FT : Spain to buy 10% share in Telefónica in response to Saudi stakebuilding

FT : Spain to buy 10% share in Telefónica in response to Saudi stakebuilding
Madrid issues order for purchase to provide ‘shareholding stability’ for national champion

Spain is to buy a stake of up to 10 per cent in Telefónica in a bold response to a move by Saudi Arabia’s STC Group to acquire 9.9 per cent of the telecommunications company.

Spain’s decision raises the intensity of a battle for influence at Telefónica, a national champion with businesses in security and defence. It has been targeted by STC — majority-owned by Riyadh’s sovereign wealth fund — as the Saudi group seeks to expand its investments in Europe.

The Spanish cabinet issued the order for the stake to be acquired with the aim of giving Telefónica “shareholding stability”, according to a filing made by the government holding company that will buy the shares. The stake would be worth about €2.1bn at today’s valuation,

Nadia Calviño, Spain’s outgoing deputy prime minister, said on Tuesday that the move was “in line with other large European countries, such as France and Germany, which have and are increasing their shareholdings in big and strategic telecommunications operators”. She did not comment on STC.

Spain’s move came more than three months after STC shocked the Spanish establishment by announcing that it had spent €2.1bn in acquiring a 4.9 per cent stake in Telefónica and derivatives that gave it an economic interest in a further 5 per cent.

To raise its stake to 9.9 per cent STC will need to convert the derivatives it has bought into equity. However, for a stake above 5 per cent, it will need Spanish government approval. A decision on allowing the expansion to 9.9 per cent is not expected until early next year.

STC’s move was the first time a Saudi institution has taken a large stake in a big Spanish group.

Sepi, the Spanish government holding company, said its planned stake would help Telefónica to “achieve its objectives and will contribute to safeguarding its strategic capabilities”. It would mark the state’s return to Telefónica’s shareholder register for the first time since 1999, when the company’s full privatisation was completed.

Telefónica said it remained focused on the execution of its strategic plan in order to “continue creating value for its shareholders and providing the best-in-class service for its clients”.

Should the Spanish state and STC secure stakes of nearly 10 per cent, they will catapult past CaixaBank and BBVA — two pillars of corporate Spain — to become Telefónica’s largest shareholders.

Calviño said Telefónica “is without doubt the most strategic company in Spain, not only because of its presence in telecommunications infrastructure and innovation but also because of its weight in security and defence”.

Opinions have been split inside the government on STC’s move, according to officials. It was viewed favourably by those supportive of Spain’s strong trade ties with Saudi Arabia, but seen more sceptically by others wary of STC’s intentions.

STC has said it was not seeking a controlling stake in the company led by José María Álvarez-Pallete.

Telefónica’s share price has dropped by nearly 5 per cent since STC announced its plans. Tuesday’s announcement was made after the stock market closed.

Karen Egan, a senior telecoms analyst at Enders Analysis, said governments were becoming increasingly wary of allowing significant foreign influence over incumbent telecoms operators.

But she said Middle Eastern companies saw a chance to enhance their reputations by being associated with a “reasonably leading-edge, sizeable company” such as Telefónica. The United Arab Emirates group e& already has a stake in Vodafone.

STC chief executive Olayan Alwetaid has said that the Saudi telecoms group viewed the acquisition as a “compelling investment opportunity to use our strong balance sheet whilst maintaining our dividend policy”.

At an investor day in November Telefónica presented a strategic plan up to 2026, which included targets of 2 per cent annual growth in earnings before interest, tax, depreciation and amortisation and more than 10 per cent annual growth in free cash flow. It also committed to paying a dividend of at least €0.30 per share over this period.

FT : Nippon Steel’s US bet could be ‘catalyst’ unleashing Japan M&A wave

Nippon Steel’s US bet could be ‘catalyst’ unleashing Japan M&A wave
$14.9bn takeover comes as country’s cash-rich corporations return to global markets

Ten hours after stunning markets with the biggest acquisition in the company’s history, the president of Nippon Steel Eiji Hashimoto had a second surprise: Japan’s biggest steelmaker was still open to “any other good opportunity that comes up”.

