TheChek News Flow

Bulls will grow stale waiting for more hopeful data

Copper helps carry the world’s data — and the hopes of some inflation-wary investors.

The red metal, beloved of mining executives and climate change strategists alike, has soared in price since early February. Up more than 26 per cent on the London Metal Exchange (and more in the US, where prices hit a record this week), the metal is one of the top-performing commodities this year. But this looks more of a speculative rally than one driven by fundamental market changes.

Had demand for copper surged, it should be visible in Chinese trade data. That country represents 40 per cent of world copper imports. China has plenty of copper smelters but lacks enough domestically mined copper concentrate to feed them. But growth in copper ore import volumes has slowed in the past year, after a post-pandemic surge into 2023.

Near-term supply is not in a terrible state either. Most of the recent market angst concerned the Cobre mine in Panama, one of the world’s largest. It was forced to suspend production late last year due to environmental concerns. Even so, first-quarter production from the largest producers — roughly 70 per cent of world output — rose 5.5 per cent year on year, on Jefferies data. If anything, global copper demand is trailing supply slightly this year.

Speculators are playing more of a role than physical demand and supply. In the US, the Commodity Futures Trading Commission tracks data on non-commercial trading (long positions versus short) of certain commodities. For copper the net long position has surged since February, near the top of the 10-year range. Investors have been buying copper for months rather than simply closing out short positions. This is where the marginal copper buyer is coming from.

In recent weeks, the US exchange traded price of copper has surged much more than that on the LME, or in Shanghai. These purchases probably owe much to inflation hedging. Copper prices, more so than gold, tend to move in line with anticipated price trends, thinks Tom Price at Liberum. Over the past 10 years, the red metal’s price has moved in step with US long bond yields.

Copper prices have benefited from speculators buying for reasons unconnected to a surge in demand, or collapse in supply. But, so far, there is little evidence of either. Failing a surprise collapse in world copper supply, these bulls will grow stale waiting for more hopeful data.

Were overdue reforms to take place, then the Czech tycoon’s offer looks low

Czech billionaire Daniel Křetínský’s move to buy Royal Mail has received a tacit stamp of approval. Keith Williams, chair of owner IDS, said the board was “minded to recommend” a takeover at a price of 370p per share should a formal offer arrive. Williams said at an equity value of £3.5bn, the price fairly reflected the value of GLS, a profitable European delivery business, and Royal Mail in its current lossmaking state. 

He may be right. Still, no one seems confident that this deal is going to happen.

In giving the deal a tentative nod, Williams also took a potshot at the UK government. He expressed regret that the government had “not seen fit to engage” on postal service reform. A deal agreement would in effect kick the question of the company’s future to the government, which vets takeovers under foreign investment rules. That, if nothing else, might focus minds on overdue changes to the service obligation.

Were reform to be delivered, then this price looks low. As it stands Royal Mail has to deliver letters six days a week. Profits have slumped in line with volumes of letters sent. Royal Mail made operating losses in the region of £300mn in the year to March. Past efforts at reform have been batted away.

The latest proposals, only submitted for review in April, would move second-class deliveries to three days a week and slow delivery of bulk business mail. Royal Mail thinks this would add £300mn a year to the bottom line. The result? A company worth more than the current price on offer, well in excess of 400p a share.

The combination of a government veto on a controversial takeover of vital national infrastructure, plus this valuation uncertainty, is keeping arbitrageurs on the sidelines. True, some funds wait for a formal offer announcement to get involved. But with IDS shares trading around 320p, rough merger arb maths suggests a 60 per cent probability of completion. Muddying the numbers is the possibility that the prospect of a takeover finally prompts movement on Royal Mail’s obligations.

That would leave investors looking for a higher price. Křetínský, who already has a 27 per cent stake, would benefit regardless — and save himself the trouble of a union showdown and tricky restructuring. He has already committed to union recognition, protection of employees’ current rights and no move from the UK.

Reform to the service obligations, similar to European markets, could negate the need for a politically dicey intervention by either this government or the next. A UK election this year may yet slow progress. This deal carries substantial risk of a failed delivery.

Hugo Boss CEO Daniel Grieder had never met David Beckham, but then he watched the soccer star's Netflix documentary, and knew instantly that he wanted to partner with the celebrity sportsman on a tailored clothing collection.

LONDON — David Beckham has a new design deal, a global, multi-year partnership with German menswear giant Hugo Boss for the Boss brand.

The collaboration is the first of its kind for Boss menswear and marks the return of Beckham to the fashion fold. He previously had a partnership with the British brand Kent & Curwen, which ended in 2020.

The focus of the collaboration will be on both formal and casual menswear with the first Beckham x Boss collection bowing for spring-summer 2025. Beckham is already working alongside the design team and will appear in the brand’s global campaigns starting with the fall-winter 2024 season.

The German giant said the celebrity sportsman will participate in all stages of the design process from conception to execution. Both sides described the deal as a “longterm partnership” and stressed that it was not a license.

The exact terms of the deal were not disclosed.

The label will offer a mix of tailored clothing and more casual wear, and reflect Beckham’s distinctive personal style, Boss said. The prices will fall between Boss Camel, the ultra-premium line, and Boss Black, the main collection.

Beckham said that over the last few years, he’s been eager to invest more time in design and fashion, “but I wanted to ensure I collaborated with a brand and team that could deliver something truly global and impactful.”

