TheChek News Flow

Europe’s carmakers risk hefty bill for carbon credits from Chinese rivals

Groups failing to meet EU climate targets face a choice of paying fines, discounting EVs, or buying credits

European carmakers led by Volkswagen could be forced to pay hundreds of millions of euros to Chinese electric vehicle rivals to buy carbon credits, as the auto sector tries to avoid potential fines for failing to meet 2025 pollution rules set by Brussels.

Under EU rules requiring carmakers to cut emissions, manufacturers lagging in the electric transition face the choice of paying billions of euros in fines, boosting EV sales by slashing prices or buying credits from less polluting competitors.

Europe is the fastest warming continent on earth, estimated at twice the global average since the 1980s, in large part because of its proximity to the melting Arctic where exposed dark ground amplifies the effect.

The European Commission plans to fine carmakers €95 per car for every gramme of CO₂ per km above a 93.6g limit, based on average emissions across a company’s vehicle sales in 2025. 

Many carmakers in the EU are looking to use the “pooling” option, where manufacturers average out the greenhouse gas emissions of their fleets with other companies that sell in the bloc.

Analysts estimate that some European groups may be forced to buy hundreds of millions of euros worth of carbon credits from Chinese rivals such as BYD, which has one of the largest pool of credits to sell thanks to high EV sales in the EU.

According to recent EU filings, Tesla expects to pool credits with companies including Stellantis, Ford and Toyota. The US EV maker has already made more than $2bn in the first nine months of last year from selling credits into emission pooling systems globally. In another pool, Mercedes-Benz has teamed up with Polestar and Volvo — both owned by China’s Geely.

Geely’s founder Li Shufu holds about 10 per cent of Mercedes, while Beijing owned BAIC holds another 10 per cent.

Mercedes said it continued to “invest billions into electric vehicles”. “However, the pace of the transformation of our industry is determined by market conditions and our customers,” it added.

VW and Renault, which analysts say look likely to struggle to meet targets through their own sales, have few pooling alternatives other than Chinese manufacturers MG-SAIC and BYD. Renault could potentially also pool with strategic partners Nissan and Mitsubishi.  

Pooling is controversial. Some executives warn that the arrangement will make the European industry less competitive by empowering rivals in China at a time when Brussels has imposed higher tariffs on Chinese EVs to protect the continent’s carmakers. 

Jens Gieseke, a centre-right lawmaker in the European parliament, said the EU had made a “mistake” in allowing pooling with US and Chinese carmakers as this could benefit European carmakers’ rivals.

Industry players are reluctant to put numbers on expected payments publicly, as carmakers trade credits behind closed doors in groupings based on a web of alliances linked to their equity stakes and brand tie-ups. 

The German state of Lower Saxony holds a 20 per cent stake in VW while Renault is 15 per cent government owned, making the groups’ pooling with Chinese carmakers a politically sensitive topic, according to UBS analyst Patrick Hummel.

He added that if VW chose to pool, it would probably need to do so with a number of Chinese companies, as BYD might not have enough EV sales in Europe to fill the German group’s gap alone. 

The German group would need to almost double its EV sales in just one year if it were to meet EU targets itself, according to UBS. The company does not have a new mass-model EV launch planned in 2025. Renault is hoping to boost its EV sales with the launch of a €25,000 model.

VW said it would aim to avoid the penalties through “its own efforts”, pointing to a series of fully-electric models that were launched last year. 

“Only in a second step would other measures such as pooling come into play, naturally weighing up costs and benefits,” the company said. “Every euro invested in possible penalties would be a poorly invested euro.” 

Renault has said that it was too early to decide on pooling, but added the arrangements with Chinese manufacturers risked weakening the European car industry further.

Brussels is under pressure from the sector to make emissions rules more flexible as sales of electric vehicles in Germany and France fell last year after governments pulled back purchase subsidies for EVs. 

The bloc’s climate commissioner Wopke Hoekstra met with car industry representatives on Wednesday and a “strategic dialogue” between officials and the sector is due to start this month.

SpaceX Starship rocket explodes after lift-off

Setback for Elon Musk-led company comes hours after successful maiden launch of rival Blue Origin’s New Glenn

A SpaceX Starship rocket has exploded after lift-off from Texas, in a setback for Elon Musk’s $350bn space technology company just hours after a successful launch by rival Blue Origin.

Starship experienced “a rapid unscheduled disassembly”, with initial data indicating a fire developed in the aft section, SpaceX said on Thursday.

However, the company did manage to execute a successful “catch” of the flight’s rocket booster on its return to Earth.

