This means companies are being compelled to treat takeover offers more seriously, as well as to spin out or sell noncore businesses, all of which throws up acquisition opportunities for private-equity firms.

Shareholder activism is on the rise, adding to the pressure. Takeover interest for Fuji Soft, for example, came after activist investors pushed the company for a sale.

The successful restructuring of industrial icon Hitachi could be a case study. The 114-year-old Japanese company with businesses from nuclear reactors to railways was brought to its knees during the financial crisis: It posted a net loss of ¥787 billion, then the largest-ever loss for a Japanese company.

Hitachi, however, has had an impressive turnaround in the past few years—its share price has surged nearly sevenfold since the end of 2018. The company exited from many of its noncore businesses and returned the cash to shareholders or recycled it into more promising acquisitions such as automation and power equipment. Private-equity firms such as KKR and Bain have picked up many subsidiaries that Hitachi has spun off, including logistics, chip-equipment manufacturing and steel making.

Japan’s continued push for its companies to improve corporate governance will keep bringing more opportunities for private-equity firms. Japan’s main stock exchange, for example, is pushing companies to bring their share price above book value. Japan’s low interest rates, despite the recent rate increases, make dealmaking in the country even more lucrative. The financing cost for leveraged buyouts is around 2% to 3% in Japan, compared with 9% to 10% in the U.S., according to private-equity firm Carlyle.

With ample funding, better returns and a plethora of potential targets, Japan has become the new playground for private-equity firms. They are likely there to stay.

Matt Garman, CEO of Amazon Web Services, says the company didn’t get off to a slow start with generative AI. It was just more deliberate.

When Matt Garman took over as chief executive of Amazon Web Services in June, one challenge stood out among the rest. He is now responsible for directing the efforts of the cloud-services business—the main driver of Amazon.com’s AMZN 0.78%increase; green up pointing triangle profits—to harness the potential of artificial intelligence for its customers. In doing so, he has to compete with powerful rivals like Microsoft MSFT 0.81%increase; green up pointing triangle and Google parent Alphabet GOOGL 1.57%increase; green up pointing triangle.

At the recent WSJ Tech Live conference, Garman talked with Emma Tucker, editor in chief of The Wall Street Journal, about AI and other significant challenges, including government regulation and the potential effects of Amazon’s decision to call an end to remote work for corporate staff in the new year.

Here are edited excerpts of that conversation.

A big bet

WSJ: Like a lot of big tech companies, Amazon is spending huge amounts of money in the AI boom. Do you worry that all this competitive spending is creating a bubble? Or do you think it’s leading to tangible results?

MATT GARMAN: I firmly believe that AI, and particularly generative AI, is a transformational technology that is going to change every single company, every single job, every single workflow out there.

WSJ: I think there’s a general perception that Amazon was off to a bit of a slow start with generative AI. What are you doing to play catch-up?

GARMAN: I think the whole world was amazed when ChatGPT first came out. So what you saw was a bunch of providers rush out and try to get something out to market quickly. We took a bit of a different approach.

We firmly believe that your data is the thing that ultimately differentiates one company versus the other as you go and actually apply these models inside your businesses. And so companies want to make sure that that was very secure, that they had control over how that data was accessed when they’re using it in an application. And then we also wanted to enable people to go build interesting models and interesting technologies.

And so we had this fundamental view that there wasn’t going to be one model that was going to be the rule, but there’s going to be a lot of different models, used in concert with each other to go build interesting applications. And that people are going to need a rich set of tools to deliver interesting business results. So we took a step back.

We basically said we’re going to go build that platform, so that our enterprise customers, our startup customers, our government customers can go build those applications and build what’s going to be unique to them, and not just get something to market quickly.

WSJ: Another big challenge I know you spend a lot of time thinking about—so much so that Amazon has bought its own small nuclear reactor—is energy. I think I read that these small modular reactors aren’t going to come on stream until 2036 at the latest. So what are you going to do in the meantime to meet the energy demands?

GARMAN: I think it’s 2030 hopefully, not 2036—we’re more optimistic they can deliver a little sooner than that. But they’re just part of the portfolio.

In the near term, there are projects in place that can meet all of the needs in the next couple of years. And many of those are renewable, by the way.

And we think that nuclear can be a big part of this. There’s a bunch of nuclear around the world that’s been shuttered because people didn’t need that source of power. And so the very first project we did was a partnership with Talen TLN 1.84%increase; green up pointing triangle [an independent power producer] in Pennsylvania to bring eventually almost a gigawatt of power back online that just wasn’t being used.

