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The French luxury skiwear brand aims to accelerate growth and expand overseas.

PARIS — French luxury skiwear brand Fusalp has named Pascal Conte-Jodra chief executive officer as it seeks to accelerate growth and expand overseas.

His nomination follows the departure last November of Alexandre Fauvet after 10 years at the helm.

Working in close collaboration with Mathilde Lacoste, artistic director of Fusalp, and its leadership team, Conte-Jodra is charged with consolidating the identity of Fusalp and reinforcing the brand’s presence in strategic markets, the company said Monday.

“His exceptional background and strategic vision are formidable assets for supporting our company in this new phase of growth and success. We are convinced that Pascal will lead our teams towards the ambitious and lasting growth that Fusalp deserves,” Sophie and Philippe Lacoste, copresidents of Fusalp, said in a statement.

Founded in 1952, the French company based in the Alps is best known for its early technical advancements, such as contour-fit ski pants, stirrup styles and one-piece suits worn by the French national ski teams in the 1960s.

After hitting hard times in the mid-1980s, Fusalp was purchased in 2014 by siblings Sophie and Philippe Lacoste, grandchildren of tennis legend and Lacoste founder René Lacoste, and Fauvet, also a former Lacoste executive. It is now sold in 25 countries.

“I am deeply honored to join Fusalp, an iconic house with a very strong brand heritage, a unique DNA and an unwavering commitment to innovation, excellence and style. With passion and determination, I will bring my experience to support the brand in its growth ambitions, while strengthening its influence on the international scene,” Conte-Jodra said.

He joins the firm following a yearlong stint as CEO of Y/Project, which ended in July following the death of the label’s cofounder Gilles Elalouf.

Prior to that, the French executive held senior positions at brands including Mugler, Marc Jacobs and Carolina Herrera.

A graduate of Toulouse School of Management and Paris Dauphine University, Conte-Jodra began his career as senior financial analyst at Hermès, based in New York City.

He Used to Bag Groceries. Now Kroger’s CEO Is Trying to Save a $20 Billion Deal.

As antitrust trial wraps up, Rodney McMullen aims to strengthen grocery chain against the next wave of industry disruptors

Rodney McMullen first realized the threat Walmart WMT 1.18%increase; green up pointing triangle posed to the established supermarket business in the 1990s, while he was rising through the finance ranks at Kroger KR 1.29%increase; green up pointing triangle.

Walmart had just started selling groceries at a new supercenter store in Dickson, Tenn., near the Kentucky border. Almost overnight, McMullen said, the supercenter took between 30% and 35% of the sales from nearby stores run by Kroger, the century-old supermarket chain.

“We keep doing what we were doing, we would go out of business,” McMullen thought at the time, he told a federal court in Oregon earlier this month.

McMullen, now Kroger’s CEO, has made his 46-year career at Kroger a study of the grocery industry, using its sometimes-bruising lessons to hone his strategy of getting bigger to build leverage with suppliers and cut costs. It has helped make the Cincinnati-based company the biggest U.S. supermarket company by sales.

The trouble is, Walmart is bigger. The Arkansas-based retailer 22 years ago became the country’s largest seller of groceries, surpassing Kroger and other supermarket chains—just as McMullen had anticipated. He sees the next wave of disrupters in e-commerce giant Amazon and European discount grocers like Aldi.

McMullen, who started as a bag boy and has led Kroger since 2014, is fighting to save the deal he believes will secure its future—a roughly $20 billion takeover of Kroger’s next-smallest competitor, Albertsons, that would unite the two largest pure-play supermarket operators. McMullen says the combined company will invest $1 billion to lower prices at the newly acquired Albertsons stores.

Opposing the deal is the Federal Trade Commission, which has sued to block it, as well as state attorneys general and labor officials representing supermarket workers. After testimony finishes this week in an antitrust trial, a judge is set to consider the case and rule in the coming weeks or months. Analysts at Bank of Montreal this month forecast a 70% likelihood that the deal is blocked.

In the antitrust trial this month, McMullen, 64, has been the defense’s star witness. Inside a packed, sweltering Portland, Ore., courtroom, he described how decades of watching supermarket competitors rise and fall formed his rationale for the deal, while government lawyers sought to portray it as a way to squelch competition.

If he can pull it off, McMullen would begin the next chapter of his career leading a nearly 5,000-store supermarket empire, roughly double Kroger’s current total and matching the scale of Walmart’s 3,500 supercenters. If completed, it could redefine McMullen’s legacy and how Americans shop. If the deal is blocked, analysts say Kroger could try to acquire a smaller, regional grocer, while Albertsons said it could close stores and lay off employees.

McMullen, 64, is a farm-raised Kentuckian and Cincinnati Reds fan who grew up in Kroger’s backyard. While earning his college degree and later his master’s in accounting, he worked at Kroger stores, and then stuck with the company afterward.

Over time, former colleagues said, McMullen developed a reputation for shopping at competitors’ stores, alert for things they do differently than Kroger, how their stores look, and their prices. At Kroger, he keeps a list of the top grocery retailers going back several decades, a reminder of how quickly the industry can change.

When he first got into the business, A&P was the largest U.S. grocery retailer, McMullen told the court during testimony in the antitrust trial. “They don’t even exist today,” he said.

