Weekend Papers Summary
FINANCIAL TIMES
-Central bankers in Europe and the US are close to declaring victory over the biggest inflation surge in a generation, with new data giving policymakers confidence they can cut rates by the summer. US jobs growth figures for December and January were downgraded, cementing investors' expectations of a rate cut by June. Eurozone data showed wage and profit growth easing. Federal Reserve chair Jay Powell said the US central bank was "not far" from having the confidence to start lowering borrowing costs. European Central Bank president Christine Lagarde said policymakers had begun discussing the dialing back of their restrictive stance and celebrating progress towards their inflation target. The question now is whether the Fed will wait to cut rates until September.
-President Biden faces a close race against a divisive predecessor who is alienating moderate and swing voters and has 91 criminal charges, including for his role in overturning the 2020 election results. His own problems could undercut his chances, including doubts about his physical and mental fitness, a backlash from the left over America's support for Israel, fears about immigration at the southern border, and persistent gloom over inflation. Some Democrats worry that Biden is behind, as he trails Trump by 1.8 percentage points in a head-to-head match up nationally and his approval rating is below 40%. Paul Begala, a Democratic strategist who advised former president Bill Clinton, believes that if the election were held today, he would lose. However, the election is not being held for 243 days, so Biden may have the right strategy and political skills to turn the tide.
-The Behshad, an Iranian dry bulk carrier, has been under increasing scrutiny for its role in providing targeting information to Houthi rebels. The vessel moved to the Gulf of Aden in January after years in the Red Sea, just as attacks on vessels surged in the vital waterway off Yemen. Experts have noted a drop in Houthi attacks during a period last month when the Behshad was seemingly out of action. Jon Gahagan, president of maritime risk specialist Sedna Global, said that for a supposed cargo vessel, the behavior of the Behshad, registered and flagged in Iran, was “extremely unusual”. He asked major questions about its role in the current crisis and the links to the attacks.
-The Pentagon has announced that it will take 60 days and over 1,000 forces to build a floating pier and causeway off the coast of Gaza to deliver humanitarian aid into the besieged territory. The plan comes amid growing frustration among Israel's allies over its failure to prevent a humanitarian crisis in Gaza, where easier land routes have been shut. The US will build the 1,800-foot pier and causeway at sea, then propel it into the shore. The floating structures will allow for the delivery of 2M meals per day. The US is coordinating with ally and partner nations, the UN, and humanitarian NGOs on the distribution of assistance into Gaza.
-The US Congress has approved legislation to fund key agreements with Pacific Island nations, including the Compacts of Free Association (COFA). The Senate provided $7.1B in funding over 20 years for the agreement, which grants the US exclusive military access to Palau, the Marshall Islands, and the Federated Republic of Micronesia in exchange for economic support. The funding was part of a $460B spending package to prevent government agencies from shutting down at midnight. The three small Pacific island nations provide critical access to the US, helping to overcome the Pentagon's "tyranny of distance" and base missiles and early warning radars.
-Wu Qing, the new head of the China Securities Regulatory Commission, has been criticized for his "broker butcher" nickname. He defended the key Chinese characters in market regulation, stating that the key Chinese characters are "strong" and "severe." Wu's more forceful approach, including crackdowns on quant funds, has produced visible results, with China's benchmark CSI 300 index climbing 14% since February. However, there is little renewed appetite among local and foreign investors, who want more monetary and fiscal stimulus from Beijing. A rally in Chinese government bonds reflects persistent concerns over slowing growth. The CSRC's punitive actions have been attributed to the "national team" of state-run institutions buying alongside the CSRC's actions.
-Donald Trump has posted a $91.6M bond to prevent the collection of an $83.3M civil judgment for defaming writer E Jean Carroll. The sum, insured by Chubb Corporation, was posted in Manhattan federal court as part of an appeal against the decision. Judge Lewis Kaplan, who oversaw the Carroll case, refused to grant Trump's request to temporarily stop Carroll's lawyers from collecting. Kaplan also declined to rush through a ruling on whether he should be allowed to appeal without posting the full amount.