His comments on Tuesday followed the announcement of Nippon’s all-cash $14.9bn takeover bid for US Steel, a deal that would make the combined group the world’s third-biggest steel producer.

The deal marks Japan’s largest overseas acquisition this year and signals that the country’s cash-rich corporations are returning to global markets as some of the world’s hungriest strategic buyers, said M&A bankers and lawyers in Japan.

Japanese companies from across different industries have been cautiously planning multibillion-dollar acquisitions as companies seek growth outside of the shrinking domestic market, said three Tokyo-based M&A bankers.

Ken Lebrun, a Tokyo-based M&A partner at Davis Polk & Wardwell, said there were increasing signs that 2024 would bring a long-awaited rebound in Japanese outbound dealmaking after a lull during the pandemic, with interest rates outside Japan beginning their expected decline.

“Nippon Steel’s ambitious acquisition of US Steel may act as a catalyst to encourage other Japanese companies to finally act on their long-term strategic plans to grow overseas,” said Lebrun.

Nippon Steel’s shares closed down 2.8 per cent on Tuesday, as investors assessed the strategic value of the acquisition. Nippon Steel’s offer, a bet on a surge in US manufacturing driven by subsidies, was nearly double the offer from Cleveland-Cliffs in August.

The deal, which needs to be approved by US regulators, is facing opposition from senators and the United Steelworkers, a 1mn-strong union.

On Tuesday, three Republican senators sent a letter to Treasury secretary Janet Yellen asking for the Committee on Foreign Investment in the US, which vets international takeovers, to launch a review of the deal. 

“[Cfius] can and should block the acquisition of US Steel by NSC, a company whose allegiances clearly lie with a foreign state and whose record in the United States is deeply flawed,” wrote JD Vance of Ohio, Josh Hawley of Missouri and Marco Rubio of Florida.

Democratic senators also sent a letter on Tuesday to the Nippon Steel president, complaining that the United Steelworkers union had not been consulted or notified before the agreement was announced,

Japanese companies are under increasing pressure to secure growth overseas through acquisitions because of the contracting domestic market and louder calls from shareholders to deploy capital more effectively. 

Strategic buyers looking for targets in the US enjoy an advantage, said another Tokyo-based lawyer. Chinese companies are not competing for as many American companies, as a result of rising geopolitical tension between Beijing and Washington. Meanwhile, higher US interest rates are causing private equity firms to pull back on deals until the financing environment improves.

Another head of M&A at a global investment bank said the Nippon Steel deal “would inspire other Japanese companies to act”. But he noted that while companies had appetite for outbound acquisitions, several transactions fell through earlier this year as company boards were unwilling to take risks amid the uncertain global macro environment. 

Nippon Steel’s purchase had also taken place against a dramatically changing domestic dealmaking environment, said M&A advisers. Shareholders are pushing for Japanese companies to consider the sale of non-core businesses and domestic consolidation in order to unlock value and become more competitive.


The value of Japanese companies making deals in their home market rose to the highest level since 2005, according to data provider Recof, hitting ¥7.7tn in 2023. That figure was boosted by a sudden flurry of management buyouts and unsolicited takeover bids in December, including the proposed management buyout of publisher Benesse and the unsolicited bid by Dai-ichi Life for the corporate benefits provider Benefit One.

The June revision of Japan’s fair takeover guidelines helped drive the sudden jump in dealmaking, said bankers. In the revision, the Ministry of Economy, Trade and Industry (Meti) called on companies to set up special committees to fully examine incoming bids rather than the historic pattern of senior management rejecting them.

“The market and bankers have begun to focus more on domestic consolidation and domestic transactions and that has been driven in part by new Meti takeover guidelines, rising levels of activism and a weaker yen,” said Koichiro Doi, head of M&A and investment banking at JPMorgan Japan.