And some of these small modular reactors, they’re not going to solve anything in the 2020s, but in the 2030s they could be an excellent source of energy.

Too much regulation?

WSJ: Do you fear that too much regulation will hold back the development of these new technologies around AI, or do you think the U.S. has roughly got it right?

GARMAN: We’re happy to play with whatever rules the government wants.

What we advocate for is really thinking through not setting regulations or policies that are inadvertently going to lead us to the place that you’re trying to avoid. I think you just want to be super careful about that, because it’s very easy to construct a scenario where you actually give China the leg up that you’re trying to prevent by accidentally holding back the companies that are doing all this incredible innovation.

It’s a hard question. I don’t think we know the answer, and I think zero regulation is probably not the right answer either. We have to be thoughtful about it.

Back to the office

WSJ: In September CEO Andy Jassy ordered everybody back into the office five days a week, from January. You were speaking about this last week, and you were very clear—shape up or ship out was basically your message.

GARMAN: That’s not quite what I said.

WSJ: It was definitely the message. So have people shipped out, or has there been a lot of pushback?

GARMAN: Just to be clear what I actually said, it was more like, for us, we think that being in person is super important. We think that our teams are more innovative, and—particularly as we think about how do we want to disrupt and how we want to invent on behalf of our customers—we find that there is no substitution for doing that in person, just the creative energy and how fast you’re able to iterate. When you’re sitting there writing on a whiteboard, or you’re talking to people in the cubicle next to you, or you’re running into people that are in a different department but you see them at the coffee line or whatever it is—there is just that exchange doesn’t happen when you’re remote.

We tried three days a week first, and then what happened is Bob would come in on Monday and Sally would come in on Tuesday and we kind of didn’t accomplish what we wanted because everybody picked a different set of three days.

And so if it’s not for you, then that’s OK. You can go and find another company if you want to, but for us, that’s what we’ve decided is the best way to operate our company.

WSJ: So could you put a number on what percentage of the workforce you expect to churn in January or before then?

GARMAN: I don’t know. I’ve had plenty of people reach out to me and say, part of the reason I came to work at Amazon is because I want to work together with a bunch of smart people and be together. I am optimistic that most of our employees actually are excited about that in-person working.

Aerospace groups are in talks over tie-up offering satellite manufacturing and space systems

An alliance combining the space activities of Thales and Airbus would be anti-competitive and threaten to create a monopoly in Europe that would be detrimental to customers and industry, the head of the continent’s third-biggest satellite manufacturer has warned.

Marco Fuchs, head of the family-controlled and Bremen-based OHB, told the Financial Times he planned to raise concerns with EU competition authorities about a potential tie-up between Europe’s two biggest satellite manufacturers, should talks between them result in concrete proposals.

He said: “That would be a very strong, market-dominating player. We are concerned. I think competition will be diminished.”

The companies, along with Italy’s Leonardo, are in exploratory discussions about an alliance to create a European space company spanning satellite manufacturing, space systems and services. Thales holds most of its space activities in a joint venture with Leonardo called Thales Alenia Space, in which the French group holds a two-thirds stake.

“The discussion aims to see how Europe can be more competitive and have more critical mass,” said a person involved in the exploratory discussions.

The talks come as Airbus and Thales are attempting to deal with a sharp downturn in their traditional telecommunications satellite markets, where commercial customers operating in geostationary orbit have been hit by competition from Elon Musk’s Starlink low-earth-positioned broadband network. 

European manufacturers are also handicapped by the scale of the bloc’s institutional and government demand, which is just a fraction of that available to US companies in their domestic market through Nasa, public institutions and the Pentagon.

Combining the two companies’ space activities would “certainly shake up Europe’s space landscape”, reducing the number of prime contractors capable of handling large space programmes to the new alliance and OHB, said Caleb Henry, analyst at Quilty Space. “This would make intra-continental competition harder for Europe.”

It was unclear whether a deal would make sense given the lack of a sizeable public-sector demand to drive economies of scale, he added.

For OHB, a combined Airbus-Thales Alenia Space would be a formidable competitor in areas such as remote sensing and navigation satellites. However, Henry said it could also spur the German government to send more business OHB’s way to “maintain, at the very least, a competitive duopoly in Europe”.

People close to the discussions said that there was no guarantee an agreement would be reached. Previous talks in 2019 failed to lead to any concrete proposals. However, the pace and price of innovation had accelerated since Musk’s SpaceX began launching Starlink satellites in 2019, making industrial restructuring more pressing.

“It is clear that SpaceX has disrupted this commercial business and taken market share from our customers,” said one satellite group executive. Lower demand and a faster R&D cycle meant economies of scale were essential for survival, the person added.