Jorge Montoya, a former Kroger board member, recalled walking the aisles of a Virginia Wegmans store with McMullen, who examined everything from the produce’s freshness to the lighting and the spread in the meat case. McMullen chatted up customers about the store and prices.

“He could spend hours in one store,” Montoya said.

McMullen also likes buying them. Early in his tenure as Kroger’s CEO, McMullen spent about $200 million to acquire chains such as Roundy’s and Pick N’ Save in Wisconsin and Mariano’s in Chicago, expanding Kroger’s Midwest footprint.

It was Amazon’s $13.7 billion acquisition of Whole Foods Market in 2017, though, that McMullen said was a watershed moment. He told the Portland courtroom that he keeps on his desk an article published that year by the Cincinnati Business Courier headlined “How Amazon is Crashing Kroger’s Party.”

“It’s to remind me every day that Amazon is just like Walmart where they’re going to keep adding things every single day,” he said.

Another revelation hit McMullen during a trip to Europe, where he saw how German grocers that once resembled many U.S. stores had been gobbled up by discount grocery chains. “Today Aldi and Lidl control about 50% of that market,” he said.

McMullen testified that the deal would give Kroger a better chance at matching Aldi on price and Amazon’s e-commerce prowess.

Representatives for Walmart, Whole Foods and Aldi had no comment.

Dave Dillon, a friend for the past 40 years who preceded McMullen as Kroger’s CEO, said in the 1990s McMullen was one of the first grocery leaders to recognize that his competitors stretched well beyond other supermarkets—any retailer selling products that Kroger stocked could be a threat.

That view has been validated for years, as Walmart, Costco and Amazon have gathered more grocery sales while Kroger’s slice of the market has declined. Currently Walmart’s market share in U.S. grocery sales is nearly 30%, compared with Kroger’s 10%, while Costco is at 9% and Albertsons 6%, according to Numerator data.

Figures like those underpin McMullen’s core argument for preserving Kroger’s planned takeover of Albertsons. Combining Kroger stores, largely in the Midwest and Western U.S., with Albertsons’ presence in the Northeast and West Coast will provide Kroger more leverage with suppliers to lower costs, he said, and ultimately reduce prices for shoppers.

The FTC sued to block the deal in February, saying that it would reduce competition in the industry, leading to higher prices for shoppers and lost jobs for workers.

“I think people underestimate [McMullen] because he is a mild-mannered guy,” said Joseph Feldman, an industry analyst at Telsey Advisory Group. “But he’s intense. He wants to win.”

America needs a better strategy on semiconductors

Export controls have their place, but they should not be allowed to choke innovation

The 2022 National Security Strategy establishes as a strategic objective that the US will “outcompete China” and “maintain and refine its competitive edge”. Stimulated in part by the geostrategic shock of pandemic-induced supply chain disruptions, the Biden administration established semiconductors as the principal competitive battleground. Yet for all the grand statements of intent, the US government has so far failed to produce a plausible strategy for achieving these aims.

Its efforts have been focused in two directions: $52bn in Chips Act incentives to build domestic manufacturing and R&D capacity; and export control policies that aim to deny China access to advanced compute and artificial intelligence capability. 

While unprecedented, these actions fail to account for upstream or downstream considerations such as the need for increased domestic demand to drive supply chains onshore. For an industry as complex and capital intensive as semiconductors, we must holistically redefine the battlespace. 

Success in a competition requires a clear strategy that cultivates one’s own sources of strength relative to those of the competitor. Unfortunately, our approach thus far has failed to capitalise on America’s greatest competitive advantages: innovation and foreign partners.

The US semiconductor industry’s biggest strengths are the companies and academic institutions whose innovations have enabled both overwhelming American market dominance and the fantastic rate of technology advances globally, as well as the foreign partners who share a critical role in our collective ability to secure this supply chain. Properly leveraged, these assets should be an insurmountable competitive advantage. Rather, these partners are diverging.

Policymakers have become increasingly troubled by continued corporate activity in China which they view as contrary to US national interests. Industry feels battered by export controls and unpredictable policies that hamper its ability to plan for the long term. Foreign partners are wary of entangling their own critical industries in volatile American policy.  

Let me be clear: export controls, outbound investment and other such restrictions are a necessary element of any US-China strategy. China’s unfair trade practices have played a significant role in the erosion of critical US supply chains. And no one doing business in China, no matter how diligent or well intentioned, can prevent the transfer of dual-use technology to its defence, intelligence or security services. 

It should come as no surprise, therefore, that the US has ramped up export controls to protect against the use of its critical technology in ways that run counter to its national interests. But we should also acknowledge that these tools can only work as part of a holistic “compete” strategy. 

We have implemented export controls that uniquely disadvantage US companies without accomplishing a strategic aim. We have impeded their access to key growth markets, for which Chinese competitors are waiting in the wings. We have implemented incentive programmes so burdensome as to deter companies from participating.

So how do we generate the requisite degree of urgency and collaboration between governments and industry that such a challenge requires? The answer is leadership, specifically by the president and the White House.

The Executive Office of the President must oversee strategic co-ordination of the disparate array of government authorities needed. It must lead a radical and holistic rethink of how government and industry interact. Policymakers must adopt a long-term, business-oriented mindset, understand the calculus that drives business decisions, and identify policies that would align business interests with those of national security. The government must prioritise dialogue with foreign partners to establish a common view of the threat landscape and align strategic aims. 