While bankers and private equity executives have predicted that management buyouts could become one the country’s biggest drivers of deals in the coming years, there is a growing expectation that Japan might finally start to see elevated levels of unsolicited bids and even hostile takeovers as the longstanding taboo against the practice is lifted by shareholder pressure.

Japanese companies faced with unsolicited approaches put “too much importance on harmony, which could undermine the international competitiveness of corporate Japan”, said Kensaku Bessho, head of investment banking at Mitsubishi UFJ Morgan Stanley Securities. “The guidelines from METI have tried to find a balance and eliminate the more extreme negative actions.”

Japanese companies do not necessarily perceive a weak yen, which has fallen more than 20 per cent since early 2022, to be a barrier for acquisitions.

“The yen is having an impact, but it is going two ways. There are companies who will think about outbound deals and, in yen terms, will decide everything looks very expensive,” said Nick Wall, an M&A partner at Allen & Overy in Tokyo.

“But on the flip side, some companies are looking at [the weak yen] and deciding that they really need a non-yen revenue stream and can get that via acquisition.”

FT : General Atlantic in talks to buy UK infrastructure investor Actis

General Atlantic in talks to buy UK infrastructure investor Actis
US private equity firm is seeking to diversify and grow its asset base ahead of possible listing

US private equity firm General Atlantic is in talks to acquire infrastructure fund manager Actis as it seeks to diversify and add assets ahead of an expected initial public offering, according to four people with knowledge of the plans.

The deal, which would add $12.7bn to General Atlantic’s $77bn assets under management, has yet to be finalised and could still fall apart, the people cautioned. General Atlantic and Actis declined to comment.

The move would mark the latest in a series of acquisitions by larger private equity groups seeking to boost their fee-paying assets and widen the array of investment strategies they offer, as fundraising has become more difficult and investors concentrate their bets on a smaller group of asset managers.

Best known for backing fast-growing technology and consumer companies such as Alibaba and Joe & the Juice, General Atlantic has recently sought to broaden its offerings beyond its flagship growth equity strategy.

In April, the New York firm bought Iron Park, a private credit fund manager. It acquired a stake in Clipway, which buys second-hand investor stakes in private equity funds — or secondaries.

The talks come as General Atlantic has filed confidentially for an initial public offering, the FT reported earlier this month.

Were it to decide to press ahead with a public offering, General Atlantic would be following in the footsteps of larger groups such as Blackstone, KKR and Apollo, all of whose stock has performed strongly this year. 

Other large, privately held groups including CVC Capital Partners have also considered going public, although the European firm has recently shelved its plans because of volatile market conditions.

Actis executives, who have expanded the business since spinning out of the UK government’s development finance unit in 2004, are likely to net a big windfall by selling their firm.

The spinout at the time attracted criticism for short-changing the UK taxpayer. Its management team bought a 60 per cent stake for £373,000 before acquiring the UK government’s remaining shareholding for £8mn in 2012.

In total, Actis has raised $25bn from limited partners, including $6bn for its most recent sustainable energy fund, closed in 2021.

In September CVC Capital Partners paid €1bn for infrastructure fund manager DIF Capital Partners, which is of a similar size as Actis.

Actis, which began life focused on emerging markets private equity, has expanded into energy and infrastructure, leading deals including a $500mn investment in a Japan-focused renewables operator earlier this year.

With 17 offices in cities ranging from Mexico to Seoul, it has also made big bets on companies including Middle East and Africa focused solar business Yellow Door Energy and Rezolv, which manages wind projects in central and southeastern Europe. 

General Atlantic has prioritised growth in so-called sustainable investments, naming co-president Gabriel Caillaux as head of its climate-related strategy. This has raised $3.6bn for its first such fund so far.

Caillaux is one of the General Atlantic executives spearheading the negotiations with Actis, according to one of the people with knowledge of the talks.

The deal would help Actis gain access to General Atlantic’s investor base and boost fundraising at a time when many firms were finding life difficult to raise new money, another person said.