Neither Airbus nor Thales would comment on the discussions.

A new space entity dominated by French companies would come on top of rising tensions with Germany since Berlin pushed to open Europe’s launcher market to competition, challenging French leadership in the field.

German space executives were also irritated last year by initial industry proposals for Europe’s new secure communication satellite constellation, known as Iris2, which Berlin claimed did not include sufficient German representation.

“Germany has to be very careful it doesn’t suffer due to the fact that France and Italy have an issue in their space businesses,” said one German executive. “The question is, if they find synergies, will they lay off people in Germany or move workload from Germany elsewhere.”

If this were the case, German institutional demand could be moved to companies such as OHB to compensate, he said.

Chief executives warn that Michel Barnier’s plan will reverse Emmanuel Macron’s business-friendly reforms

France’s luxury, defence, and construction blue-chip companies are among those set to face significantly higher tax bills under a new belt-tightening budget that will dent their profitability this year and next.

LVMH, the Paris-based luxury powerhouse controlled by Bernard Arnault, expects to pay an additional €700mn to €800mn in corporate tax this year, an increase of about 15 per cent on the €5.7bn it paid last year. Vinci, the infrastructure group that operates toll roads in France, will pay an extra €400mn, or 18 per cent, in taxes.

While lawmakers are still debating the budget, meaning that details can still change, executives have warned that higher corporate taxes and other policy changes will reverse seven years of business-friendly reforms undertaken by President Emmanuel Macron.

“The policies being proposed today will put us at the back of the pack again in Europe,” Alexandre Bompard, chief executive of food retailer Carrefour, told France Inter radio this month.

Premier Michel Barnier this month unveiled a €60bn fiscal package to address ballooning deficits through spending cuts and what he said will be “targeted and temporary” tax increases on companies and wealthy people.

About 400 corporations with over €1bn in revenues in France will be expected to pay more tax over two years to raise an estimated €8bn for state coffers, according to a draft budget.

Although Barnier has promised the extra tax will only last two years, companies and economists are sceptical since France has often gone back on such pledges and deficits will remain wide.

Sector-specific taxes will also be applied to airline tickets and maritime shipping groups to generate €2bn, and the government has proposed a tax on share buybacks to raise €200mn.

Macron enacted a gradual corporate tax cut starting in 2017 to take it from 33 per cent to 25 per cent. Some high profile chief executives have argued that Barnier’s proposal will send a negative image by penalising companies who conduct most of their business in France.

LVMH chief financial officer Jean-Jacques Guiony told analysts on a recent results call that the company pays about 40 per cent of its tax in France, so “nobody [should] feel that we’re not contributing to the budget effort that is currently under way.”

Rival luxury group Hermès said on Thursday that it expected to pay around €300mn in additional tax for 2024, a 19 per cent uplift from €1.6bn last year. Cosmetics maker L’Oréal has estimated that its tax bill will increase by €250mn this year.

“Your level of pain depends on the amount you sell in France and then how much profit made there,” said Thomas Zlowodzki, head of equity strategy at Oddo Securities.

Barnier, a conservative who leads an uneasy power-sharing government with Macron’s centrists, is relying significantly on tax hikes to narrow a budget deficit that is estimated to reach 6.1 per cent of national output this year, far above the EU target of 3 per cent.

Other measures in the budget, such a cutting subsidies for apprentices and low-wage workers, will also raise the cost of labour.

Economists have also warned that the plan, which aims to return the deficit to 5 per cent of GDP by the end of 2025, could cut economic growth to as low as 0.5 per cent next year, from an estimated 1 per cent in 2024.

An executive at a Cac 40 company said Barnier’s budget was “cowardly and misguided” because it is just “plugging holes in the short term” instead of instituting structural reforms to curb long-term spending.

Oddo estimated that the additional payments from companies with €1bn to €3bn in sales in France will raise their corporate tax rate from 25 per cent to 30 per cent for 2024, and 27.5 per cent for 2025. The rate for those with sales above €3bn will increase to 35 per cent in the first year and then dropping to 30 per cent, the financial services firm said.

The average statutory tax rate in the OECD when weighted for GDP is 25.8 per cent.

Aircraft engine maker Safran said on Friday that it expected additional taxes of €320mn to €340mn for 2024, which would cut its earnings per share by $0.75. Defence electronics group Thales said on Wednesday that it would pay roughly €105mn in extra tax for 2024 and 2025.

Broadcasters TF1 and M6, lottery company Française des Jeux, and airport operator ADP — all of which are heavily exposed to France — will end up with higher tax bills than larger companies such as oil major TotalEnergies, which earns very little of its profit in the country.