In a post on his social media platform X, Musk said the main rocket’s failure might have been due to an oxygen or fuel leak in the firewall of the ship’s engine.

“Nothing so far suggests pushing next launch past next month,” he said.

The flight was the seventh test launch of a Starship, a 400ft rocket powered by Raptor engines that first reached space in November 2023.

Videos posted on social media showed it spectacularly disintegrating in a shower of flames over the Turks and Caicos Islands in the Caribbean. SpaceX said the debris had fallen “into the Atlantic Ocean within the predefined hazard areas”.

The US Federal Aviation Administration was reported to have briefly slowed and diverted aircraft around the area where the debris was falling after issuing a warning to pilots. Flight-tracking websites noted commercial flights in the area diverting after the explosion.

SpaceX said the failure “served as a reminder that development testing by definition is unpredictable”.

The incident came shortly after the successful maiden launch of Blue Origin’s New Glenn rocket, backed by Amazon founder Jeff Bezos, who is challenging Musk in the satellite launch market. The launch of New Glenn came five years later than originally planned.

Earlier on Thursday, Bezos wished Musk and SpaceX luck in a post on X.

SpaceX became the world’s most valuable private start-up a month ago, receiving a $350bn valuation in an employee stock sale. That marked a significant jump from the company’s $210bn valuation just six months earlier.

Investors rushed to back SpaceX in part because of Musk’s proximity to the incoming president, according to people with knowledge of that deal, leading to a “Trump bump” in the valuation of various Musk entities.

SpaceX has led the race to commercialise space flight, making strides towards Musk’s ultimate ambition to develop reusable rockets and make the human race “multiplanetary”.

The company, founded in 2002, became the first private company to transport people to the International Space Station in 2020. Last year, SpaceX was called upon to return stranded astronauts from the station. 

Engine Capital’s move on UK-listed multinational is latest effort to target sprawling conglomerate structure

US activist investor Engine Capital is calling for UK-listed Smiths Group to follow other conglomerates and explore the break-up of a multinational with products and services spanning aerospace, communications, energy and security.

In a letter sent to Smiths’ board seen by the Financial Times, New York-based Engine, which holds roughly 2 per cent of the company, argued it should launch a strategic review of its four businesses, or sell the group entirely.

“We believe that Smiths has significant value that is currently unrealized due to its conglomerate structure,” wrote Engine managing partner Arnaud Ajdler and partner Brad Favreau. “It is time for the Board to announce a strategic alternatives process.”

The Engine stake in Smiths includes about 1 per cent in equity and another 1 per cent in swaps.

The activist’s move comes less than a year after Smiths chief executive Paul Keel, who had defended the FTSE 100 conglomerate’s structure, departed for a US company half its size. Smiths this week also announced the retirement of its chief financial officer.

Ajdler and Favreau argued that Smiths was trading at a significant discount to a sum-of-its-parts valuation, and that it should follow other peers and break up. Smith could be worth a 60 per cent premium to the current share price in a sale, they predicted.

Engine’s push is part of a broader trend among industrial businesses as conglomerate structures fall out of favour. The likes of Johnson Controls and 3M have split or spun off businesses, and General Electric last year completed a split into three units. 

US industrial conglomerate Honeywell said last month it would consider spinning off its aerospace division after US activist investor Elliott took a $5bn stake and pushed it to split.

“With several break-ups that have created tremendous value for investors in the industrial sector, we see a significant and timely opportunity for the Board to unlock meaningful value for shareholders by optimizing Smiths’ corporate structure,” Ajdler and Favreau wrote.

Engine Capital, founded by Ajdler 12 years ago and now with roughly $1.2bn in assets under management, has achieved considerable success with its campaigns.

Last month, it replaced the entire board at software company Dye & Durham in a proxy contest that included removing the chief executive. It has recently targeted freelancing marketplace Upwork and infrastructure consultancy Aecom.

Smiths did not immediately respond to a request for comment sent outside its business hours.

Critical minerals are the new oil: Everyone needs them, but not every country has them. That’s led some to search for them in some pretty wild places. And few places are as outlandish as the ocean deep.

But deep-sea mining appears poised to get a boost from the incoming Trump administration, according to The Wall Street Journal. A string of nominees all previously said that they support the practice, which usually involves vacuuming egg-like rocks known as nodules from the ocean floor.

The nodules consist of a range of minerals, depending on where they’re located. Mining companies can recover copper, nickel, cobalt, and other minerals all vital to the data centers and the energy transition.