FT : Recession fears in Europe punish risky borrowers with higher yields

Recession fears in Europe punish risky borrowers with higher yields
Credit spread with US triple C issuers is highest since 2009

A powerful rally in risky financial assets has left behind Europe’s weakest corporate borrowers, with recession fears persisting in the region just as optimism grows about a US “soft landing”.

Europe’s riskiest corporate bonds now have an average yield of 19.66 per cent, according to an Ice BofA index tracking regional debt rated triple C and lower. That translates into a spread — the premium paid by companies over government debt issuers — of more than 18 percentage points.

By contrast, the lowest-rated US corporate bonds have an average yield of 13.47 per cent, with a much smaller spread of less than 9 percentage points. The difference between the two regions’ risky credit spreads this month has hovered at its widest level since the global financial crisis in 2009.


For some economists and investors, the gulf between those spreads underscores diverging sentiments about the health of the European and US economies.

“It really does reflect mainly these fears and risks of a recession in Europe relative to a ‘soft landing’ in the US,” said Torsten Sløk, chief economist at investment firm Apollo. The US scenario involves the Federal Reserve successfully cooling the world’s biggest economy without inducing a sharp downturn.

“Europe is certainly looking far weaker than the backdrop in the US. It’s likely that Europe is in recession, or very close to it, and that has been the case since really the third quarter of this year,” said Mike Scott, head of global high-yield and credit opportunities at hedge fund Man Group GLG.

As recently as early November, investors on both sides of the Atlantic were fearful about the implications of “higher for longer” interest rates, as central banks continued to wage battle against inflation. In the US, the Fed has raised borrowing costs from near zero in March last year to a target range of 5.25-5.5 per cent, while the European Central Bank has taken its rate to 4 per cent.


But concerns about further Fed tightening gradually eased last month on signs of cooling economic growth. Any residual fears were extinguished last week, when policymakers indicated they expected to cut interest rates by 0.75 percentage points in 2024, with Fed chair Jay Powell giving his strongest signal yet that the tightening cycle was over.

Markets have since rallied strongly, with Treasury yields dropping sharply and US stocks leaping higher. However, ECB officials have pushed back against hopes of imminent relief on borrowing costs.

Powell “is signalling that he is more confident [about] a soft landing in the US”, said Sløk. But “with the ECB being more hawkish last week . . . the fear is that we get a ‘hard landing’ in Europe”.

The divergence between European and US credit spreads has played out primarily at the weakest end of the credit quality spectrum. Moves in the broader junk bond indices for both regions, spanning a wider range of ratings, have been more aligned.

The average spread on the broader US high-yield bond index has tightened by 1.01 percentage points since November 1 to 3.46 percentage points, with most of that move occurring this month. Over the same timeframe, the spread on the European junk bond index has narrowed by 0.88 percentage points to 3.94 percentage points.

But in triple-C territory, the US spread has tightened by 1.62 percentage points since November 1, with 0.81 percentage points of that move occurring this month. That compares with a tightening of just 0.04 percentage points for the European index since early November, and a slightly more pronounced narrowing of 0.2 per cent in December.

“Triple-Cs clearly struggle in recessionary environments,” said Scott. “Their ability to generate cash is ultimately what is being priced.”


Strategists also stressed that the European triple-C index is much smaller than the US gauge and more easily influenced by individual companies — complicating the comparison between the two. The index is worth just $26.8bn in dollar terms, compared with a value of $172bn for the US gauge, according to Ice BofA data.

“The lowest-rated part of the European high-yield market consists of only a few bonds, so a handful of very lowly trading names can drive the whole average significantly wider,” said Tatjana Greil-Castro, co-head of public markets at Muzinich. “We do see value in the European high-yield market, but one needs to know the names well and understand the refinancing risk of each individual issuer.”

Highly indebted telecoms group Altice holds the largest weighting in the European triple-C index, whose other constituents include German cable company Tele Columbus and travel group TUI Cruises. The US bond index includes cable group Dish, cinema chain AMC Entertainment, Viking Cruises and the US debt of Altice.

Still, Scott noted that “in order for that dispersion to arise in the first place, it really relies on fundamental drivers”.