Luxury group Kering, owner of brands including Gucci and Saint Laurent, told analysts on Wednesday that it did not expect a significant impact on its tax rate because the “geographical footprint of our houses and of our production is concentrated in Italy.”

Shipping magnate Rodolphe Saadé said his CMA-CGM group expected to pay an additional €800mn over the two years. Global container shipping companies have long benefited from a favourable tax regime in which they pay depending on tonnage transported rather than profit.

Saadé told Le Figaro newspaper on October 21 that the supplemental tax represented a “consequential effort” for the group and that it “would pay out of patriotic spirit.” He warned that investment will take a hit if the government does not reverse the extra tax after two years as promised.

“If taxes increase, we will be less able to invest,” Saadé added. “Yet we need investment to remain competitive and stay among the best in the world.”

But Oddo’s Zlowodzki warned that the government would find other ways to extract more money from companies if deficits remained high, perhaps by permanently raising the corporate tax rate from the prior 25 per cent.

“As long as the budgets are so out of balance, there will be more tax one way or another on companies,” he said.

New boss seeks to bring Naspers out of Tencent’s shadow

Fabricio Bloisi will overhaul corporate culture and pay structures in search of growth beyond its stake in the Chinese internet giant

The new head of South Africa’s Naspers group will overhaul corporate culture and pay to meet an ambitious four-year target to double the market value of its investment arm Prosus, the biggest shareholder in Chinese internet giant Tencent.

Fabricio Bloisi, who runs both Naspers and Prosus, told the Financial Times: “I’m here to do the next Tencent”.

Naspers turned a 2001 investment of $32mn in what was then a start-up into a stake that is today worth $115bn. Prosus owns just under 26 per cent of China’s biggest gaming company. But the market value of Amsterdam-listed Prosus is around $105bn, in effect ascribing no value to its host of other global assets, from food delivery to payments businesses. 

After years of management attempts to reduce the discount, including through stock buybacks funded by selling Tencent shares, Bloisi became chief executive in July with the prospect of a $100mn payday if he hits a $168bn market value target for Prosus by mid 2028, from its $84bn level in July.

“Prosus was not building the future as it could, and that’s what is going to happen,” said Bloisi, the former head of iFood, a Prosus-owned business that is the largest food delivery app by market share in his native Brazil.

The goal is to boost other businesses to equal or exceed the value of the company’s Tencent stake.

Bloisi will be paid the $100mn in Naspers and Prosus shares if the $168bn market value is maintained for a year. The deal also requires him to increase shareholder returns over the next four years to higher levels than at least half of companies in a “peer group” that includes Amazon, Meta, Uber, and SoftBank.

“I don’t think [Prosus] had a good performance in the last five years. Maybe that’s why they changed the CEO,” Bloisi said. “Many people were getting high compensation even if the company was not growing. For four, five years the share price was more or less stable.”

“I’m changing this a lot. Compensation has to be driven by results and the growth you create,” he added. “Not [just] for me, for everyone, for the whole company.”

Bloisi said his highest priority was to create a higher risk, higher reward entrepreneurial culture at Prosus, which employs 30,000 people.

“Prosus is not innovative enough. I think Prosus is not taking risks enough,” he said. Top managers, he said, needed to think more like founders of technology companies who are not only disruptive but intensely focused on results that are linked to their pay.

Bloisi’s $100mn potential payout was called “excessive and disproportionate” last month by Dutch fund manager PGGM, after Naspers’ controlling stake in Prosus meant the deal was approved by shareholders.

The one-off award would be more than the previous chief executive of Naspers and Prosus was paid throughout his entire nine-year tenure. 

Before he stepped down as CEO in 2023, Bob van Dijk listed Prosus as the owner of the Tencent stake and broke a taboo on selling the Chinese company’s shares.

While Bloisi said he is still committed to the Tencent investment, he suggested that previous management had not been fully incentivised to move Naspers out of its shadow.

However, the Tencent stake is included in the market value target, which Prosus is already on the way to hitting partly because of the rally in the Chinese company’s shares since July.

Investors and analysts have said that Bloisi’s market value-based target and his background at iFood mean he may expand Prosus through acquisitions, particularly in the fragmented food delivery sector.

Bloisi is paid an annual salary of $750,000 plus short-term incentives worth another $750,000 if he hits certain financial and operational targets, including cutting the group’s share discount.

Three historic hotels – three fabulous makeovers

Check in to these legendary landmarks in Rome, Miami and NYC

The Moore, Miami

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