-Israeli Cyber security startup Wiz is in talks to raise funds at a valuation of over $10B, indicating a revival in venture capital markets. Founded four years ago, Wiz is in talks with investors like Thrive, Light Speed Venture Partners, and G Squared to raise hundreds of millions of dollars. The company could aim to raise around $800M. The funding could help finance future acquisitions of other tech groups, bolstering Wiz's offering. Wiz, Thrive, Lightspeed, G Squared, Sequoia, and Cyberstarts declined to comment.
-French defense companies are planning to repair and manufacture military equipment locally in Ukraine as Paris seeks to rally western allies to help local forces resist the Russian invasion. The companies involved are KNDS, a joint-venture of France's Nexter and Germany's Krauss-Maffei Wegmann, Arquus, a military vehicle maker and supplier of chassis, and drone maker Delair. The first production could begin by this summer. The move is part of a broader push among European defense companies to shift production, repair, or maintenance functions into Ukraine as the war continues and shortages of ammunition hinder Ukrainian soldiers' ability to fight. Ukrainian President Volodymyr Zelenskyy hosted a conference in Kyiv in September to attract companies.
THE NEW YORK TIMES
-The Senate approved a $460B spending bill to fund half the federal government through the fall, a resolution to a spending stalemate that has pushed the government to the edge of shutdown. The 75-to-22 vote resolved a spending stalemate that consumed Congress for months. The White House halted shutdown preparations and President Biden is expected to sign the bill on Saturday. Top lawmakers are still negotiating spending bills for the other half of the government.
-Republicans claimed to use their majority to cut the budgets of federal agencies, including the Federal Bureau of Investigation (F.B.I.), which they claimed had been weaponized against them. Speaker Mike Johnson unveiled a package of six government spending bills he negotiated with Democrats, which is on track to clear Congress. However, the story of the F.B.I. cut is more about how a powerful senator used budgetary sleight of hand to steer hundreds of millions of dollars to a single project in his state, only to see the money slashed by members of his own party after he retired.
-Canada will resume funding for the United Nations Relief and Works Agency (UNRWA), the main agency supporting Palestinian refugees in Gaza, following allegations by Israel that a dozen of UNRWA's 13,000 employees were involved in Hamas-led attacks on Israel. The announcement follows an interim report from the UN office investigating the claims and the agency's immediate steps to improve oversight and accountability. The UN has also commissioned an external review.
-President Biden and Israeli Prime Minister Benjamin Netanyahu are set to hold a "come-to-Jesus meeting" to address the humanitarian crisis in Gaza. This comes amid rising tensions between the two leaders, as the civilian death toll in Gaza has risen. Biden has been under pressure to pressure Israel to agree to a cease-fire. He had expressed hope for a six-week cease-fire deal by Ramadan, but negotiations between Israel and Hamas have reached an impasse. Biden has stated that a deal is "looking tough" and that a deal cannot be reached by Ramadan.
-President Biden launched his second term campaign with a populist pitch and an aggressive attack on his Republican challenger, former President Donald J. Trump. Biden used the themes of his State of the Union address at a rally in Wallingford, Pa., to capitalize on his nationally televised performance and galvanize Democrats who have been anxious about his age and poor poll numbers. He targeted billionaires, corporations, pharmaceutical companies, banks, credit card companies, and potato chip makers as targets to gouge consumers and duck their fair share of taxes. However, his favorite villain will still be Trump, his opponent from 2020, in a rematch set by this week's Super Tuesday primaries. Biden cited Trump and the MAGA Republicans as trying to take away our freedoms, stating that Democrats will not let him.
-Donald Trump and President Biden both addressed the upcoming presidential election, presenting different visions of the nation's past, present, and future. Trump evoked the halcyon days of his presidency, where there were no wars and the nation was universally admired and united in egalitarian prosperity. Biden, on the other hand, conjured a mirror image of a country that is now "literally the envy of the world" and a past that was "one of the toughest periods in the nation's history." Both men shared the political goal of rallying their base voters, rather than pivoting to the center to appeal to fence-sitters and foes.
