TheChek News Flow

Circle K owner still wants friendly 7-Eleven deal after $39bn offer rejected

Shares in Seven & i Holdings rise on hopes of improved offer from Canada’s Alimentation Couche-Tard

Canada’s Alimentation Couche-Tard has said it remains “highly focused” on pressing ahead with a friendly takeover of Seven & i Holdings, despite the Japanese convenience store giant’s rejection last week of a near $39bn preliminary offer.

Couche-Tard, owner of the Circle K convenience store chain, said on Monday it was prepared to have “collaborative and friendly discussions” with Seven & i for a deal that would be the biggest buyout of a Japanese company by a foreign group.

Shares of Seven & i, which have risen since Couche-Tard’s offer emerged in mid-August, jumped almost 3 per cent in Tokyo on Monday.

The Japanese owner of the 7-Eleven chain has a market capitalisation of ¥5.5tn ($39bn), slightly higher than the $38.7bn valuation placed on the company by Couche-Tard.

Couche-Tard’s statement comes after Seven & i last week laid out why a special committee set up to examine the bid had unanimously rejected the Canadian company’s approach, saying it was “opportunistically timed” and significantly undervalued the Japanese group.

Seven & i highlighted the need for deeper discussion of the central role that 7-Eleven stores play in Japan. The stores are designated as part of the social infrastructure needed to provide supplies and basic services in the event of an earthquake or other natural disaster.

It also said the proposal had not taken adequate account of the potentially significant competition issues a merger would encounter in the US.

Investors took Seven & i’s statement as leaving open the possibility of further discussions if Couche-Tard were to return with a higher offer.

“We are disappointed in 7&i’s refusal to engage in friendly discussions,” Couche-Tard said on Monday. “We are highly confident that collaborative discussions would lead to our ability to find increased value for 7&i shareholders.”

The Canadian group said its request for its advisers to engage with advisers to Seven & i had been rejected, along with its offer to enter a non-disclosure agreement with the Japanese group “to enable both sides to share information to find more value”.

Couche-Tard’s offer of $14.86 a share in cash gave Seven & i an estimated enterprise value of close to $60bn, according to analysts.

Couche-Tard said it remained “highly confident” it had “sufficient capacity to finance the transaction in cash”.

In response to Seven & i’s concerns about competition issues, Couche-Tard said the highly fragmented US convenience store market — where the two groups together represent more than 10 per cent of stores — would make it possible to “jointly consider divestitures that may be required to secure regulatory approvals”.

Couche-Tard also acknowledged that Seven & i played “an important role in Japan’s emergency response” and said it was committed to its “continuing to serve in this capacity”.

Anglo faces uncertainty over coal unit valuation after fire at flagship mine

Some offers presented this week may include payment structures contingent on the state of Grosvenor, say bankers

As Anglo American prepares to receive the first round of bids for its coal assets this week, the miner will be braced for the offers to be impacted by the devastating fire at one of the flagship mines.

The coal sale will be a crucial test of Anglo’s ability to deliver on its ambitious disposal programme launched after it spurned BHP’s £39bn unsolicited takeover attempt earlier this year.

The sale, which includes five coking coal mines in Queensland, Australia, was widely expected to fetch between $4bn and $5bn. However a fire in June at Grosvenor, its largest mine, has complicated the deal.

Potential bidders include Peabody, Yancoal, Glencore and more than a dozen others, according to people familiar with the process. But with the underground coal fires still smouldering, there is uncertainty over when the mine can reopen. Some offers may include payment structures contingent on the state of Grosvenor, said bankers.

“The fire under the ground is serious . . . it will definitely impact the process and the valuation,” said one banker.

Anglo’s share price is currently 33 per cent below BHP’s final all-share offer in May, which valued the company at £31.11 per share. The company is under pressure to demonstrate to shareholders that its strategy will deliver shareholder value.

“Anglo American has promised the world that it would restructure its complicated asset portfolio, and ditching the last of its ESG-unfriendly coal assets is a key part of this strategy,” said Tom Price, analyst at Panmure Liberum.

In addition to the coal sale, the 107-year-old company plans to sell or IPO its De Beers diamond business, divest its nickel mines, and spin out its platinum business in South Africa — all by the end of next year.

Grosvenor is the most valuable mine in the package, accounting for about a quarter of the total value, according to analysts. Jefferies calculate that the fire has wiped off $1bn from the value of the coal assets, which are now worth $3.4bn, based on the assumption that Grosvenor does not reopen until 2027.

However, analysts at Panmure Liberum who put the value of the coal mines at around $4.5bn, have kept their valuation on the expectation that the fire would have been extinguished before the sale, and that the reserves are intact.

At present, the mine, in Queensland’s Bowen Basin, remains sealed and Anglo says that “monitoring suggests that the fire has now been extinguished” although the temperature inside remains very high. Anglo said it has made “significant progress” at the site, which has a dedicated team working on maintenance and “ongoing sealing” activities.

Speaking to the Financial Times in July, after the fire broke out, chief executive Duncan Wanblad said that the interest in the steelmaking coal assets “has been very, very good.”

“Even post the fire, many of those parties have come back to us and said ‘we’re still very interested and also interested with Grosvenor in the picture’,” he said.

Anglo has said it wants to get a coal asset deal agreed by January.

Steelmaking coal, also known as coking or metallurgical coal, is a key ingredient for steel mills, and has been a top focus in mining deals in recent years, led by Glencore’s $6.9bn acquisition of Teck’s coking coal mines.