He added that he’s enjoyed the collaboration with Boss so far and has “been impressed by the team’s ambition, creativity, and desire for excellence. I look forward to sharing what we’ve been working on so far.”

Daniel Grieder, chief executive officer of Hugo Boss, said in an exclusive interview that he pursued the deal after watching the “Beckham” documentary on Netflix.

“David was always on the radar, but I didn’t know him personally, and until I saw the Netflix documentary, I wasn’t aware of all that he’d achieved in his life, all of the difficult times he went through, and how he stayed strong,” said Grieder.

“The show changed my whole point of view, and I was convinced that we had to get him,” added Grieder, who hopped a plane to Las Vegas where Beckham was attending a Formula One race, and spoke to him about collaborating.

“I said, ‘Listen, we don’t just want you as an ambassador, we want you in a partnership. We want you to be involved in the design, and to do a collection.’ Then we met again, and discussed what we could do together. He visited the company and was impressed,” said Grieder.

Grieder said that Beckham is already well embedded in the Boss team. “It’s so wonderful to work with him, and he’s a real team player. It’s very the best start that we have ever had” with a collaborator, he added.

The deal is straight from the Grieder playbook.

He took on the top job at Hugo Boss mid-2021 and instituted a five-year plan he named “Claim 5.” It was an all-encompassing brand refresh, with high-profile fashion events and star-studded marketing campaigns meant to rev up the previously moribund German company.

It worked. In 2023, Hugo Boss saw double-digit growth every quarter and record sales, although this year the pace of growth is set to slow.

Grieder has said the company would be taking a more cautious approach to 2024. The company expects sales to increase between 3 percent and 6 percent over the year, bringing in somewhere between 4.3 billion euros and 4.45 billion euros.

Grieder, who spent most of his career building the business at Tommy Hilfiger, has also set ambitious sustainability targets for Hugo Boss, which include climate neutrality at the company by 2030, and throughout the entire value chain by 2045.

The Hugo Boss deal comes on the heels of Beckham’s new eyewear deal with Safilo. As reported, Safilo has forged a “perpetual license agreement” with Authentic for Eyewear by David Beckham. It replaces a previous contract set to expire at the end of 2030.

Authentic has proven a fruitful partner for Beckham, who restructured his brand businesses a few years ago and teamed with the American brand builder.

In 2022, Authentic paid $269 million for a 55 percent stake in DB Ventures, which manages Beckham’s global brand and businesses spanning sports, entertainment, lifestyle and luxury.

As part of the deal, Authentic became the largest shareholder in Beckham’s Studio 99, which produced the “Beckham” documentary which was released on Netflix last year.

Before Authentic, Beckham’s company had a number of partnerships, including one with Trinity Ltd., which had owned brands including Cerruti 1881, Gieves & Hawkes and Kent & Curwen.

From 2015 to 2019, Beckham partnered with Kent & Curwen, working with the designer Daniel Kearns on the preppy, outdoorsy collection and promoting the brand with ad campaigns, fashion shows and other events.

Beckham eventually exited that partnership in 2020 after new owners Shandong Ruyi took over. Kent & Curwen, which was losing money, ceased trading the following year, although it has since been revived under new Chinese owners.

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Private equity giant Thoma Bravo has announced that its security information and event management (SIEM) company LogRhythm will be merging with Exabeam, a rival cybersecurity company backed by the likes of Cisco and Lightspeed Venture Partners.

SIEM is the business of using real-time data gleaned from servers, network devices, and applications to flag abnormal activity and thwart potential security threats before they escalate. Consolidation in the space is rife. The LogRhythm and Exabeam merger news arrived on the same day as Palo Alto Networks confirmed it was acquiring the assets of IBM’s SIEM business, QRadar, which IBM itself had acquired in 2011. It also follows Cisco’s $28 billion megadeal to procure SIEM giant Splunk, a deal that closed in March.

More broadly, the cybersecurity space is awash with M&A activity: earlier this month, Akamai revealed it was acquiring API security company Noname for $450 million; Permira bought a majority stake in digital fraud detection startup BioCatch at a $1.3 billion valuation; and Thoma Bravo reared its head again to take cybersecurity company Darktrace private in a $5 billion deal.

Elsewhere, cloud security platform Wiz hit a whopping $12 billion valuation on a $1 billion fundraise, an investment it says will be used substantively to scoop up other cybersecurity startups.

LogRhythm, for its part, had raised around $126 million before Thoma Bravo swooped in and acquired a majority stake back in 2018 for an undisclosed figure. Exabeam, meanwhile, took its total funding to nearly $400 million at its $200 million Series F round in 2021. Thoma Bravo hasn’t divulged Exabeam’s valuation at this merger. Exabeam was previously valued at $2.4 billion. Many companies’ valuations have plummeted in the great post-pandemic correction, however; and Exabeam has hit a few bumps. This Reddit post details layoffs six months ago, for example.

As with just about every sector these days, AI is playing an increasingly pivotal part in the cybersecurity space, and it’s “AI-driven security solutions” that LogRhythm CEO Chris O’Malley says is what Exabeam brings to the table.

“Together, our expertise and shared strategic vision will accelerate innovative AI-driven cybersecurity solutions for customers around the world,” O’Malley said in a statement. “Vigilant CISOs have eagerly awaited the emergence of a strong, customer-obsessed, singularly-focused global leader in AI-driven security operations — one that offers a best-of-breed alternative to the frustratingly complex options on the market today. That day has arrived.”