For its part, industry is best positioned to inform the government on how it can “outcompete” China. It must bring to the table constructive business solutions that take national security and foreign policy goals into account. Attempts by industry to divert policymakers from pursuing those ends are counterproductive.

We must deploy America’s sources of strength to their greatest competitive advantage. We must demonstrate the leadership and strategic sophistication necessary to enlist industry and foreign governments as collaborative partners. The outcome of the strategic competition with China in semiconductors will define US national and economic security for the foreseeable future. We must do better. 

Apollo pushes into high-grade debt business long dominated by banks

Led by a onetime dealer in death benefit settlements, a leveraged buyout pioneer evolves into a bulge-bracket lender

Jamshid Ehsani began his Apollo career betting on death. Now he’s the central executive behind its effort to help companies breathe fresh life into their operations.

In the process, Apollo’s private credit strategy is taking on the largest traditional banks in the race to fund the billions needed by highly rated multinationals such as Intel, AT&T, AB InBev and Sony Music, which historically relied on high-rated bonds or vanilla credit facilities.

Asset managers have long been established as alternatives to banks in the lending industry. But Apollo’s rapid growth over the years has created a unique opportunity: to be the one financial sponsor with the firepower to move beyond the mid-market clientele typical of the sector and step into underwriting the biggest companies in the world.

Apollo says it could originate more than $200bn in overall corporate loans annually by 2026. One part of that effort is what it calls its “high grade capital solutions” strategy. Apollo then places the paper it spins up into its retirement annuities affiliate Athene, as well as third-party insurers and other asset managers, the latter two generating management and transaction fees.

In the middle of the effort is Ehsani, who has a PhD in energy economics from the Sorbonne and arrived at Apollo in 2010 after stints at Swiss Re, UBS and the World Bank. Among Ehsani’s original assignments were “structured settlement” deals, a common if controversial business of acquiring life insurance policies that pay out to the buyer upon the customer’s death.

Colleagues describe Ehsani, whose title now is global head of principal structured finance, as a hard-charging dealmaker, prone to speaking sharply to colleagues.

“He’s probably the most powerful person at Apollo that a limited amount of people know about,” said one fellow Apollo executive.

Marc Rowan, Apollo’s chief executive, has told investors the firm’s biggest private credit opportunity is not the competitive “direct lending” business of funding risky leveraged buyouts.

Instead, many creditworthy companies — including large ones — have unique projects or strategic objectives better served by customised structured financing. Each deal has different terms but all transform a cash flow waterfall into investment-grade debt that is supposed to simultaneously solve a challenge for the Apollo counterparty, supports retirement savings of Athene’s elderly customers and give Apollo a higher rate of return for its shareholders.

In the instance of AB InBev, the beverage company sold half of an unwanted metals plant for $3bn to Apollo. For Intel, Apollo invested $11bn to help pay for the completion of an Irish semiconductor fabrication facility. At AT&T, Apollo contributed $2bn to the telco’s wireless segment used to build out mobile phone networks.

For the $50bn or so that Apollo has cumulatively originated in high-grade debt, Apollo also earns placement and management fees for the portion syndicated to other asset managers or insurers. Apollo can charge interest rates that are 1 to 2 percentage point higher over more conventional loans or bonds as a premium paid for illiquid private debt.

Annual profits from lending out insurance customers’ funds at Apollo top $3bn and are growing at double-digit rates; the company’s market cap has soared to about $65bn. Since the start of 2020, shares of Apollo have more than doubled, far outperforming the S&P 500.

The pitch to corporate clients is just one part of Apollo’s broader lending push, as it looks for loans of all kinds that can feed both its own and third- party insurers. It provides financing underlying rail cars, aeroplanes, music royalties, machinery, inventory, real estate and even other asset managers who are in need of capital.

“They just really understand how to drive through these alternative structured pathways and then they get paid for it,” said an executive from one firm that is financed by Apollo. “They have worked out a way to make sure they are compensating themselves pretty richly.”

And for a firm whose heritage lies in swashbuckling corporate takeovers, its $500bn credit business has essentially become about replicating a traditional banking model. Insiders describe an intensive marketing effort resembling a Wall Street sellside apparatus, where Apollo executives are relentlessly trying to get an audience with Fortune 500 treasurers and chief financial officers in order to pitch them on Apollo-designed transactions.

Apollo, for example, had intensely pursued a transaction with Boeing, the cash-strapped jet maker, including dispatching William Lewis, the veteran sellside investment banker who joined Apollo in 2021, to court Boeing’s management. Ultimately, the company decided to sell $10bn of ordinary bonds.

“These are the kinds of things that are not well-suited for [banking] institutions, who are funded short,” Rowan recently told investors. “These are exactly the kinds of transactions in the investment-grade market that we expect to drive our business and are driving our business.”

Whether its risk assessments, underwriting and lending designs actually work will play out over several years. But Intel’s sudden unravelling is a cautionary tale.