But deep-sea mining is controversial. Life thousands of feet below sea level tends to be slow-growing and fragile. Even small disruptions to the ocean floor can persist for decades, and scientists are concerned that the sediment plumes from mining company vacuums will leave scars that, over human time scales, may never recover.

Removing nodules might threaten deep-sea life, too: Since light doesn’t reach the depths to drive photosynthesis, organisms depend on other sources of energy and oxygen, from geothermal vents to the nodules themselves.

Still, the value of those minerals and their presence in international waters has some countries salivating over the prospect. The International Seabed Authority, a UN organization, is tasked with regulating deep-sea mining in international waters, and it recently received a permit application from The Metals Company, a U.S. company that’s working with the Republic of Nauru, an impoverished island in the South Pacific. Other countries, including the U.K., Canada, and France, have called for a ban on the practice.

Given the deep-sea mining’s international focus, two Trump administration nominees stand out, Elise Stefanik and Marco Rubio. Stefanik is Trump’s pick for UN ambassador, and Rubio is expected to head the State Department. Ultimately, they’ll be the ones negotiating with other countries to determine how to regulate deep-sea mining.

Despite the favorable political environment, deep-sea mining still has some rough waters ahead of it. Battery manufacturers have begun to shy away from expensive minerals like nickel and cobalt. If the trend continues, it could depress demand and drag down prices, undermining the sector’s profitability.

FCA encourages Hargreaves Lansdown, Interactive Investor and AJ Bell to make shareholders aware of looming votes

The UK’s Financial Conduct Authority has been drawn into an increasingly fractious activist campaign targeting seven investment trusts as concerns mount over retail investors’ interests.

The FCA has contacted the largest retail investment sites over their communications with customers of seven investment trusts being targeted by the US activist hedge fund Saba Capital, according to people familiar with the situation. The regulator wants to ensure that shareholders are aware of upcoming votes on board memberships at the trusts.

Officials from the FCA have asked Hargreaves Lansdown, Interactive Investor and AJ Bell about how they are alerting customers who hold shares in the investment trusts on their platforms, according to the people aware of the communications.

Saba, which is run by activist investor Boaz Weinstein, has called for shareholders to vote on overthrowing the trusts’ boards, claiming that the boards have failed to hold their investment managers to account over poor performance.

The campaign could lead to one of the biggest shake-ups of the 150-year-old British investment trust industry, which has £266bn in assets under management.

Saba has proposed its own board candidates and is ultimately aiming to take on the investment management of the trusts, which are currently run by Baillie Gifford, Janus Henderson, Herald Investment Management and Manulife.

However the investment trust industry has raised concerns that retail investors might not turn out to vote, paving the way for Saba to take over. Saba has stakes ranging from 19 per cent to 29 per cent in each of the trusts, amounting to £1.5bn in total. Saba needs more than 50 per cent of votes in favour at each trust to win.

The FCA is closely monitoring the situation and staying in close contact with the investment platforms that handle communications with investors in the investment trusts, according to a person briefed on the matter.

However, the rules governing votes to remove and appoint directors of investment trusts are set by the Companies Act, rather than by FCA regulations, so the watchdog had decided that for now these were internal matters for the trusts, their boards and investors, the person added.

The Association of Investment Companies, the trade body for the sector, has written to the FCA raising concerns about the protection of shareholders’ interests.

“With so much at stake, the regulator can’t just rely on people doing the right thing,” said Richard Stone, chief executive of the AIC. “When significant changes to an investment trust are proposed, platforms should actively contact their clients to encourage voting.”

Stone called on the FCA to review how board independence is determined under its listing rules. He said Saba’s campaign to take control of both investment trusts’ boards and also become their asset manager raised potential conflicts of interest.

The seven trusts that Saba is targeting are Baillie Gifford US Growth; Edinburgh Worldwide Investment; Keystone Positive Change; European Smaller Companies; Henderson Opportunities; Herald Investment; and CQS Natural Resources Growth & Income.

Hargreaves Lansdown and AJ Bell said they had written to the trusts’ shareholders to encourage them to vote. Interactive Investor said it had also taken steps to enable customers to vote. The FCA declined to comment.

Bureau Veritas ditched talks with UK’s Intertek to seek €31bn Swiss deal

Anglo-French tie-up discussions shelved in favour of possible deal with rival SGS

France’s Bureau Veritas broke off merger discussions with FTSE 100 group Intertek in favour of pursuing a €31bn combination with Swiss rival SGS, underscoring the appetite to consolidate in the certification sector.