-A private dinner in Paris on July 4, 2022, aimed to strengthen the relationship between France and Germany. Chancellor Olaf Scholz praised the exchanges, but President Emmanuel Macron warned that the situation would be challenging. In 2024, the exchanges have revealed deeper differences over Ukraine, Russia, and the US. Macron reiterated his refusal to rule out Western troops in Ukraine, surprising allies who wanted to avoid direct confrontation with Russia. Germany pushed back, but Macron responded in kind. Macron criticized Berlin for its postwar history after the Nazi trauma, a jab Berlin took as an insult. German defense minister Boris Pistorius responded that discussions about boots on the ground or having more or less courage were unnecessary. The Franco-German relationship, built since 1945, remains central to Europe's cohesion and global power. However, the bond seems to be fraying at a time marked by a European war and uncertainty over America's future commitment to Europe.
-OpenAI has concluded an investigation into the firing of Sam Altman over three months ago, marking a victory for the CEO as he regains control of the artificial intelligence company he helped create. OpenAI stated that Altman did not do anything that justified his removal and would regain the role of a board of directors. Altman's ouster stunned Silicon Valley and threatened the future of one of the tech industry's most influential start-ups. When he returned to OpenAI in November, he agreed to an investigation of his behavior and board actions. Two members who voted for his removal agreed to step down, and their replacements, from outside the company, oversaw the investigation by the law firm, WilmerHale. Bret Taylor, chairman of OpenAI's board, said the highly anticipated report about the episode was finished, but the company did not release the report.
THE NEW YORK POST
-Former President Donald Trump has expressed his opposition to a proposed TikTok ban in Congress, claiming it would benefit Facebook, which he referred to as "a true Enemy of the People." Trump referred to Meta founder and CEO Mark Zuckerberg as "Zuckerschmuck" in a Truth Social post. Zuckerberg banned Trump from Facebook and Instagram in January 2021, following a storming of the US Capitol by his supporters. Trump later stated that he would not have dinners with Zuckerberg and his wife, stating that the next time he was in the White House, it would be all business. The move comes after Zuckerberg banned Trump from Facebook and Instagram in January 2021.
-Apple has restored Epic Games' permissions to offer its own app store to iPhone customers in Europe, following concerns from European Union regulators that its move to block Epic may have violated a new antitrust law. Apple faced scrutiny under the European Union's Digital Markets Act, which requires Apple to allow developers to run their own app stores. Epic Games, which has been in a legal battle with Apple over its App Store policies, said it would move forward with its plans to offer Fortnite and its Epic Games Store. Epic Games said the decision sends a strong signal to developers that the European Commission will act swiftly to enforce the Digital Markets Act and hold gatekeepers accountable. CEO Tim Sweeney praised the company's decision as a "big win for European rule of law, for the European Commission, and for the freedom of developers worldwide to speak up."
Barron’s Weekend Summary: The stock market has seen a 130% rally since March 2020
Cover:
-The stock market has seen a 130% rally since March 2020, reaching a record high and fetching 21 times expected earnings over the coming year. However, the past year's gains are primarily due to the outperformance of seven "magnificent" stocks. The Federal Reserve is expected to delay cutting interest rates until inflation is subdued. This leaves the market vulnerable to a near-term correction, defined as a 10% drop. The best case for the stock market's continued gains depends on the outlook for a strong economy, which will generate more earnings growth for more companies, allowing the rally to broaden. A good economy is good for earnings and allows the Fed to take its time lowering rates. The US real GDP grew by 2.5% in 2023, silencing skeptics who had called for a recession or banking crisis.
Interview:
-No interview this week
Tech Trader:
-Artificial intelligence (AI) is transforming the tech sector, with companies like IBM, Salesforce, HPE, and Dell Technologies experiencing significant stock gains. IBM's WatsonX AI platform has led to a 20% increase in its stock this year and over 50% over the past 12 months. Salesforce's shares have also seen a 16% increase this year, and HPE's shares have rallied over 20% due to high hopes for its AI server business. Dell Technologies' shares have spiked 55% this year. SAP, a German software giant, has long dominated the market for enterprise resource planning (ERP) software, used for critical corporate applications like accounting, compliance, and supply chain management. Historically, installing a new ERP system was complex, requiring significant time and capital commitments, and posing a risk of business disruption.