Intel shares have dropped 60 per cent this year as it suddenly missed revenue targets and slashed forecasts as it struggles to keep up with chip rivals. Its overall credit rating has dipped from A to BBB in response. Apollo told the Financial Times the credit rating on the particular debt it structured for Intel remains unchanged and capital charges faced by insurers have not increased, though that could still change if Intel’s fortunes continue to slide.

Apollo declined to make Ehsani available to speak to the FT and said multiple senior executives were responsible for its corporate origination effort.

Rowan has said Apollo can accumulate more than enough cash from insurance customers to fund loans. Rather, the limiting factor for the firm is creating enough clever investments — including those that resemble big cap deals exemplified by the Intel transaction — to generate larger and safer returns.

Jim Zelter, the co-president of Apollo, told the FT that the market for conventional high-yield direct loans was about $1tn to $2tn, a fraction of the $40tn investment-grade landscape.

“We want to invest in investment-grade companies at scale,” he said. “The traditional markets alone are not large enough to be responsive to these companies.”

F1 rival calls for Brussels scrutiny of Liberty Media’s €4bn MotoGP takeover

Formula E’s Alejandro Agag warns deal would hand US group significant power with broadcasters

One of the biggest power brokers in motorsport has called on Brussels to demand concessions from the owner of Formula One ahead of its proposed €4.2bn takeover of the elite motorbike series MotoGP.

Alejandro Agag, co-founder and chair of electric car series Formula E, warned that the deal threatens to hand US group Liberty Media “very significant” power with broadcasters when negotiating media rights deals.

The US group agreed a €4.2bn takeover of MotoGP in April. It is hoping to emulate its success with F1, which has boomed in popularity beyond its European heartland thanks to the Drive to Survive series on Netflix and new races in Miami and Las Vegas.

“From the point of view of competition law, I think there are significant challenges,” Agag told the Financial Times in an interview. “The leverage that this merger will give the resulting entity in terms of negotiating with broadcasters will be significant and I think the European Commission will look very carefully at this deal.”

Agag, who also founded off-road racing competition Extreme E and electric powerboat series E1, stopped short of saying the takeover must be blocked but called for “proper remedies to guarantee fairness in the market”.

He expressed concern despite the link between Liberty Media and Formula E’s major shareholder, Liberty Global. Telecoms and media tycoon John Malone chairs both Liberty Global and Liberty Media — which are separate public companies with different leadership teams — with shares that grant him significant voting rights in each group.

Liberty Global, which took a controlling stake in Formula E in June, declined to comment.

Agag, a former member of the European parliament, made the comments in a personal capacity.

A Formula E spokesperson said: “As a former politician Alejandro has a strong personal interest in antitrust issues and was expressing his own views. We generally don’t comment on prospective deals.”

Agag’s remarks came as Liberty Media hopes to complete the MotoGP takeover by the end of the year. Liberty Media is preparing to formally file the deal for scrutiny by Brussels in the coming weeks, according to people with knowledge of the matter.

F1 has been owned by Liberty Media since 2017 after it acquired the car racing series in an $8bn deal from CVC Capital Partners. European regulators have previously required that F1 and MotoGP be owned separately. When CVC bought F1 in 2006, the commission approved the deal on the condition that the private equity firm sell the motorbike series.

Liberty Media’s chief Greg Maffei previously told the FT that he was “very confident” that the deal would gain approval. “We’re certainly not going to be trying to merge and sell the product in the TV market as one,” he said.

“There is a very large and growing market for audiovisual entertainment well beyond sports, and this transaction will enhance MotoGP’s ability to compete in this highly competitive market,” Liberty Media said. “We are confident that the European Commission will understand the dynamic nature of the market and clear the transaction.” The company added it looks forward to continuing its “constructive work” with the commission.

In January Agag agreed a partnership with Saudi Arabia’s Public Investment Fund across Formula E, Extreme E and E1 to promote electric racing in a key sponsorship deal for the competitions. He had held talks earlier this year for Liberty Media to invest in Extreme E, but no deal materialised, according to three people with knowledge of the negotiations.

BHP warns AI growth will worsen copper shortfall

World’s largest miner expects global demand for red metal will rise by more than 70% by 2050

The growth of artificial intelligence will exacerbate a looming shortage of copper, a metal vital for the clean energy transition, miner BHP has warned.

The rise of data centres and AI, which requires more energy-intensive computing, could boost global copper demand by 3.4mn tonnes a year by 2050, BHP’s chief financial officer Vandita Pant told the Financial Times.

“Today, data centres are less than 1 per cent of copper demand, but that is expected to be 6 to 7 per cent by 2050,” she said. “There is a lot of copper in data centres.”

BHP, the world’s largest mining company by market capitalisation, expects global copper demand will rise to 52.5mn tonnes a year by 2050, up from 30.4mn tonnes in 2021 — a 72 per cent increase.

AI is reshaping energy systems as well as demand for commodities around the world.

The expectation of a shortfall of copper has triggered a race to secure access to mines, including BHP’s unsuccessful £39bn bid for London-listed Anglo American earlier this year.

In July BHP, along with Canada’s Lundin Mining, paid $3bn to acquire exploration company Filo, whose assets include copper prospects.

Copper is used in a range of industries and products needed to meet net zero targets, including power cables, electric vehicles and solar farms. Many analysts expect a global copper shortfall in the medium to long term.