Bureau Veritas and SGS are in advanced negotiations over a Franco-Swiss tie-up, billed as a merger of equals, people with direct knowledge of the talks told the Financial Times.

But immediately before starting talks with SGS, Bureau Veritas was in long-running merger discussions with Intertek, the people said. A tie-up with Intertek would have positioned the combined company as an Anglo-French champion in the certification sector.

People close to those talks with Intertek, which collapsed in late autumn 2024, said Bureau Veritas’s cornerstone shareholder Wendel, a French investment firm, saw greater potential in a deal with SGS and has encouraged the merger discussions. 

Another person said a combination between SGS and Bureau Veritas had less execution risk and that the two continental companies would be a better cultural fit than an Anglo-European merger.

Together, Bureau Veritas and SGS would have about 8 per cent of the growing €160-180bn testing and certification industry, which spans services from food safety inspections to engineering compliance checks on buildings, according to a person close to the negotiations.

The Swiss company, which has a market value of SFr16.1bn (€17.2bn), would in effect be taking over Bureau Veritas, which is worth €13.7bn after its shares rose on reports of the advanced talks. The two companies are hoping to cut more than €400mn in costs as part of the deal, one person said.

In contrast, the French company would have been the larger party in a combination with London-listed Intertek, which has a market value of £7.9bn (€9.4bn) and is led by French executive André Lacroix.

Wendel is being advised by boutique firm Zaoui & Co and owns 26.5 per cent of Bureau Veritas but has been looking to sell down its stake. It sold 9 per cent of the company in 2024, including 4 per cent to a fund run by French state investment bank Bpifrance.

Any final agreement is expected to include lock up provisions for key shareholders, said one person close to the talks. Belgian-based investor Groupe Bruxelles Lambert owns 19.1 per cent of SGS.

Bureau Veritas is working with Morgan Stanley, while SGS is being advised by Goldman Sachs and Citigroup.

Intertek, Bureau Veritas, SGS, Wendel and Bpifrance declined to comment.

Markets reacted to the potential deal with scepticism, with the companies’ combined market value falling on news of the talks.

“There are real question marks around the scope for immediate value creation,” said Mark Kelly, of MKP Advisors, who added that the longer-term benefits of a deal would come from improvement in productivity.

“This probably suits both anchor shareholders. Wendel, as sellers, get a smaller stake in a bigger business,” he added.

The details of any deal are expected to attract attention in France, given the stake held by Bpifrance and the fact that Bureau Veritas entered the CAC40 index of French blue-chip companies in December. 

The optics of a French industry leader being taken over by a foreign rival, in particular, could create political friction.

The Elysée and finance ministry have been briefed on the negotiations in recent days, as has the prime minister’s office, according to two of the people, while Bpifrance is part of the talks.

The talks between SGS and Bureau Veritas have reminded some advisers following the situation closely of the construction merger of France’s Lafarge and Switzerland’s Holcim in 2014.

That deal was another supposed merger of equals driven by powerful shareholders, but faced a cultural clash between the two companies and failed to deliver on the promise of the tie-up.

Fifty-fifty joint venture would bring together 2 of the biggest European investment groups

The owner of France’s Natixis Investment Managers and Italian insurer Generali are close to announcing an agreement to create an asset management joint venture that would bring together two of the biggest European names in the sector.

Under the terms of the tie-up, BPCE and Generali Investments will combine their asset management operations in a 50-50 joint venture, people familiar with the situation said. A non-binding preliminary agreement could be reached as early as next week. It would still need to be approved by the relevant unions and authorities. 

Woody Bradford, the head of Generali’s investment division, is expected to be appointed as chief executive, while Nicolas Namias, chair of Natixis and chief executive of its owner BPCE, is set to be appointed as chair. 

The deal comes as consolidation is sweeping across the industry, with groups searching for scale in the face of declining margins, the need for investment in technology and the growing might of the largest US participants.

Natixis has €1.2tn in assets under management and operates a multi-boutique model, which owns majority stakes in 15 active managers that continue to be run by their original management. 

Generali had €632bn in assets under management as of September 30, run across a platform of 12 affiliated asset management firms investing in public and private markets, of which about 40 per cent is managed for third-party clients and the remainder for its parent insurer.

European banks, insurers and independent groups are evaluating their commitment to asset management, weighing up whether to double down, partner with others in pursuit of scale or withdraw from the sector. 

Pulling off full-blown mergers and acquisitions in asset management is fraught with difficulties and firms are increasingly turning to strategic partnerships. The Financial Times revealed in November that the two sides were exploring a potential tie-up.