The Trader:
-The stock market has continued its strong performance in 2023, with a shift in the top positions. Apple, Tesla, and Alphabet have fallen, while Nvidia and Eli Lilly are ascending. This is due to the growing economy and the market's potential for future cash flows from innovations in artificial intelligence and healthcare. The S&P 500 index, which has been at the top since 2018, has notched its 16th record of 2024. However, the Dow Jones Industrial Average and Nasdaq Composite fell, while the Dow Jones Industrial Average and Nasdaq Composite fell. The S&P 500's market-cap leader board has been dominated by Alphabet, Apple, Amazon.com, and Microsoft since 2018, but this reshuffling is happening beneath the surface.
-New York Community Bancorp's $1B rescue and a new CEO are expected to alleviate investor concerns about regional bank stocks. The KBW NASDAQ Regional Banking Index has lost 7% since NYCB's January 31 dividend drop and loan loss reserves increase. The industry is in good shape, with only three out of 4,700 banks in trouble last year. Capital levels and tangible book values are rising among the banks KBW follows. If the Federal Reserve's rate cuts are implemented, KBW believes bank margins and earnings should resume growth in 2025. However, regional bank valuations remain weak, with banks trading at less than 60% of the S&P's forward earnings multiple. KBW recommends large regional banks like US Bancorp and Truist Financial, while smaller regional banks like Synovus Financial and Old National Bancorp are recommended.
Features:
-The Nikkei 225 index in Japan is still near record levels, driven by economic and policy-related factors. The index hit a closing record of 40,109 earlier this month, decades after its previous record close at 38,915 in 1989. The Tokyo market has gained roughly fivefold since its bottom in 2009, at around 80% below its peak. Despite a slight dip to just under 39,700, the Nikkei is up about 18% for the year, mainly due to investors willing to pay a higher multiple of anticipated near-term earnings for stocks. The government's changes regarding corporate governance have increased earnings per share and strengthened the market's confidence in the quality of companies' financial reports, driving up valuations. Companies must provide shareholders with a clearer view of their financial condition, and the government is pushing companies to allocate capital more efficiently.
-Boeing is overhauling incentives for some workers in its commercial aerospace division, with safety and quality metrics determining 60% of annual bonuses. The balance is a mix of financial-based metrics, with safety and quality metrics remaining 25% of bonus scores in Boeing's defense business. Boeing COO Stephanie Pope emphasized the importance of delivering a safe and quality product to customers. Boeing stock closed down 2.2% in Friday trading at $198.49, signaling that fixing quality, manufacturing, and design problems is a long process. The recent moves come after an emergency door plug blew out of a 737 MAX 9 flight operated by Alaska Air in early January. The FAA grounded all MAX 9 jets after the incident, but they were returned to service after inspection and repairs. All MAX jets were grounded worldwide between March 2019 and November 2020 following two deadly crashes tied to faulty flight control software. Boeing stock was north of $400 a share before the second fatal MAX crash in March 2019.
Europe:
-Farmers across Europe are protesting against the EU's environmental and foreign policy, with some even threatening to show police with liquid manure and eggs. This wave of protests could help far-right parties gain a quarter of the European Parliament in the upcoming elections. Agriculture is an under-recognized contributor to pollution and climate change, emitting nearly two-thirds of the carbon emissions in Europe. European Commission President Ursula von der Leyen has championed a green revolution in farming, aiming to halve the use of pesticides and chemical fertilizers by 2030. However, Russia's natural gas cutoff has increased energy and fertilizer prices, and soaring interest rates have restricted farmers' ability to borrow. As of 2024, farmers can't afford the burdens, and the focus on the environment has led to a U-turn away from the ambitious Green Deal. The EU's long-pending free trade deal with South America's Mercosur bloc is likely to be a casualty, as negotiations are unlikely to be concluded under these conditions.
Emerging Markets:
-No update this week
Commodities:
-Gold is trading at a record of $2,200 an ounce, with alternative currencies like Bitcoin also gaining attention. The VanEck Gold Miners exchange-traded fund trades at roughly half of what it fetched back in 2011. ETFs have shown a waning interest in alternatives to government-issued money, with the SPDR Gold Shares' total assets exceeding those of the SPDR S&P 500 Trust. However, gold has continued its bull market, with central banks being active buyers, adding 1,037 tons in 2023, just shy of the previous year's 1,082 million purchases. China continues to be an active buyer, holding 2,245 tons at the end of 2023. Gold has advanced despite headwinds from higher interest rates and a firm dollar. John Hathaway, senior portfolio manager at Sprott Asset Management, believes that gold has decoupled from its traditional inverse correlation with interest rates. The gold mining industry's stock market value is about $300B, less than that of Mastercard or Home Depot alone. Gold mining stocks are valued at steep discounts to the current gold price, setting the group up for a sharp mean reversion.