Apollo’s Sløk added that “triple-Cs in the US and in Europe are a reflection of worries about a recession or not.

“If there is no [worry] about a recession in the US anymore — and much more worry about a recession in Europe — then it makes sense that the spread is widening out.”

FT : Bonus cap raises uncomfortable choice for Europe’s banking lobby

Bonus cap raises uncomfortable choice for Europe’s banking lobby
Souring relations with European Commission over such an unpopular issue would risk progress on bigger regulatory battles

Picking your battles is a central part of every effective lobbying effort. The EU’s banking lobby faces a particularly uncomfortable choice now, as it contemplates whether to go to war on the issue of the bloc’s banking bonus cap.

The cap, introduced in the aftermath of the banking crisis, has just been axed in the UK, where regulators argued that it prevented banks from adjusting pay up and down as profits ebbed and flowed, making it harder to attract talent to London.

The result is an unlevel playing field in the City, where British, American and other foreign banks can now use unlimited bonuses to lure and retain top talent, while BNP Paribas, Deutsche Bank and their EU peers must continue to cap variable pay at twice salaries.

London’s financial centre isn’t what it was before Brexit, but it’s still big enough to matter to the EU banks that employ thousands of people there. But so far, the lobbying effort has been tentative for such a hot-button issue. The heads of Deutsche Bank and Santander are among those who have suggested the EU might want to rethink its approach, but the tone of comments has been restrained.

Deutsche’s Christian Sewing told the FT’s recent Global Banking Summit that if the cap were removed elsewhere, the EU would “need to take [that] into account and consider [how] to stay competitive”.

Santander’s executive chair Ana Botín was even milder, saying she welcomed the UK’s effort and that a similar move in the EU would be a good step.

And the European Banking Federation, the lobbying body for the EU’s banks, has been notable for its silence.

Such reticence by the industry to engage on a topic so dear to the heart of thousands of their workers partly stems from the inherent difficulty of the task.

In the UK, the change was enacted by regulators, with the fair wind of a political system that had vowed to liberate the City from an EU regime that choked growth. Agreements in the EU are brokered by a complex system of trade-offs between the bloc’s parliament, its council of member state leaders, and the bureaucrats in the European Commission.

Trying to win support from all those quarters for lining the pockets of rich bankers would be a tough sell at the best of times, but it becomes even harder during a brutal cost of living crisis. Or, as one French lobbyist puts it of the tentative industry outreach: “We don’t sense any appetite in Europe to change the rules.”

Another lobbyist, who says the European debate “has moved on” from the banker vilification of the post-crisis era, admits evolution of thought has been less in some countries such as the Netherlands and Ireland. “We’re sensitive, this is not the first thing we lead on,” he says. “It’s on a list of many issues that we as an industry raise with policymakers.”

The other thing holding lobbyists back is the impending EU elections in the summer. “The timing is off,” says one senior EU lobbyist. He’s conscious that chasing such an unpopular issue could sour relations with the new Commission before it’s even under way, making it harder for banks to progress topics that are more financially meaningful and less politically toxic.

And there are plenty of those, including implementing the latest mammoth package of global banking capital rules, known as Basel IV; pressing for the long-awaited reform of Europe’s securitisation market; and taking up the cause of Europe’s stalled bank deposit guarantee scheme.

The latter proposal, first tabled by the European Commission eight years ago, is designed to ensure that the depositors of failing banks across the EU are guaranteed equal treatment. It is part of the plan for a European Banking Union, a market where banks could operate freely across the EU and embark on profit-boosting, cross-border mergers. The prizes for these issues run to tens and tens of billions, including potential fees and capital benefits from a revived securitisation market.

Other topics crowding lobbyists’ to-do lists include developing Europe’s payment system and protesting new ESG disclosures designed to hold firms accountable for the impact of their activities on rights and the environment.

Together, it all adds up to a lot of reasons to want to start off on the right foot with the next Commission, rather than spoiling relations with a doomed campaign over a politically toxic issue.