Data centres are expected to exacerbate this shortage in the shift to accommodate AI applications, which use more energy-intensive chips and increase energy needs.

“Data centres themselves are becoming incrementally less copper intensive, but getting the electricity to them, that is copper intensive,” said Colin Hamilton, commodities analyst at BMO Capital Markets.

Copper is used not only to supply power to data centres but also in the cooling systems and to connect processors in the centre.

However, others caution that long-term forecasts for copper in data centres are highly uncertain.

“We are trying to predict the future of a market that we don’t really know that much about,” said one analyst. “We are at the dawn of AI, so how much AI will the world be using in 2050? We don’t have any idea.”

Weak demand in China has weighed on copper prices this year, which are trading at about $9,207 a tonne, 15 per cent lower than their peak in May.

The copper market is in surplus this year due to poor demand, and that will continue next year as well, according to BHP forecasts, before reversing towards the end of this decade.

The company warned in August that rising demand for copper “in the final third of the 2020s” could lead to a “fly-up” pricing regime as demand outpaces supply.

UK steelmakers face dumping risk over EU carbon tax timing, industry warns

Ministers urged to bring forward start date of British scheme to 2026 to align with Europe

The UK government must synchronise the introduction of a new carbon border tax with Brussels or risk causing “considerable harm” to the British steel industry as a result of cheap imports flooding the country, the industry’s main lobby group has said.

The warning to Sir Keir Starmer’s government is part of growing concerns about the impact of a UK decision to introduce a carbon border tax in 2027 — a full year later than the equivalent EU tax designed to incentivise low-carbon manufacturing.

Gareth Stace, director-general of UK Steel, said the delay in introducing the tax would lead to the dumping of high-emission steel in Britain as producers in Asia and the Middle East looked to avoid the EU’s “carbon border adjustment mechanism”, or CBAM.

“The UK should bring forward its UK CBAM to 2026 to prevent high-emission steel being diverted from the EU to the UK market,” he said. “I fear that HM Treasury is underestimating how rapidly trade flows can change in the steel market.”

Sarah Jones, energy and business minister, told the Financial Times that the government was seeking to “iron out as many bumps as we can” as it examines differences between the EU and UK regimes including the implementation dates, acknowledging the topic was not easy to address. “We want to make it as smooth as possible,” she said.

The UK announced last December that it was introducing a carbon border tax on a range of carbon-intensive products including steel, cement, ceramics and fertiliser from January 1, 2027 following a similar decision from the EU.

The UK tax, which is similar but not identical in scope to the EU version, is designed to create a global level-playing field by taxing imports from countries that do not charge polluters to emit carbon.

According to calculations by UK Steel, under the planned regime an EU company importing steel from a carbon-intensive producer would face charges of approximately €37.50 a tonne, a significant amount for an industry with very tight margins and a global overcapacity problem.

UK Steel has warned that the UK Treasury has underestimated how quickly cheap steel could be diverted to the UK in a global market where fluctuations of as little as €5 a tonne can cause contracts to be renegotiated.

The Labour government indicated before taking office in July that it was interested in re-linking the EU and the UK carbon-trading schemes as part of its reset with Europe.

However, the industry is concerned, given the pace of EU negotiations, that any linkage of carbon trading schemes and subsequent harmonisation of the two regimes would not happen by January 1, 2026 when EU importers must start collecting CBAM payments.

People familiar with discussions in Whitehall said there were significant gaps between the UK Treasury and other impacted departments, including the Department for Business and Trade, and the Department for Energy Security and Net Zero.

Internal EU briefing documents seen by the FT said that Brussels is “open” to relinking its carbon trading scheme with the UK, but only if Britain accepted “dynamic alignment” with EU rules.

The documents added that such a move would require a new international agreement, which in turn would require EU ratification in the European parliament, suggesting that the process could be quite lengthy.

Exporters to the EU are already required to submit detailed information about the carbon content of products including in the EU CBAM, in preparation for the collection of taxes from January 1, 2026.

Jones said conversations were ongoing between government departments and with the EU on how best to make the carbon pricing regimes work. Challenges include the design of the scheme and range of industries in scope, as well as the question of implementation dates in the UK and EU, she said. 

“There are challenges when a previous government has announced a certain date,” she said. “There is obviously a challenge of being able to change it and get all the work done in time.”

Jones said the UK wanted to work “really closely” with the EU to ensure the carbon pricing regimes work for business. “With the reset with the EU, that is an opportunity to make sure we are working together to make sure we are delivering the best for our collective industries,” she said. 

The Treasury defended the decision to introduce the new regime in 2027. “A CBAM is a novel mechanism, which is why implementation in 2027 will allow the government to consult fully with affected businesses and give them more time to prepare fully for its introduction.”

Barclays calls for tax breaks to boost London equity market

Incentives for investors needed to ‘revive’ UK stock exchanges

Barclays has called for an overhaul of the way investors in UK-listed companies are taxed to help “revive” flagging UK public markets.

Changes needed to make London “internationally attractive” include tax reliefs for investors in businesses that graduate from a junior exchange to the main market, rather than the current “cliff edge”, it argued.

In a report to be published on Monday, the bank also called for the UK to review the 0.5 per cent transaction tax currently levied on a wide range of share purchases on London’s main market.