Buyers have been emboldened by the relatively slow development of low-carbon steelmaking methods, which will mean demand for steelmaking coal will last longer than some had anticipated at the start of the decade.

A shift in shareholders’ attitudes towards coal is also supporting interest, as environmental mandates are fading, and mining companies say their investors are now more comfortable with coal ownership.

Glencore, which is the world’s largest listed thermal coal producer, reversed its plan to demerge its coal business, owing to changing shareholder views.

There has also been a land-grab in Queensland’s lucrative steelmaking coal industry, as the country’s largest integrated miners have sold out to specialist players at healthy valuations.

BHP sold two Queensland mines to Whitehaven for US$3.2bn last year as it reshaped its portfolio, a deal that closed in April. South32 this year also sold its Illawarra Metallurgical Coal for US$1.3bn.

Yancoal, an ASX-listed coal miner which is controlled by China’s Yankuang Group, also bid for those assets having acquired a number of mines including Rio Tinto’s coal mines in 2017 for US$2.7bn.

Yancoal has said it is interested in further acquisitions, and it held back its dividend last month to help build up its war chest. The company is expected to be one of the top bidders for Anglo’s coal assets, but could face political opposition owing to its Chinese ownership, according to people close to the deal.

The value of Australia’s coking coal assets was put into perspective last month when two Japanese steelmakers paid US$1.1bn for a 30 per cent stake in Whitehaven’s Blackwater mine, previously owned by BHP, as the Asian investors looked to secure supply. The price was higher than anticipated by some analysts.

Prices for coking coal have been soft this year because of a global glut of steel and a slump in Chinese construction. However miners and steelmakers expect a shortage of high-quality metallurgical coal in the longer term, leading to a rush for assets.

The talks over the Anglo sale coincide with a state election in Queensland with the Labor party, which introduced a sharp rise in the royalties that mining companies have to pay, behind in the polls. The opposition Liberal National Party has not indicated it will lower the royalties however, a move that could boost the value of the miner’s assets.

The acclaimed Burton, who spent her entire career at Alexander McQueen, becomes the French maison's eighth designer since it was founded in 1952.

PARIS — Givenchy has selected Sarah Burton as its new creative director, WWD can confirm exclusively.

The British designer, who spent her entire fashion career at Alexander McQueen in London, becomes Givenchy’s eighth designer — and its second female couturier.

She will be introduced this week to the workers in the ateliers at Avenue George V — a storied ritual in French fashion — and she is expected to present her first designs for Givenchy during Paris Fashion Week in March 2025.

“Sarah Burton is an exceptional creative talent whose work I have passionately followed for many years. I am very glad that she is joining Givenchy today,” Sidney Toledano, chairman of the Givenchy board, said in a statement shared first with WWD.

“Her unique vision and approach to fashion will be invaluable to this iconic maison, known for its audacity and haute couture,” he continued. “I am convinced that her creative leadership will contribute to the future success and international standing of the maison.”

“It is a great honor to be joining the beautiful house of Givenchy, it is a jewel,” said Burton, whose creative responsibilities cover all women’s and men’s collections. “I am so excited to be able to write the next chapter in the story of this iconic house and to bring to Givenchy my own vision, sensibility and beliefs.”

A fastidious fashion technician prized for dramatic tailoring and intricate, yet empowering dresses, Burton was rarely seen backstage without straight pins stored in her sweater sleeves, and a big pair of scissors shoved in a back pocket.

She follows in the footsteps of the late Lee Alexander McQueen, who designed Givenchy from 1996 to 2001, when luxury kingpin Bernard Arnault began revving up European heritage brands with powerful fashion talents.

Burton’s appointment completes a new duo at the brand following the July appointment of Alessandro Valenti as the new chief executive officer. He joined Givenchy from Louis Vuitton, where he was most recently president of Europe, Middle East and Africa.

Burton and Valenti will be charged with igniting a renaissance at the storied house, which has lagged the rapid growth charted by the likes of Celine and Loewe, which are also controlled by French luxury giant LVMH Moët Hennessy Louis Vuitton.

“The arrival of Sarah Burton as head of our creative design is a very exciting moment for Givenchy,” Valenti said in the statement.

“Her remarkable career path and creative vision have already won her a vast fan base, and we are certain that under her direction, Givenchy will continue to innovate and captivate an extensive audience across the world stage,” he said. “I eagerly anticipate the new creative energy Sarah will bring as she works alongside our outstanding teams in our exceptional workshops, and we embark on this new chapter in the history of Givenchy.”

Founded in 1952 and owned by LVMH since 1998, the house has seen a number of designers come and go since founder Hubert de Givenchy retired in 1995.

Riccardo Tisci was arguably the most successful of a string of talents who have led Givenchy, bringing heat and stability over a 12-year tenure.

John Galliano was Hubert de Givenchy’s immediate successor and moved on quickly to Christian Dior. Lee Alexander McQueen tried his hand next with eclectic collections — space aliens one season, rockabilly the next.

Julien Macdonald came next, and went back to a style rooted in French elegance and sophistication, but did not win much acclaim.

Tisci was succeeded by British designer Clare Waight Keller, who largely plied a tasteful, aristocratic brand of fashion occasionally spiked with toughness or subversion — a touch of latex here, a giant wing-like backpack there. Her biggest claim to fame during her three-year stint was dressing Meghan Markle for her marriage to Prince Harry in 2018.

(Burton, meanwhile, famously designed the Alexander McQueen wedding gown for Kate Middleton’s marriage to Prince William in 2011, catapulting her profile in the fashion firmament.)