Streetwise:
-Jack Hough has changed his Bitcoin rating Incognito Unclear, indicating uncertainty about its future price. Other assets, such as gold and U.S. stocks, have also seen significant growth, with the S&P 500 being deemed "egregiously expensive" by Bank of America. However, Bitcoin has tripled in value over the past year, reaching $67,000. The author first wrote about Bitcoin in June 2011 for SmartMoney.com, calling it the "top-performing money in the world."
JP Morgan has used the model of treating Bitcoin like digital gold due to their shared characteristics: limited supply, fungible and divisible stores of value, not under government control, and durability. Bitcoin has outlived the publication where it first wrote about it, with the value of all mined gold estimated at close to $15T. Private investors hold gold at $3.3T, and Bitcoin's market cap is around $1.3T.
JPM adjusts Bitcoin's fair value downward for its volatility, but Reda Farran, an analyst at Finimize, believes this adjustment is too harsh due to Bitcoin's falling volatility and slower supply growth than gold. Farran suggests that if Bitcoin is as good as gold, it might point to a substitution effect pushing gold's price lower, rather than reaching record highs.
Furthermore, Farran points out that central banks have been offsetting this substitution effect by buying gold, which is evident in ETF flows. While the author is too square to turn bullish now, there are creative workarounds for those tempted by bitcoin ETFs or wondering when to sell.
LVMH’s Arnault Rivals Bezos and Musk in Wealth—and in Media Influence
Billionaire’s luxury conglomerate is in talks to add Paris Match magazine to his stable of media assets
PARIS—Bernard Arnault, head of handbags-to-Champagne behemoth LVMH MC 0.61%increase; green up pointing triangle, has significant sway over the luxury industry. Now he wants to boost his influence in the media too.
The billionaire, one of the world’s richest people, already controls France’s leading financial title, a daily newspaper and a classical radio station, among a host of other media investments. His latest target is Paris Match, a French magazine best known for spreads of politicians and celebrities.
LVMH recently entered exclusive talks to buy the title for about 100 million euros, or roughly $109 million, according to people familiar with the matter, in a deal that could be completed in the coming months.
An LVMH spokesman confirmed the negotiations with Lagardère, the magazine’s parent company, but declined to comment further. Lagardère first disclosed the talks late last month.
Arnault’s expanding media holdings place him among a cadre of billionaires who have scooped up prestigious titles in recent years. Jeff Bezos, the Amazon.com founder who vies with Arnault and Elon Musk to top the list of the world’s richest person, bought the Washington Post in 2013. Salesforce CEO Marc Benioff bought Time magazine. And Musk, who bought Twitter and turned it into X, has said he wants the social-media platform to supplant traditional media as a means of communication.
While none of those entities are big moneymakers, influence has often been more important than profits in the media business.
Magazines and newspapers are also often trophy assets that give their owners “a way to feel the vibrations of society,” said Alain Minc, who has advised some of France’s most powerful executives and politicians.
The bid for Paris Match, if successful, would end Arnault’s yearslong pursuit of the magazine that chronicles the crème de la crème of French society.
Founded in March 1949, the same month that Arnault was born, Paris Match covers major national and international news alongside its celebrity features. While its print circulation has declined in the past couple of decades—its paid distribution now stands at almost 450,000—the weekly publication is still seen as a leading outlet for photojournalism and is often referred to as the photo album of the French.
Being featured in the magazine’s pages has long been considered a rite of passage for France’s aspiring prime ministers and presidents. Last month it ran an interview with the country’s interior minister, Gérald Darmanin, stoking expectations that he plans to mount a campaign to succeed Emmanuel Macron when the president’s term ends in 2027. Photographed on the phone in his office, his son on his lap, Darmanin, 41, told Paris Match that “his family allows him to put political difficulties into perspective.”