Reducing or abolishing this “stamp duty on shares” is a popular idea among City of London executives, but would come at a cost to the Treasury, which raises about £3.8bn a year from the levy. 

The measures would help to smooth the path between junior markets — Aim and the Aquis Growth Market — and the London Stock Exchange’s main market the report argues.

The Centre for Policy Studies think-tank previously estimated that abolishing stamp duty on shares could increase GDP by between 0.2 and 0.7 per cent in the long run.

The UK is battling to make its equity market more attractive and combat a trend of companies choosing to list overseas or go private.

Recent changes to main market listing rules had removed requirements that were “a barrier for some companies moving from a junior market to a senior market”, Barclays’ report said.

But it argued that its recommendations would encourage private companies to list on junior markets by creating a “positive glide path” towards the main market.

“If we want the UK’s public markets to revive, be strong and sustainable in the long term and be internationally attractive, we need to find firms that are currently at a growth stage that are going to be the next big firms,” said Katharine Braddick, Barclays’ head of strategic policy. “We need that pipeline — of private companies moving to junior, and then senior markets — to operate better.” 

Barclays’ report also argues for the extension of reliefs enjoyed by investors in Aim-listed companies for a limited period if these businesses move their listings to the main market. Investors in companies listed on junior markets enjoy reliefs from capital gains and inheritance tax and can also benefit from incentive regimes such as Enterprise Investment Schemes and Venture Capital Trusts where eligibility criteria are met.

Barclays also suggests removing the requirement for a company to publish a prospectus when moving to the main board if it has been listed on a junior market for at least 18 months, and for the government to tailor rules to the needs of junior market companies as it replaces EU laws that the UK kept in place after Brexit.

Barclays’ report aims to widen the focus of the political and regulatory drive to improve the UK’s capital markets, which it said had so far focused on companies listing on London’s main market but should also include smaller companies on growth markets. 

Top government officials were unaware of talks with Italian lender that created impression approach was welcome

Top officials in Berlin were not briefed in advance about an invitation for UniCredit to bid for a German government stake in Commerzbank, according to three people familiar with the events, despite the move opening the door to a full takeover by the Italian lender. 

JPMorgan Chase bankers who advised the government on the 4.5 per cent stake sale invited the Milan-based bank to participate, the people said, giving it the impression that Berlin welcomed its interest.

The sale on Tuesday in an after-hours auction enabled UniCredit to jump to a 9 per cent stake without previously disclosing any interest — something that could have pushed up the price.

The sudden move to become Commerzbank’s second-biggest shareholder — behind the government with its remaining 12 per cent — caught the German establishment off-guard, ignited public opposition to the sale of a strategic asset and put Berlin in an awkward position ahead of federal elections next year.

Before this month, Berlin repeatedly signalled to UniCredit and European rivals circling Commerzbank that it was not interested in selling to them. 

Instead, it wanted to sell its stake in small portions to financial investors, according to people familiar with the deliberations, but EU bailout rules barred it from discriminating against strategic bidders.   

UniCredit did not approach the government about a potential tie-up with Commerzbank between Berlin’s announcement that it would cut its stake and the auction, people familiar with the matter said. 

But people familiar with UniCredit’s thinking said it had expressed interest in purchasing shares to representatives of the German government in advance of the auction, and that the size of stake and lack of special rights attached to it meant the bank was a financial rather than strategic investor.

The Italian bank, headed by experienced dealmaker Andrea Orcel, had by the time of the auction on Tuesday accumulated a 4.5 per cent stake through derivative transactions that fell below the threshold for disclosure. 

Senior officials in Berlin were only told late in the process on Tuesday night that UniCredit was bidding and held an existing stake. 

Berlin has started a review of the events and who was responsible for the decisions that led to them, people familiar with the move told the FT.  

“At the point in time when the bookbuilding was irrevocably started, the finance ministry did not know that UniCredit owned additional shares in Commerzbank,” the ministry told the Financial Times. 

Germany’s federal finance agency, the body in charge of the sale, learnt about the existing stake shortly before the auction closed, the ministry said. The ministry does not oversee the day-to-day decisions of the Frankfurt-based finance agency. 

“In such a non-discriminatory process like an [accelerated bookbuilding], such information cannot have any influence on the allocation of shares,” the ministry added, with stock awarded to the highest bidder. 

People familiar with UniCredit’s position said its existing stake had been disclosed early in the process.

“When we bought it, the German government was well aware we had a 4.5 per cent stake. Implicitly, they were at least neutral on us building the stake” to 9 per cent, Orcel told Bloomberg TV on Thursday. 

People familiar with Berlin’s view said this was a misreading of its position. 

“Nobody [in the top echelon of the government] wanted to invite UniCredit,” one of the people said. 

People briefed on internal discussions said key government officials were frustrated by the outcome of the sale. 

“UniCredit deliberately tried to take everyone by surprise, which has gone down as a highly unfriendly behaviour,” said one person familiar with top officials’ views. 

UniCredit acquired the government block of shares at a 4.8 per cent premium to Tuesday’s closing price. Commerzbank’s shares have since shot up 24 per cent because UniCredit’s holding is seen as a potential prelude to a bigger deal. 

The events triggered doubt about whether UniCredit should be allowed to pursue a full takeover, the person familiar with the officials’ views added.  