Matthew M. Williams followed Waight Keller, arriving just as the coronavirus pandemic gripped the world. He wound up his three-year collaboration with Givenchy at the end of 2023 after failing to ignite big commercial success or media acclaim, underscoring a trend for shorter tenures at Europe’s heritage brands.

Born in Macclesfield, England, and educated in Manchester, Burton studied print fashion at the Central Saint Martins College of Art and Design in London in the late 1990s, and landed at McQueen after one of her instructors, Simon Ungless, introduced her to the incendiary designer in 1996.

He offered her an internship at his design house. After graduating in 1997, Burton became McQueen’s personal assistant and was promoted in 2000 to head of womenswear.

She presented her first collection without the late designer during the spring 2011 season and was applauded for adding a feminine hand to McQueen’s hard-edged aesthetic.

She has long been a go-to designer for many women and men in the creative industries and contemporary art scene, and the Alexander McQueen brand gained heat during the streetwear boom as hype beasts sought out its skull-print scarves and chunky-soled sneakers.

A reserved woman who prefers to toil in the workrooms rather than seek attention for herself, Burton has long been viewed as a bona fide couturier in the vein of the founder, experimenting with cuts, volumes and draping to invent new shapes and attitudes.

At McQueen, she often found inspiration in the Victorian era, in nature, and from research trips across the United Kingdom. Her designs ranged from poetic and frothy in register to stronger, sculptural designs, or ones with punk tinges.

Burton, who was named creative director of Alexander McQueen in 2010 following Lee Alexander McQueen’s suicide, showed her final collection for the house, which was for the spring 2024 season, in October 2023, when she parted ways with the London-based house and its parent Kering.

The low-key designer was named Designer of the Year at the British Fashion Awards in 2011, was honored in 2012 by the-then Prince Charles with an OBE, or The Most Excellent Order of the British Empire honor, for her services in the fashion industry, and received the International Award from the CFDA.

And last December, Burton was awarded the Special Recognition Award at The Fashion Awards in London, honoring her outstanding contribution to the fashion industry.

Her appointment caps off a protracted search for Williams’ successor, during which time Givenchy scaled back its runway shows for womenswear and menswear, setting out small café tables or benches at its couture salons on the Avenue George V.

It is understood Toledano spearheaded negotiations with Burton, which seems to confirm he is once again implicated in LVMH Fashion Group brands, which is headlined by such marquee names as Celine, Loewe and Givenchy.

In January, LVMH said Michael Burke, whose long career at the group included a stellar 10 years as chairman and CEO of Louis Vuitton, would take the helm of LVMH Fashion Group and succeed Toledano, who was to leave the LVMH executive committee and become an adviser to LVMH chairman and CEO Bernard Arnault.

It is understood Burke has recently been more implicated in large-scale real estate projects, in addition to other projects at the world’s biggest luxury group.

While nothing has changed officially, LVMH insists, it’s clear responsibilities are shifting between two of Arnault’s most trusted and seasoned executives, who have long extolled the virtues of “management flexibility” within the group.

Duties are also shared with Pierre-Emmanuel Angeloglou, who in June was named CEO of Fendi, in addition to being managing director of LVMH Fashion Group overseeing Fendi, Kenzo, Marc Jacobs, Pucci, Stella McCartney, Patou and Off-White.

High yield debt is becoming more investment grade

A better equipped private credit market is underwriting more ‘junk’ deals

Back in the 1980s, when Michael Milken helped foster an appetite for higher risk-reward corporate bonds, junk bonds became the fun asset class with volatility and bankruptcy workouts featuring sharp elbows and big egos.

Credit cycle after credit cycle, if you were on the right side of the trade on stressed or lower quality debt, you hoovered up bonds at pennies on the dollar and made big profits if they bounced back in value; if you were on the wrong side, you rode your holdings through the workout process.

But the financial crisis resulted in changes to the high yield or junk bond market that took more than a decade to manifest. Increasingly, the high yield category of bonds has moved closer in overall quality towards investment grade.

The average spread of securities in the Bloomberg US high yield index — that is the incremental yield over Treasury rates — is a substantial 3.5 percentage points. But you would be hard-pressed to find many individual bonds that trade at that average. Instead, you’d find BB-rated bonds inching towards lower investment grade spreads, and borderline distressed credits, often with CCC credit ratings, trading at double-digit yields.

Importantly, more of the high-yield universe is now made up of better quality bonds. While issuance of BB and even high B-rated credits is robust, the issuance of CCC-rated bonds has dwindled.

This lowest quality end of the ratings spectrum had its heyday in the lead-up to the financial crisis. According to data from JPMorgan, lower-rated (any bond with a CCC from at least one of the agencies) bonds represented 24 per cent of high-yield bond issuance from 2004-2007. In parallel with the trend, the broadly syndicated loan (BSL) market came into its own, as banks found insatiable demand for the loans they used to hold on their own balance sheets.

Everyone knows what happened next: risk appetite evaporated, the banks stopped making markets in the bonds and loans they had underwritten, and credit investors experienced equity-like returns (in a bad way).

Lower-rated bond issuance subsequently declined, a trend that accelerated recently with the quantitative tightening era as interest rate rises meant less need to search for yield. CCC-rated bonds accounted for only 6 per cent of the last 18 months of high-yield bond issuance.

So if you’re waiting for a huge default wave to trash the high-yield bond market, you could be disappointed, as the low percentage of CCC issuance over the past few years is likely to cap distress. While ratings downgrades are inevitable in a recession, the high-yield bond market is starting from a position of (credit) strength. 