It also documents the lives of the rich and famous. In September 2005, the magazine ran a 22-page feature on the marriage of Arnault’s daughter, Delphine, to a wealthy Italian wine heir. Readers learned that the workers of the Dior atelier spent 700 hours stitching together the John Galliano-designed wedding dress, and a further 600 hours embroidering it. Fashion designer Karl Lagerfeld took some of the photos.
“Paris Match is transpartisan, it seeks consensus,” said Patrick Eveno, emeritus professor at the Sorbonne who specializes in the history of media. “They seek to tell good stories about politicians, about monarchies, about big stars in cinema and music.”
Across Europe, many media outlets are in the hands of powerful families and industrial groups, which often face criticism for using them to promote personal goals or influence politicians.
Arnault, who began buying up media assets in the early 1990s, told a French senate inquiry into media ownership in 2022 that his purchases were “more like philanthropy,” since many of the titles would have faced an uncertain future without investment from his luxury empire.
Arnault added that his media assets were marginal for LVMH and that he spent relatively little time on them. They made 400 million euros—about $438 million—in annual sales, he said at the inquiry, before adding “unfortunately, the losses are substantial.”
Annual revenue at LVMH, whose brands include Louis Vuitton, Dior and Hennessy, surpassed 86 billion euros last year, more than 90% of which was generated outside of France.
Marketing benefits between LVMH’s brands and its media assets are limited, analysts say. The head of LVMH’s press unit has said he wished the group’s brands would advertise more with its titles and less with the competition.
From time to time, though, Arnault has expressed an interest in expanding his media holdings. For instance, he has said publicly that he considered a deal for the Financial Times in 2015 before the British title was eventually sold to Japanese media group Nikkei.
Arnault’s relationship with the media hasn’t always been comfortable. As an owner, he faced a strike at his financial daily Les Echos last year over the abrupt dismissal of the publication’s editor. The newspaper has been operating without an editor in chief for about a year after staff—who get to vote on the title’s top editor—rejected LVMH’s proposed candidate for the role.
As a public figure, Arnault has also faced some uncomfortable scrutiny at times. In 2012, France’s richest man confirmed that he was seeking Belgian citizenship, a move that came as the French government was pressing ahead with a controversial tax on the country’s wealthiest citizens. In response, left-wing newspaper Libération ran a front-page photo of a smiling Arnault carrying a suitcase, alongside the headline, “Get lost, you rich jerk.” Arnault sued the publication, and the case was eventually settled before trial. Arnault later withdrew his bid for Belgian citizenship.
Eveno, the professor at the Sorbonne, said that Arnault was generally hands off with his newspapers, particularly when compared with his fellow billionaire Vincent Bolloré, who currently controls Paris Match.
Bolloré is the largest shareholder of French media group Vivendi, which took control of Lagardère last year. He has a record of shifting his media assets to the right of the political spectrum. At one of Vivendi’s 24-hour news channels, he increased time devoted to debates on topics including immigration and violent crime, and helped propel a nationalist French talk-show host to a presidential run.
Bolloré has said that his group invests in the media to make money and not for political or ideological reasons.
One senior journalist at Paris Match said LVMH would in theory be a better owner for the publication because the luxury company is less political, and the two have a natural affinity through some of the topics covered by the magazine.
Still, the journalist said they hoped LVMH—the world’s largest seller of luxury goods—would retain the magazine’s balance of visually rich features on society and the arts, and in-depth reporting on topics like the war in Ukraine.
Kering and EssilorLuxottica among suitors for eyewear maker Marcolin
Italian company has been put up for sale by PE owners
Kering and EssilorLuxottica are among the suitors for Marcolin, the Italian manufacturer of Tom Ford’s popular eyewear line, according to people briefed on the matter.
The Veneto-based company, whose private equity owners are seeking a valuation as high as €1.3bn, has held preliminary talks in recent weeks with groups including rival Safilo as well as the Franco-Italian eyewear group and French luxury conglomerate, the people said. US-based Marchon has also expressed an interest, according to one person involved in the talks.
However, the €1.3bn asking price has proved a sticking point between the company, in which PAI Partners owns a 83 per cent stake, and its potential acquirers, according to multiple people close to the talks.
The Paris-based private equity group, which first invested in family-owned Marcolin in 2012, has hired Goldman Sachs as advisers.