Policymakers are “annoyed that the move could mean that the highly acrimonious discussions about a Commerzbank takeover will drag well into 2025, a crucial election year,” they said.  

One experienced investment banker told the Financial Times it was unusual to allow a strategic investor to join an after-hours block sale of shares. 

The person added that an accelerated bookbuild — a standard process used to quickly sell large tranches of stock to financial investors — was “the wrong tool” when buyers had strategic ambitions.   

Thomas Schweppe, a former Goldman Sachs M&A banker and founder of Frankfurt-based boutique shareholder advisory firm 7Square, said Berlin “could have realised a much higher premium and proceeds” in a strategic sale.

Even if the government felt obliged to allow all bidders to participate in a “non-discriminatory” process, it could have included terms to prevent any single bidder acquiring all the shares. “Those are typical terms and conditions,” said one person familiar with such sales. 

Several bankers familiar with accelerated bookbuilding processes suggested it should have been aborted after UniCredit’s interest as a strategic bidder became clear. People familiar with discussions within the finance agency said this was not considered possible for legal reasons. 

Goldman, which organised the auction alongside JPMorgan, had to withdraw midway through the process once UniCredit’s interest became clear, leaving JPMorgan to complete the bookbuild alone. 

Goldman is a longtime strategic adviser to Commerzbank and is now advising on its takeover defence. JPMorgan has previously been an adviser to UniCredit. 

UniCredit, JPMorgan, Goldman and the federal finance agency declined to comment.

Demand for watches globally appears to have passed its peak and many watchmakers have cut production, Johann Rupert, Richemont’s chairman, said at the group’s annual shareholders’ meeting in Geneva on Wednesday. Backtracking on plans announced a year ago, the South African billionaire also said that the group was no longer planning to create a beauty unit.

“I think I was wrong in calling it a division – it’s more of a coordinating role,” Rupert said in answer to questions from Miss Tweed about the mooted plans to create a stand-alone beauty business.

More broadly, Richemont’s chairman warned about the state of demand. “Watches globally have gone past the boom,” he said.

“Last year, we were the only luxury goods company who would caution that it would take longer for China to rebound,” he added. “We’ve proven to be correct. It is taking longer. We more than ever stick to this view even if I continue to very much believe in China’s long-term prospects. Demand from the American and European clientele has been remarkably resilient, but it may turn volatile, more so in the United States until the outcome of the presidential election.”

Those geopolitical and macroeconomic concerns may be behind a less than smooth development of beauty, not just at Richemont, but also at other groups, like Kering.

BEAUTY

A year ago, Rupert appointed Boet Brinkgreve to the role of CEO of a newly created division called Laboratoire de Haute Parfumerie et Beauté. Rupert made the appointment on his own without consulting many people, industry sources say. Similarly, in February last year, Kering announced the creation of a beauty division to develop the category for many of its brands. The French group has not been very vocal on progress or on its ambitions in that area ever since.

There are signs things may not be going according to plan at Kering either. This month saw the resignation of Sarah Rotheram, CEO of Creed, the high-end perfume brand on which Kering spent €3.5 billion last year, making it the most expensive deal in recent history. No explanation was given for her exit, but the fact that no replacement has been lined up could mean that it was not planned and that Kering was not able to hold her back.

Meanwhile, Bottega Veneta launched a candle collection in the spring and aims to launch new fragrances by the end of the year. Beauty is a volume business. Success depends on having the right distribution. LVMH is already a big player in beauty with many brands, such as Christian Dior, Celine, Guerlain and Givenchy. It also has its own distribution network with Sephora and the travel business DFS.

Brinkgreve joined Richemont from the nutrition, health and beauty company DSM-Firmenich. It’s not clear what he has achieved since joining, nor what experience he has in retail since he was in charge of ingredients and procurement at DSM-Firmenich. “There are various contracts with various companies,” Rupert said, explaining to the annual general meeting the steps that Richemont has taken into beauty. “We run autonomy of maisons but somebody needs to coordinate in terms of distribution. Are our products overdistributed, underdistributed and where they are distributed? So, it’s not like we are going to go and do this,” Rupert said referring to plans for beauty. The group’s brands with perfume products include Cartier, Van Cleef & Arpels, Chloé, Alaïa, Montblanc and Dunhill.

Rupert also answered a question from Miss Tweed about the group’s Specialist Watchmakers division and why the CEO position at many brands, including Montblanc and Roger Dubuis, has been left vacant for months. It’s not yet clear who will replace Catherine Rénier, who was CEO of Jaeger-LeCoultre and started this month as CEO of Van Cleef & Arpels. It’s also not clear who will replace Louis Ferla, who was CEO of Vacheron Constantin and has just begun as CEO of Cartier, Richemont’s most important brand and cash cow. One key question for investors regarding Cartier is whether it will continue to focus on best-sellers or launch new collections. Rupert seemed to be satisfied with the status quo: “Cartier have very successfully concentrated on iconic pieces, whether it be the Santos or Ballon Bleu, and it has worked. Cartier has had very strong resilience.”