FT : LVMH’s Antoine Arnault defends incremental approach to emissions

LVMH’s Antoine Arnault defends incremental approach to emissions
‘Not everyone likes it, but that’s how it is,’ Bernard Arnault’s son says, as rival Kering sets ambitious long-term goals

Antoine Arnault has warned LVMH could start firing suppliers that do not comply with the luxury company’s own sets of environmental standards, rather than commit to reductions in greenhouse gas emissions as some rivals have.

Bernard Arnault’s eldest son, who leads environmental initiatives at the world’s biggest luxury group, said that while sales grew by 48 per cent between 2019 and 2022, LVMH’s emissions from direct business activities — known as Scope 1 and 2 — fell by 11 per cent by cutting back on air transport and reducing energy consumption in its stores and production sites.

However, its so-called Scope 3 emissions, which take into account its entire supply chain, increased by 16 per cent over the period. Scope 3 emissions account for about 95 per cent of the group’s carbon footprint.

“We are pretty good students” when it comes to tackling climate change but expanding the business is the priority, Antoine Arnault said in an interview.

“We are the champions of continued growth and certainly not of decline. I don’t believe that our [competitors] are Marxists at heart. This is our philosophy [and] it suits us,” he said.

“I am ready to respond to all the detractors, to all the criticisms of this self-evaluation. I would give us good marks even if we are never perfect, could do more, could be more engaged,” he added.

While rival French luxury group Kering has set ambitious group-wide reduction targets covering Scope 1,2 and 3 emissions — 40 per cent by 2035 and net zero emissions by 2050 compared with 2021 levels — LVMH has resisted setting absolute goals, preferring to set shorter-term goals to cut emissions relative to growth and focusing instead on greening its supply chain incrementally each year.

Emissions reductions in the luxury sector had been “a mixed bag . . . with some laggards”, said Stéphane Girod, professor at IMD Lausanne business school, with groups such as Kering, Richemont and women's luxury apparel brand Ports leading the way on reducing direct emissions in recent years.

“The elephant in the room is that with incredible rates of growth, post-Covid, all their Scope 3 emissions have gone through the roof . . . They’re going up because of the pure volumes these companies are selling,” Girod said, adding that “very few companies are prepared to make that sort of compromise”.

LVMH had piloted a number of important initiatives on sustainable agriculture, traceability of raw materials and repurposing materials such as deadbolt fabrics, said Girod. But on emissions targets they have been less pioneering.

“Being the biggest group, the sheer volume and complexity and variety of sectors [at LVMH] makes it more difficult to reduce emissions . . . but LVMH is not as active as Kering has been,” he said. “Kering has been the leader of the pack.”

LVMH, the owner of Louis Vuitton and Tiffany, aims to reduce Scope 3 emissions by 55 per cent for each incremental percentage point in sales growth it records by 2030.

It also wants each incremental growth point to produce half the emissions from energy consumption by 2026, compared with a 2019 baseline.

“There was a very strong increase in turnover [between 2019 and 2022]. We are trying and we have succeeded in de-correlating these two subjects so that we can grow much faster and slow down our CO₂ emissions much more quickly,” Arnault said.

“We have always done things a little differently . . . it doesn’t bother us because we own the decisions we make and above all we believe in data, science and the reality of things, not in some sort of incantations that we could make to clear our conscience,” he said.

“Not everyone likes it, but that’s how it is. And so we will continue to set objectives like those you’ve seen.”

The company is now launching a new programme to tackle its Scope 3 emissions by helping its suppliers to improve their environmental practices, particularly in transport and raw materials.

The group has yet to fire a supplier for failure to comply with environmental standards, but Arnault warned this could happen. “For the years 2023 to 2026, we will see how they improve. But if they don’t play the game . . . we will draw the consequences along the way,” he said. 

However the luxury leader has no ambitions to promote less conspicuous consumption. “Becoming a sort of example of lower consumption, that’s not at all our objective and I don’t think that’s what our customers want either,” he said.