In the next credit cycle, private credit may bear the brunt of the defaults and distress that used to characterise downturns in the public market. Highly leveraged companies didn’t stop issuing debt in recent years; instead, they turned to private credit, which does not typically require that borrowers obtain a credit rating.

Private credit investors tout their indifference to credit ratings as a positive. These agencies do get things wrong on ratings but data from Moody’s shows that over long periods of time its ratings of industrial corporate bonds are broadly predictive — that is, roughly a third of bonds rated CCC at issue can be expected to default within five years of issue versus 8 per cent of BBs.

But since private credit investors have greater access to information by virtue of being “private side” — along with the ability to renegotiate terms on the fly that permit issuers to skirt bankruptcy and prevent crystallising losses at the trough of the cycle — this transition might dampen corporate bankruptcies overall and improve risk-adjusted returns for leveraged credit.

And the “unitranche” structure used in many private credit transactions, which features only one debt instrument in the capital structure, should enhance recovery values for the deals that do end up defaulting. This is because that eliminates the riskiest (unsecured) portion of the capital structure.

Private credit is still too small to accommodate the mega deals that rely on the junk bond and broadly syndicated loan markets. But it would not be a surprise to see a $25bn leveraged buyout get done entirely in the private credit market within the next few years.

The market Milken made is in some sense coming full circle, as the quality complexion of the high-yield bond market looks more like investment grade, and riskier deals return to the shadows. 

Volkswagen’s $5bn Rivian tie-up prompts dismay at software division

Top executives at Cariad unit sidelined in a deal that has upended German carmaker’s tech strategy

Volkswagen’s $5bn tie-up with US electric vehicle start-up Rivian has sparked dismay among staff at the German carmaker’s software division Cariad, with top executives sidelined in the sudden change of strategy.

The June agreement to set up a joint venture that will develop software for both companies’ cars followed budget overruns and setbacks at Cariad that pushed back the rollout of new VW, Audi, and Porsche models by nearly two years.

Peter Bosch, who was brought in last year to turn Cariad around, was not part of the talks that led to the deal. Sanjay Lal, a former Rivian executive hired by Bosch as chief software officer, has had to down tools on the architecture he was brought in to develop, said people close to him who added he and his team faced possible absorption into the new JV.

“We all learned about Rivian from the news,” said one senior Cariad engineer, adding that the partnership had unleashed uncertainty and frustration among the division’s 6,000 employees.

The tie-up with Rivian highlights the high stakes for legacy carmakers as they seek to adapt to an industry where the defining feature of modern vehicles is no longer the engine — the hallmark of German engineering prowess — but the software that controls critical aspects of the driving experience.

It also strikes at the heart of the governance issues that have slowed down the attempts by Europe’s largest carmaker to future-proof its vehicles.

The company last week announced it was considering shutting factories in Germany for the first time in its 87-year history, rowing back on a pledge not to cut any jobs before 2029.

Daniela Cavallo, chair of VW’s powerful works council, last week questioned chief executive Oliver Blume’s decision to outsource the development of critical software rather than address failures at Cariad that she said had boiled down to the “egoism” of the group’s competing brands.

“Can we be sure that this won’t be the next billion-euro grave?” she asked.

Since launching Cariad four years ago, VW has poured almost €12bn into building in-house car software to retain control over everything from parking assistance and navigation to battery management systems and cars’ interaction with other devices and apps.

“There’s so much chaos right now,” said another employee of the software unit. “But we know it’s more or less the end of Cariad.”

Bosch declined to comment, while Lal did not respond to a request for comment. A spokesperson for Cariad said Volkswagen’s software strategy included “forming strong development partnerships”, adding “Cariad is part of shaping this overall strategy”.

VW said the deal with Rivian would allow it to “reduce costs per vehicle”, adding the partnership fitted “seamlessly into the existing software strategy”.

Partly because of its lagging software offering, VW has struggled to adapt to modern consumer demands — especially in China, its most important market. The sliding demand for its cars, both in China and at home, has become palpable enough that the company last week said it might have to shut factories in Germany — a historic decision.

The company’s share price has slid more than a third in the past five years, as investors grow increasingly worried about its ability to compete with EV software specialists such as Tesla and China’s BYD.

At last week’s town hall meeting attended by nearly 25,000 VW employees, where some heckled Blume and other executives, Cavallo said “€5bn to a US start-up and here, in Germany [ . . . ] you want to rob us of our prospects”.

Current and former Cariad employees said the unexpected decision to backtrack on plans to build VW’s future software architecture in-house had not only unleashed fear about the future of the division, but sparked concern over whether the new software strategy would work.

Cariad has been beset by budget overruns and delays that have led to the rollout of crucial new models such as Audi’s Q6 e-tron and Porsche’s first electric SUV falling behind schedule.

But the people who worked at Cariad said the software unit had been unfairly blamed for issues they claimed stemmed from the sprawling group’s bureaucratic culture.

Cariad was formed by merging engineering teams from Audi and VW’s flagship brand, a move three insiders said had burdened the new division with legacy projects and led to friction because of the different priorities for the mass-market VW brand and the more upmarket Audi marque.

They added that another factor behind Cariad’s problems was constantly changing priorities from top management. Herbert Diess, VW’s former chief executive who set up the division, directed engineers to concentrate on the so-called 2.0 platform for futuristic software-defined vehicles, which had initially been scheduled for a 2026 launch.

When Blume took over in 2022, he halted progress on the 2.0 platform, instead instructing engineers to prioritise fixing the problems that had delayed the launch of models in the pipeline such as the electric Porsche Macan, the people said.