TRANSITION

Concerning the CEO posts left vacant, Rupert said: “The posts will be filled soon but we are in the process of transition.” He explained that his priority was first to establish the group’s top leadership, with Nicolas Bos, former Van Cleef & Arpels boss, as group CEO, and with Ferla at Cartier and Rénier at VCA. Now that this triumvirate is in place, Rupert said, other nominations will come. “We have undergone a very smooth transition,” he said. “It took me a long time to seduce Nicolas… And that sets off a trigger and a series of events. I am not concerned about the succession there.”

One job that may evolve is that of Emmanuel Perrin, who oversees the group’s Specialist Watchmakers division. His deputy, Michael Guenoun, who was in charge of Richemont’s TimeVallée multi-brand retail chain, has become CEO of Baume & Mercier, one of the group’s weakest brands. Guenoun has not been replaced, making some wonder whether Perrin, his former boss, might not move on as well. Miss Tweed asked Rupert specifically about whether the corporate structure of the watch division was likely to change, but he ducked the question.

Managers at Richemont’s watch brands and at Cartier have been complaining about excessive corporatism, mutualization of costs and interference of the group into their affairs, blocking the flow of initiative and the realization of projects. Rupert often approves projects but afterwards they do not get the budget needed to finance them, insiders say, resulting in frustration and killing creativity and the desire to try out new things.

The watch industry, Rupert told shareholders at the AGM, “has to understand that you cannot just launch more and more, newer and newer watches when the total market led by mainland China is subdued…The Chinese economy is slowing down. That will have an impact on the feel‑good factor, and people are less inclined to spend and to show.”

Rupert said that many watchmakers, including privately held ones, were “acting very responsibly and constraining production.” Miss Tweed reported earlier this month that many brands, including LVMH brands, Breitling, Ulysse Nardin and Girard Perregaux, had put some of their staff on part-time work to save jobs and benefit from government help. In light of the current difficult context, Rupert said, “I don’t think the watch division is underperforming,” a point Miss Tweed had raised as an introduction to the question.

OPENNESS TO DIALOGUE

The answers marked the first time Rupert had replied to Miss Tweed’s questions since the news website was launched in 2020. Dozens of emails to Rupert, his executives and his entourage have gone unanswered, and requests for dialogue have been ignored.

In this case, Miss Tweed was speaking to Rupert as a shareholder of Richemont. Having been banned from all Richemont media events and press conferences for the past four years, Astrid Wendlandt, Miss Tweed’s founder and editor, bought one share in order to attend the annual general meeting. In replying to Wendlandt’s questions, Rupert made clear to the AGM that he was aware of her relationship to Miss Tweed.“Yes, I know exactly who you are, Astrid,” Rupert said.

Rupert said that Richemont did not ban journalists. Speaking in front of his shareholders, he told Miss Tweed several times: “You are welcome.” He said that journalists who complain about not having access are those who criticize him, the group and his managers. It does not work, he said, when his colleagues “have been criticized a week before and you know, you criticize them one day and the next day you want to come for dinner.”

Rupert’s message was that journalists who write critically about the group and its executives cannot expect to be welcomed. This reflects an industry-wide problem with independent media. For many years, luxury brands have been telling journalists what they should write in exchange for advertising revenue. Independent outlets that cannot be controlled are regarded as a menace – which is unfortunate.

Miss Tweed is a member of the jury for the 2024 Temporis Awards for the best watches, but for three years has been banned from the Watches & Wonders annual fair in Geneva. None of the brands nor the group are allowed to respond to Miss Tweed’s emails or talk on the phone. Richemont staff have been vocally discouraged from “liking” any content Miss Tweed posts on social media or subscribing – creating an economic prejudice against Miss Tweed.

Miss Tweed is at a disadvantage here because it’s small. Bloomberg’s Geneva correspondent did not need to buy a share to attend Richemont’s AGM on Wednesday. That’s not a level playing field. Professional media organizations should be able to play by the same set of rules regardless of their size, particularly in major areas of the economy such as the business of luxury and fashion. When the European Union last year strengthened laws protecting freedom of speech, it noted that “media freedom and pluralism are a vital part of democracy and of the fundamental rights of EU citizens. True democracy is not possible without a free media scrutinizing those in power.”

Some institutional shareholders have told Miss Tweed in private that Richemont cracking down on the independent press sends a negative signal about the group’s corporate governance. They say it means that the group does not feel accountable to those who question or criticize its ways.

In this regard, Le Figaro features a relevant quote at the top of its front page, just beneath the newspaper’s name: “Without the freedom to criticize, there is no true praise.” The quote is from Beaumarchais, the writer and founder of the society of authors and authors’ rights legislation in France.

Rupert offered to give Miss Tweed a list of all of its unfair, inaccurate reporting on himself, his managers and the group as a whole. We welcome this initiative. It would be good to know so that Miss Tweed can correct any inaccuracies and attempt to remedy any wrong. Should Richemont be open to dialogue, there are many subjects on which Miss Tweed’s readers would like to know more – such as the arts and crafts Homo Faber biennial fair in Venice, the Creative Academy in Milan and topics concerning the preservation of the environment. At the end of the AGM, Rupert gave Miss Tweed his word that such a meeting would happen. Let us hope that this meeting does indeed take place.

Here is the link to the video posted on Instagram of Astrid Wendlandt asking questions to Johann Rupert during Richemont's AGM in Geneva on Sept.11.

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