FT : European telcoms group Lebara explores sale

European telcoms group Lebara explores sale
London-based company has been a winner from the squeeze on consumers across Europe

European telecoms group Lebara is examining a possible sale or initial public offering after emerging as a winner from the cost of living crisis.

The London-based company, which since 2019 has been owned by the investment groups Alchemy and Triton, began life offering cheap international phone calls to migrants who had come to Europe.

Over the past three years, the company has shifted focus to target younger consumers and those seeking cheaper deals than on offer from major telecom operators.

Since 2020, Lebara has added more than 1.6mn customers, taking its total to 4mn. It expects to generate earnings before interest, taxes depreciation and amortisation of £70mn next year, more than double the level of 2020.

Chief executive Stephen Shurrock said the group was working with advisers at the investment bank Guggenheim to assess its strategic options. A sale could attract interest from a private equity or corporate group, he said, adding that deliberations were at an early stage and no decision had been taken.

“Under our existing ownership we’ve really had a remit which is ‘fix what you’ve got’,” said Shurrock. “The transformation of the business is very substantive.”

Lebara offers its SIM-only mobile phone plans in the UK, France, Germany, Netherlands and Denmark.

The company is a mobile virtual network operator, meaning it does not have its own networks and uses wholesale agreements with operators such as Vodafone in the UK to sell services to consumers.

Karen Egan, a senior telecoms analyst at Enders Analysis, said Lebara would “attract a high [ebitda] multiple” as MVNOs have low levels of capital expenditure and are becoming “very attractive” to network operators because of their subscriber bases.

In 2020, Spanish telecoms group MasMovil paid a multiple of 8.2 times for Lycamobile’s Spanish business, also an MNVO.

“I think that multiples could be higher now given the strength of the MVNOs both in terms of growth trajectory and ability to move between network operators,” Egan added.

The sector has benefited as the squeeze on living standards prompts consumers to look “for cheaper offers” while the pandemic helped accelerate online sales for MVNOs.

“There’s loads of organic growth left in this market for us,” said Shurrock.

Lebara’s new owners invested about €25mn into the business in 2021. As part of that shift, the company says now nearly two-thirds of its revenue is recurring, double the levels seen in 2021.   

Alchemy, which is the majority owner, and Triton took control of Lebara in a debt-for-equity swap after the company faced a litany of financial reporting errors and breaches of debt terms under its previous owners, a little-known Swiss family office.

FT : The legal case for seizing Russia’s assets

The legal case for seizing Russia’s assets
G7 allies are debating whether to spend Moscow’s frozen funds to support Ukraine

After hitting Russia with an unprecedented array of sanctions following its full-scale invasion of Ukraine, G7 allies are considering an even more drastic step: spending Moscow’s money.

Western nations, including the US, are exploring ways to justify seizing Russian central bank assets that are frozen in the financial system, and using them to fund Kyiv.

The idea has gained traction in recent weeks as the US and EU struggle to secure political approval for fresh funding packages for Ukraine worth tens of billions of dollars.

But legal experts warn it would represent a dramatic departure from normal practice, carrying legal and economic risks. It is also highly contentious among the allies.

Where are the frozen assets located?
About €260bn of Moscow’s central bank assets were immobilised last year in G7 countries, the EU and Australia, according to a European Commission document seen by the Financial Times.

The bulk of this — some €210bn — is held in the EU, including cash and government bonds denominated in euro, dollar and other currencies. The US by comparison has only frozen a small amount of Russian state assets: some $5bn, according to people briefed on the G7 talks.

Within Europe, the bulk of the assets — about €191bn — are held at Euroclear, a central securities depository headquartered in Belgium. France has immobilised the second-largest amount, some €19bn, according to the French finance ministry. Other holdings are far smaller, with Germany holding about €210mn, according to people briefed on the figures.


What is the US calling for?
Washington has not publicly backed confiscation of the frozen assets, but it has made the case for it privately. One recent G7 discussion paper written by US officials described it as “a countermeasure”, permitted under international law, that would “induce Russia to end its aggression”.