A year later, Blume sacked all but one of Cariad’s top managers and brought in Bosch, who again changed the unit’s priorities and hired Lal to revive the in-house development of software that could bring VW’s cars into the future.

But even before the partnership with his old employer, Lal — a previous director of engineering at Tesla — had struggled to enthuse VW’s top management during presentations on progress in building a cost-efficient architecture from scratch, said one person briefed on the meetings.

“These guys need to sit in a car, at least in front of a steering wheel, to understand a prototype,” the person said.

A former employee of the software unit said that although “you have some really high-quality engineers at Cariad . . . decisions have never been made by them”. They added many senior software specialists at the unit had grown frustrated by a perceived lack of understanding of software development from VW’s top management.

“It was never a tech problem; it is a culture problem,” said another former Cariad employee.

Analysts reacted positively when VW and Rivian announced they would partner on software for the German carmaker’s future models, with Citi noting management had promised it meant “cheaper access to this (working) technology than could be achieved in-house”.

But it is unknown whether the same bureaucracy that former and current Cariad employees said had stalled VW’s in-house software efforts will hinder the joint venture with Rivian, which will need to deliver solutions that satisfy not only Wolfsburg, where VW is based, but the individual headquarters of the carmaker’s 10 brands.

It is not VW’s first effort to seek outside help on software. The carmaker said in July last year it would pay $700mn for a 5 per cent stake in Chinese EV-maker Xpeng, which in return would help the company develop software suitable for the Asian country’s market.

The collaboration has got off to a good start, according to one person briefed on the progress, who said it came down to the company’s “in China, for China” strategy, which has granted its Chinese JVs the ability to make decisions without running them past executives in Germany.

Wolfsburg-based executives are not likely to accept such an offhand approach for software that will run cars on German roads, although the exact structure of the planned joint venture is still being worked out.

Speaking on a podcast in July, Rivian’s founder and chief executive RJ Scaringe said VW was on board with plans to make sure the JV maintained the US start-up’s work culture of “velocity and speed and decisiveness and lack of bureaucracy”.

“They would not be spending $5bn on Rivian if they didn’t want to keep things working the way they are,” he said.

Activist Cevian presses Swiss insurer Baloise for strategy reset

Europe’s largest activist investor says it has built stake to become group’s largest shareholder

Cevian Capital, Europe’s largest dedicated activist investor, is pressing for a strategic overhaul at Swiss insurance group Baloise after building up what it said was a stake of more than 9 per cent to become the company’s largest investor.

The move by Sweden’s Cevian — which has previously waged high-profile campaigns at other European insurance groups, including London-listed Aviva — raises the temperature for Baloise ahead of a strategy day later this week.

Baloise, which has a near-$9bn market value and sells general and life insurance products alongside banking and other services, is a top-10 insurer in Switzerland, which provides nearly half of its revenues. It also has operations in other European countries, including a small German unit, which contributed 15 per cent of its revenues last year. 

Cevian now owns about 9.4 per cent of Baloise, becoming its largest shareholder based on latest disclosures, according to the activist. UBS has a latest declared stake of 9.3 per cent, including that previously owned by Credit Suisse, according to Bloomberg data.

Cevian partner Robert Schuchna said Baloise “has the opportunity to become a top-performing Swiss insurer. We believe that there is significant value potential in the company.”

Baloise said it does not comment on its relationship with individual shareholders but was “looking forward to September 12, when we will explain Baloise’s strategic direction at our investor update”.

Cevian wants Baloise’s management to refocus the group on countries where it is strongest and has a high market share, and direct more of its cash generation to shareholder returns and investing in its domestic market, according to people familiar with its thinking. 

The capital markets day this week is seen by Cevian as a last chance to overhaul the strategy, otherwise governance improvements would be essential, including adding more insurance expertise to the board, those people added.

Baloise has had a difficult run in recent years, relative to peers. Its share price valuation has fallen over the past half decade while those of larger rivals Swiss Life, Zurich and Axa have risen. Its return on equity of 7 per cent in 2023 and 2024 also trailed peers. 

Earlier this year, Baloise ditched a start-up investment strategy that had seen it invest about SFr50mn ($59.3mn) a year in new ventures with the hope of reaching SFr350mn revenue from these innovations by 2025. Investments included Batmaid, a cleaning services business and Parcandi, which shows users local parking spaces.

Cevian’s stake-building comes after Baloise’s shareholders voted earlier this year to remove a critical protection against agitating shareholders. This was a long-standing rule whereby investors had their voting rights capped at 2 per cent, regardless of the size of their stake.

Investment firm zCapital had pushed to change the rule, and was backed by the two big proxy firms ISS and Glass Lewis, whose recommendations are influential with passive investors.

How to inoculate the world against a payment fraud pandemic

Policymakers and police must work together on prevention while individuals should take more responsibility

When Jason*, a young executive at a Hong Kong events business, got a recent WhatsApp from Janet*, his friend and colleague, he thought little of it. She was asking him to transfer HK$5,000 (US$641) to pay for equipment for their latest gig. After checking what exactly she needed it for, he logged into his bank account and made the transfer.

But like millions of people around the world, Jason had been duped. Janet’s WhatsApp account had been corrupted when she had clicked on a rogue ID-verification message, and a scammer was impersonating her.

Across the world, billions of dollars are now lost to online payment fraud every year, much of it perpetrated by international organised crime, according to experts, and most of it initiated by WhatsApps, Facebook ads, texts and other digital triggers.