PAI, Marcolin, Kering, EssilorLuxottica and Safilo declined to comment. Goldman and Marchon did not immediately respond to a request for comment.
Marcolin, which is based in the north-eastern town of Longarone at the heart of Italy’s eyeglasses manufacturing district, secured a perpetual licensing agreement to produce Tom Ford’s eyewear for €250mn last year. The Tom Ford trademark is currently owned by New York-based Estée Lauder and its fashion line is run by the Ermenegildo Zegna Group.
The eyewear group also has agreements with brands such as Pucci, Zegna and Max&Co, and also recently signed a licensing deal with luxury shoemaker Christian Louboutin.
Bankers and analysts say the lucrative Tom Ford licensing agreement is attractive for potential suitors although it does not justify paying upwards of €1bn for a group that has complex industrial operations and would be hard to integrate.
Kering, which has a growing eyewear division, EssilorLuxottica, the world’s largest eyewear manufacturer, Safilo and Marchon have all looked at Marcolin and view the Italian asset as an opportunistic add-on, according to several people with knowledge of the situation.
However, none of Kering, Essilor or Safilo were willing to “overspend” on it, said three of the people. An acquisition of Marcolin could also encounter significant regulatory hurdles given all are large players in the eyewear sector.
People close to the talks said EssilorLuxottica would be the best fit for Marcolin. Marchon and Safilo are considered the least likely buyers, with Marchon comparatively smaller than the other companies and Safilo having experienced a recent weaker financial performance.
Private equity buyers had so far shunned the sale process as they considered Marcolin too expensive at the current price expectations set by PAI Partners, said people briefed about the matter. However, they could make a comeback if Marcolin failed to reach a deal with strategic buyers.
Marcolin’s revenues grew 3 per cent to €421.6mn in the first nine months of 2023. Its adjusted core profit rose 28 per cent to €64.6mn. The company will release its full-year results at the end of the month.
TP ICAP separates data unit following investor pressure
Parameta Solutions registered as standalone company in preparation for potential listing or sale
UK broker TP ICAP has separated a fast-growing division that sells data to traders as it attempts to respond to pressure from its investors to return capital.
The data unit, Parameta Solutions, was registered in February as a standalone company as TP ICAP prepared a possible sale or listing of it, said two people with knowledge of the matter. Parameta is registered as a separate company on the Jersey companies register.
The decision to separate Parameta follows intense pressure from some of TP ICAP’s biggest shareholders to offload it because of the broker’s sinking share price. One investor said Parameta could generate as much as £1.5bn from an initial public offering, which is more than TP ICAP’s entire market capitalisation of £1.46bn, based on its stock price on Friday.
In 2022, the City of London broker was lambasted by a US hedge fund for its “disastrous share price decline”, and investors had called on the company to either sell itself or Parameta. The separation of Parameta indicated that those plans were now on track, the investors said.
TP ICAP’s share price has recovered about 70 per cent from its 2022 lows but is still depressed, trading flat over the past year.
One shareholder said a listing was the “most likely” outcome for Parameta. They added that in separating the company, the “main goal is tax efficiency in a potential IPO [or] sale”.
TP ICAP declined to comment.
In its first-half 2023 results, the FTSE 250 broker said its Parameta growth strategy was “about harnessing the valuable data generated by our businesses and external partners”. It added that “operationally, Parameta Solutions is already separate from the group with, for example, its own management team”.
Another investor said “it is clear that over the long term, that business probably won’t be sitting in TP ICAP”, adding that Parameta was “a much more valuable business”.
“If you separated those entities legally and [sort out] the tax implication . . . it is easier to then sell it or spin it off,” the investor added.
Parameta’s growth outpaces that of TP ICAP’s global broking unit, in which roughly 2,500 brokers connect buyers and sellers in finance, energy and commodities markets, earning money from commissions on trades.
In the third quarter of 2023, Parameta’s revenues rose 7 per cent, while broking revenues fell 2 per cent. Parameta’s adjusted earnings before interest, taxes, depreciation and amortisation margin was 43 per cent in the same period (the company’s profit as a percentage of revenue), far outpacing TP ICAP on the same measure at 17 per cent.
“That business is very high quality, it continues to grow strongly,” the shareholder added.