The deal would allow both BPCE and Generali to retain exposure to their earnings from asset management. It is seeking to combine a capital-rich insurance company that is growing but needs more asset management products, with a business that has strong third-party distribution in retail and wholesale markets, and a number of well-respected boutiques, including Harris Associates and Loomis Sayles.

For Generali, which receives inflows each year from its life insurance business, it makes sense to invest this money in an asset manager where it has an economic interest, rather than giving it to an external one to manage.

Generali is also expected to continue to provide seed capital to create new funds and expand existing strategies.

The tie-up with Generali would be the latest deal struck by BPCE chief Namias since he took over at the head of the French lender in 2022, after BPCE also acquired Société Générale’s Equipment Finance unit last year for €1.1bn.

Meanwhile, Generali set out it stall in asset management with the 2023 acquisition of US group Conning from Cathay Life.

Generali’s chief executive Philippe Donnet told investors in August that the Italian insurer would focus on building a global asset management platform and remained “convinced of the power of the combination between life insurance and asset management”.

Last year French insurance group Axa agreed a deal to combine its asset management business with that of BNP Paribas Asset Management after concluding that it was subscale. Axa had previously explored an asset management combination with Natixis.

Germany’s Allianz and French asset manager Amundi have held talks over a potential transaction but paused discussions in December amid disagreements over how best to structure at potential transaction, the FT reported.

BPCE, Natixis and Generali declined to comment.

The need to analyze an overwhelming influx of stock data—and to do it fast—pushed Man Group to become its own kind of tech company

A tool for crunching billions of rows and millions of columns of data is the stuff of nightmares for some. For London-based hedge fund Man Group, it was a dream.

When the firm couldn’t find something on the market to, for example, consistently and quickly pull and analyze the entire universe of daily stock prices for all time, it sought to make it a reality.

The result is ArcticDB, an open-source tech tool the firm developed internally over the course of a decade and is beginning to commercialize now among customers like financial software and media company Bloomberg. Bloomberg signed on in 2023 and has been working with Man Group to build on the tool ever since.

“I do think there’s a big shift in the financial markets and especially the capital markets, this awareness that our customers need to be able to leverage large data and more and more data sets, and they need to build more rigorous models,” Bloomberg Chief Technology Officer Shawn Edwards said.

Man Group was founded in 1783 and managed about $175 billion in assets as of last September.

The “tic” in its ArcticDB refers to tick data, or the minute individual price changes that occur every time a stock is traded, sometimes just microseconds apart. The tool was designed to handle the enormous stream of tick data that comes in every day, though it can also use daily or weekly stock price data.

“Think of it as like an industrial-scale crunching of enormous things that look a bit like Excel spreadsheets,” said Man Group Chief Technology Officer Gary Collier, referring to Microsoft’s ubiquitous spreadsheet tool.

But it isn’t simply a jumbo-capacity Excel. ArcticDB users primarily see and write lines of code, and while they can run models on the data that present smaller relevant charts, they aren’t looking directly at the mother of all spreadsheets.

Man Group’s quantitative analysts, or quants, use the tool to analyze markets, build risk reports and look for signals to help them “find alpha”—in other words, capture above-average returns on investments.

Man Group is working to commercialize ArcticDB as financial markets companies, and capital markets companies in particular, are seeking increasingly sophisticated technology for ever more rigorous data analysis, Edwards said.

Bloomberg has licensed ArcticDB and built it into its BQuant analytics tools, which it sells to financial services companies. The need to conduct time-series analysis across a large number of data points is only growing, Edwards said. Bloomberg ingests over 400 billion market ticks every single day.

To be sure, there are other powerful data analysis tools on the market. For example, Excel can display about one million cells on the grid, but can process still-larger data sets via aggregation and cloud processing, Microsoft said.

And other tools have been built to handle enormous data volume, said Jason Strimpel, founder of PyQuant News, a resource hub for quants and tech finance professionals. But ArcticDB stands out for its speed and the way it naturally integrates into existing data ecosystems, Strimpel said.

The tool hasn’t seen drastic uptake among other hedge funds since its introduction, however, perhaps partly because it competes with existing workflows and partly because some hedge funds might be wary of using tech created by a competitor, Strimpel said.

Bloomberg’s Edwards believes its applications could also go beyond finance to industries like pharmaceutical research.

“More machine learning and data science is being applied in every field,” he said. “And you need these kinds of tools if you want to do that kind of quick analysis, experimentation, exploration of data.”