A global hotspot is the UK, where new rules from the Payment Systems Regulator come into force next month obliging banks to compensate scammed customers in many circumstances — something that the largest lenders already do under a voluntary scheme. Of the £1.2bn stolen in the UK in 3mn fraud cases last year, about 40 per cent were the result of this kind of “authorised push payment” scam, according to bank lobby group UK Finance. And more than 60 per cent of those losses were reimbursed.

Some bankers welcome the new rules — they will introduce a new £100 deductible payable by the victim, as an added incentive to be more careful; and they will spread responsibility among a broader range of financial institutions than those that signed up to the voluntary code. The maximum amount covered has also been cut.

In truth, though, Britain’s new regulatory approach is a missed opportunity to deal head-on with a rampant new kind of crime.

The most fundamental problem is that police devote shockingly little resource to tackling fraud. According to the UK Home Office, it is now the single biggest crime category in England and Wales, accounting for 41 per cent of the total. And yet only 1 per cent of the police workforce is assigned to fraud. Bizarrely, much of the funding for the scant policing that does take place is contributed by the banking sector. Little is being done to crack international crime networks because individual thefts are typically small-scale, putting them below the radar for investigation or cross-border collaboration.

Meanwhile, the UK is an outlier both in the scale of the problem and the central role banks play in compensating victims. A report to be published this month by the Social Market Foundation for Santander UK, found British victims of a fraud were twice as likely to be fully compensated by their bank as those in other leading economies. Of 28,000 people surveyed, two-thirds of Britons were partially or fully compensated, the highest proportion of the 15 countries surveyed. (The US ratio is 53 per cent; Japan 31 per cent; and Germany 28 per cent.)

The incidence of UK fraud is higher for a cocktail of reasons: so-called Faster Payments, which make instant bank transfers easy, ubiquitous digital communication and the likelihood that international fraudsters speak better English than they do, say, Portuguese. The relatively easy supply of redress has been a result of Britain’s long-standing consumer protection culture, but also of pragmatism by banks, keen to rebuild trust after the financial crisis and a series of mis-selling scandals.

Other scam intermediaries, by contrast, get off scot free. Telecoms companies and the technology sector shrug off responsibility for compensation. Lobby group TechUK has signed a new “fraud charter”, but insists it would be “neither proportionate nor effective” to pick up a share of the tab.

Online fraud and consumer demands for compensation are only likely to increase from here, as digitisation and instant payments accelerate, and AI gives scammers another tool. Policymakers and all of those connected to fraud chains must work together on prevention. And police must devote serious resources to this pandemic of crime.

But individuals should also bear responsibility — by learning about the risks and how to avoid them, by reporting scams and by accepting at least some losses if they are to blame for incurring them. Jason has certainly learnt an expensive lesson. After seeking a refund from his bank, and reporting the crime to police — both to no avail — he has vowed to be hyper-vigilant in future.

Leonard Leo was architect of effort to secure conservative supermajority on the Supreme Court

The conservative activist who led the crusade to overhaul the US legal system is making a $1bn push to “crush liberal dominance” across corporate America and in the country’s news and entertainment sectors.

In a rare interview, Leonard Leo, the architect of the rightward shift on the Supreme Court under Donald Trump, said his non-profit advocacy group, the Marble Freedom Trust, was ready to confront the private sector in addition to the government.

“We need to crush liberal dominance where it’s most insidious, so we’ll direct resources to build talent and capital formation pipelines in the areas of news and entertainment, where leftwing extremism is most evident,” Leo told the Financial Times.

“Expect us to increase support for organisations that call out companies and financial institutions that bend to the woke mind virus spread by regulators and NGOs, so that they have to pay a price for putting extreme leftwing ideology ahead of consumers,” he said.

Leo has spent more than two decades at the influential Federalist Society, guiding conservative judges into the federal courts and the Supreme Court itself. In 2018, conservative justice Clarence Thomas joked that Leo was the third most important person in the world.

Leo’s efforts culminated under Trump’s presidency, when three Federalist Society-backed judges were appointed to give conservatives on the Supreme Court a 6-3 supermajority, and profound influence over US law. The court has since then ruled to overturn the right to an abortion, among other long-sought rightwing causes.

In 2020, after Trump lost the election, Leo stepped back from running the daily operations of the Federalist Society, while remaining its co-chair.

The following year, Leo founded Marble, with a $1.6bn donation from electronic device manufacturing mogul Barre Seid, to be a counterweight to what he said was “dark money” of the left. He spent about $600mn in its first three years, according to public financial disclosures. 

Leo said his goal was to find “very leveraged, impactful ways of reintroducing limited constitutional government and a civil society premised on freedom and personal responsibility and the virtues of western civilisation”.

The $1bn money machine is now funding the conservative mission against private institutions, opposing diversity, equity and inclusion policies, climate and social concerns in investing and the “debanking” of politically conservative customers, in addition to taking on the public sector.

The non-profit is increasingly interested in launching campaigns against “woke” banks and China-friendly companies involved in everything from food production to autonomous vehicles in the US and potentially Europe.

Leo also intends to invest in a US local media company in the next 12 months, although he has not decided which, and is building conservative coalitions through groups such as Teneo Network, a club with chapters across the country.

He also confirmed that Marble had since 2021 helped fund organisations that launched campaigns against companies with DEI, ESG and other initiatives, including BlackRock, Vanguard, American Airlines, Coca-Cola, State Farm, Major League Baseball and Ticketmaster.

This year, Marble aided a variety of conservative groups in their campaigns against TikTok on the grounds that it was a threat to children and US national security. President Joe Biden signed a bipartisan bill to force TikTok’s Chinese parent company to divest from the video-sharing platform.

Leo’s rise to be among the US’s most powerful conservatives has drawn scrutiny from liberal attorneys and Democratic politicians. Earlier this year, he refused to comply with a subpoena from Senate Democrats investigating undisclosed gifts to Thomas and Justice Samuel Alito revealed by ProPublica. 

In 2020, Leo joined the for-profit public advocacy firm CRC Advisors. Bloomberg has reported that an array of non-profits have paid CRC at least $69mn since Leo became its co-owner and chair.

While Marble funds Trump-aligned advocacy groups, it is not donating money to sway the 2024 presidential election, Leo said. The non-profit is instead helping the Republican effort to end the Democratic majority in the Senate, which confirms judges and justices.

“The political environment is more topsy-turvy and more uncertain than it’s ever been in my lifetime,” said Leo. “Political investing is not as good a bet as it used to be.”

Favre Leuba is one of the oldest Swiss watch brands together with Swatch Group’s Blancpain. Everyone knows Blancpain but few remember Favre Leuba which had its heyday in the 1960s and 1970s. The descendants of the Favre family sold it in the 1980s, it belonged to LVMH in the 1990s and afterwards successive shareholders never managed to properly resuscitate the brand and make it reach its full potential.

Today a new chapter is opening for Favre Leuba under the controlling ownership of the KDDL group that runs India’s largest watch retailer Ethos. In a sign of the seriousness given to the relaunch, the new owners hired industry veteran of Patrik Hoffmann, former CEO of Ulysse Nardin. Hoffmann presented the newly revived Favre Leuba watch collection at the Geneva Watch Days earlier this month. It included vintage models from the 1960s and 1970s as well as new designs.

Industry watchers may regard Favre Leuba as yet another revival like Gerald Genta and Daniel Roth led by LVMH scion Jean Arnault or Universal Geneve spearheaded by Breitling CEO Georges Kern. But Favre Leuba presents a unique twist. It’s the first historic Swiss watch brand using India as the launchpad of its return. It will open its first mono-brand boutique not in Geneva or Zurich but in Mumbai or Delhi in the next few months. Starting in November, the brand’s first batch of watches will hit multi-brand stores around the world and sell online as well.

Focusing on India makes sense. Not only because Favre Leuba’s biggest shareholder is Indian group KDDL. The brand has historically had a big presence in India. It was the first Swiss watch brand to enter India in 1865 and it remained popular until the 1970s. Young people may not remember the name but those in their 40s and 50s will. Their father or grandfather owned a Favre Leuba and some of them are probably still wearing it.

POTENTIAL

“Two or three years ago, people did not realize the potential of India, now the whole world is talking about it,” Hoffmann told Miss Tweed at the Geneva Watch Days. As growth in China slows down and luxury spending has collapsed, particularly for high-end fashion and watches, India still presents a growth opportunity. The country’s GDP is expected to increase more than 7 per cent annually, outpacing forecasts of 5 percent growth in China. India is set to become the world’s third-largest economy and consumer market by 2027.

India has a strong culture of wealth and it is developing rapidly. As new wealth is growing, the potential buyer base is expanding beyond Indian aristocracy and established old business families. Luxury enthusiasts include young entrepreneurs, investors and high-profile executives. Now is the time to double up on India.

In recent months, many luxury brands have opened or enlarged existing boutiques. In November, Kering’s Brioni opened its first ever shop in India at the Chanakya luxury shopping mall in New Delhi.

In April, Hermès opened its third boutique at the glitzy Jio World Plaza, inaugurated last year in Mumbai. Many big brands including Richemont’s Cartier, Kering’s Gucci, Balenciaga, Saint Laurent and Bottega Veneta, as well as LVMH’s Bulgari and Tiffany & Co and Louis Vuitton also opened a shop there.

Mumbai counts the third-largest population of millionaires after New York and Shanghai. It’s the place to be for luxury brands. Jio World Plaza is the brainchild of Isha Ambani, daughter of India’s richest man Mukesh Ambani, who is chairman and managing director of the Reliance Industries empire. This year, Ambani held for his youngest son Anant the most extravagant wedding in recent history, lasting several months and attended by world leaders, CEOs, celebrities and Bollywood megastars.

The celebrations, estimated to have cost more than a $1 billion, included a three-day pre-wedding bash in the Western Indian coastal town of Jamnagar in March—which featured a private concert by Rihanna—and another ceremony in Mumbai with a Justin Bieber live performance. There was a party on a boat off Portofino. Guests were flown in private jets and the nearby Genoa airport was taken over for a week. The boat roamed about cities around the Mediterranean, holding parties with celebrities in every stop from Barcelona to Palermo, Rome and Cannes.

A video went viral showing some 10 witnesses and close friends receiving a Perpetual Calendar Audemars Piguet Royal Oak watch costing more than €100,000.

The over-the-top wedding is often cited as a good example of India’s voracious appetite for luxury. “India is becoming a global luxury destination and the Ambani wedding was a step in that direction,” explains Indian designer Rahul Mishra, the first Indian designer to show during Couture Week in Paris. Mishra dressed many people who attended the Ambani wedding including Facebook founder Mark Zuckerberg. “The Ambani wedding was great for the Indian economy,” Mishra told Miss Tweed, adding he knew many people, particularly craftsmen and small businesses who got work thanks to the event.

“Over the past ten years, the perception of India has changed dramatically and Indian brands are now encouraged to grow,” Mishra said. This week, Mishra will unveil in London a collection he designed for the Italian leather goods maker Tod’s. Like Tod’s, other western brands are tying up with Indian designers to widen their reach. In March, Estée Lauder launched a lipstick designed by Indian designer Sabyasachi Mukherjee. Sabyasachi, a major name in Indian fashion, is expected to see his brand’s revenue pass the €100 million mark this year, local industry sources say. Last year, Dior staged its first fashion show in Mumbai during which it celebrated India’s traditions of embroidery and craftsmanship. It has also launched a Lady Dior bag with an elephant on it targeting Indian consumers. Galeries Lafayette is planing to open two department stores in India, one in New Delhi in 2025 and one in Mumbai in 2026.

EXPONENTIAL GROWTH

The number of millionaires and affluent middle-class people in India is growing exponentially. This year, it overtook China as the biggest population in the world. It is expected to count 1.5 billion people by 2030. It’s also a young, connected population with a high birth rate.

“We will see significant growth in the luxury space in India over the next five to ten years,” Euan Rellie, co-founder of investment bank boutique BDA Partners predicted at the Luxury at the Summit by Miss Tweed in Val d’Isère in April. “Today is India’s moment. You’re going to see a strong acceleration of India culturally, politically and even militarily. India is a nuclear power now and is the fourth-biggest defense spender in the world.”

Richemont’s Van Cleef & Arpels is looking to enter India in the next two years, according to Indian luxury industry sources. Meanwhile, Cartier already has two boutiques and has plans for more, they say. Cartier has a person in charge of the Indian diaspora around the world, which is mainly concentrated in the Middle East, the U.S. West Coast and Great Britain. Cartier has understood that Indians travelling and shopping abroad represent a strategic clientele. The French jeweler regularly organizes events just for them. “The smart brands are those brands who know how to engage with the Indian consumer globally,” said Rellie from BDA Partners.

Last week, independent watchmaker Breitling opened a boutique in Bangalore, its second in the country and it has plans for two more.

Kering’s Saint Laurent, Bottega Veneta and Gucci are also expanding in the country and looking for the best spots in malls. Same for LVMH’s brands. Louis Vuitton has three boutiques in India, Dior has only one. When asked about India, Chanel told Miss Tweed it had five standalone boutiques in India including four in the New Delhi region and one in Mumbai. However, only one sells fashion, the others sell only perfume and beauty products.

“At Chanel we are always reviewing markets around the world where we want to further develop,” the brand said in an email. “However, we don’t have any specific updates to share at this time.”

India’s potential for luxury lies more in watches, jewellery, handbags and shoes than ready-to-wear though appetite for that category is growing fast, Indian specialists say.

The growth rate of jewellery brands such as Bulgari, Cartier and Tiffany & Co is in the high double digits in India, local industry sources say. However, they start from a low base. While Swiss watch exports to India are now 1-2 percent, compared with more than 30 percent to China, some industry experts predict India could represent up to 10 percent in ten years’ time.

CHINA VERSUS INDIA

In India, the affluent middle class is rising fast, but for the moment it’s not as big as China’s. It may never be. Consumers are not as eager to spend as were the young Chinese 10 to 20 years ago when they became millionaires overnight with mobile applications and real estate deals, luxury experts say. “The Indians love their heritage, their jewellery, their silks, saris and perfumes,” points out Bénédicte Épinay, managing director of the French luxury association Comité Colbert. “They do not have a huge urge to westernize themselves like the Chinese twenty years ago, but the middle class is becoming increasingly open to adopting Western luxury brands and culture.” In response to luxury brand’s growing interest in India, Comité Colbert is organizing a conference in Paris in early October during which the Boston Consulting Group (BCG) will present a study on luxury in India. Chanel CEO Leena Nair, of Indian descent, will speak via a video link.

In contrast with China’s socialist values, India has a cultural understanding of luxury, owing to the legacy of maharajas and the tradition of lavish weddings, India experts say. It is socially accepted in India to flaunt your wealth and success. By contrast, China has been cracking down on people showing off their lavish lifestyle on social media as part of a wider campaign to show restraint and the communist party’s efforts to achieve “common prosperity.”

“We are really at the beginning of luxury brands entering India,” explains Pierre-François Marteau from BCG in Paris. “It’s been a slow start”. For more than two decades, luxury brands have been looking at India. But there was too much red tape, corruption and too few malls or chic areas where they could open a boutique. Also, import duties remain above 20 percent and rates vary depending on which region products are sold, making exports even more complicated.

In March, India signed an agreement with the European Free Trade Association (EFTA) whose members are Iceland, Liechtenstein, Norway, and Switzerland. It plans to phase out the current tax of more than 20 percent to zero over the next seven years. This will make Swiss watches much more affordable in India. Currently, retailers take a margin cut to compensate but prices are on average still 5-10 percent higher than in Switzerland.

While there is much enthusiasm about India, the country’s luxury market is never going to be as big as China’s, experts predict. “In terms of size, India cannot be the new China,” explains Marteau. “If India represents a top 10 market in five to 10 years, brands will be happy, I think.”

India is not equipped yet with the same infrastructure as China in terms of public roads, digital links, high streets and malls, but things are changing rapidly.

Today in India, there are about five malls who can welcome top luxury brands, but that number is set to rise as new malls are being built or refurbished and not only in the two big shopping meccas that are New Delhi and Mumbai but also in other regions such as Bangalore, Calcutta and Chennai, cities full of affluent shoppers eager to spend money on luxury goods.

The Indian luxury party only got started. Luxury brands cannot afford to ignore it.