According to the paper, such a move would be considered a legitimate response to Russia’s illegal invasion of Ukraine if implemented by states “injured” and “specially affected” by its aggression. That could include allies of Ukraine who have bankrolled its economy and military during the war.

The US officials suggested the seized assets could be disbursed to Ukraine in tranches, for instance through the World Bank or the European Bank for Reconstruction and Development. This is cast as an “advance” on the compensation to Ukraine that Russia would ultimately be required to pay under international law for its aggression.

What are the legal grounds for this?
The idea of confiscating Russian sovereign assets is legally fraught. Central bank assets are protected under customary international law; actions that appear to cast doubt over that principle would have profound implications for the financial system.

But advocates argue that such a confiscation can, in this case, be justified under international law as an equitable remedy to push Russia to compensate Ukraine for war damages.

Philip Zelikow, a former senior US diplomat now at Stanford University, has cited as a precedent the internationally imposed compensation after the 1990 Iraqi invasion of Kuwait.

“This represents an enormous opportunity,” he said. “We have spent nearly two years working through legal thickets and can now begin to contemplate the possibilities that may be available. If this works, the money at stake — $300bn — would be a game-changer for Ukraine.”

This reading of the law is contested, however. Ingrid Brunk, a professor of international law at Vanderbilt Law School, argues that countermeasures are not a method of obtaining compensation, but are instead designed to push a wrongful state to comply with its obligations.

She told the FT the idea was “unwise”, adding: “Many countries have been damaged by many things that violated international law with no suggestion that we seize foreign currency reserves. These are the most sacrosanct kinds of assets in the global financial system.”

The move would also likely require domestic legislation in many of the countries seeking to implement it, she added, although this may prove a less formidable barrier.

What are the financial consequences?
Opponents worry that such a move would damage the international rules-based order and undermine the trust that countries show when they place reserves with other nations.

The latter argument carries considerable sway with some EU member states and the European Central Bank. Confiscating Russian assets would, for some, cross a line by suggesting to countries such as China or Saudi Arabia that sovereign assets stowed in euros or dollars might not always be safe.

The ECB earlier this year warned member states of the risk of undermining the “legal and economic foundations” on which the international role of the euro rests. “The implications could be substantial,” it said, according to an internal EU note. It warned the bloc of the risks of acting alone and recommended for any action to be taken as part of a broad international coalition.

One EU diplomat said: “Every major euro-denominated economy is treading very carefully on this because of the potential effects for the euro and for foreign investment and clearing in euro.”

But advocates of the idea suggest these worries are overblown. Lord David Cameron, the UK foreign secretary, denied last week that there would be a “chilling effect” on inward investment. Affected investors would already “be pretty chilled” by their assets having been frozen, he said.

How do the Europeans view these arguments?
Officials are aiming for a consensus among G7 countries to seize the assets, but France, Germany and Italy remain extremely cautious.

European officials fear possible retaliation if state immunity is undermined. One noted the US holds only a very small amount of Russian central bank assets by comparison. “From an EU perspective we have much more to lose,” the EU official said.

Russia’s options to counter with litigation are limited. “However, Russia will find other ways to reciprocate . . . that would mean inflicting more harm on businesses in Russia and potential other damages,” said Armin Steinbach, professor of law and economics at HEC Paris.

Steinbach also points out that sovereign immunity cuts both ways. “Germany is still in some countries the target of war damages . . . [going back to] the second world war,” he noted.

What is Europe planning instead?
Rather than seizing the assets themselves, the EU is working on a plan to skim off extraordinary profits that Euroclear generates by holding Russia’s assets. The Belgian central securities depository earned about €3bn last year from reinvesting cash from matured securities that cannot be paid out to Russia.

But these proposals have proven controversial, with some countries fearing the repercussions from even this more limited step. Officials have acknowledged that the live discussion within the G7 could help move the EU proposals along.

>>> US After Hours : FDX -8.1% falls on EPS miss, lowered guidance; UPS -2.6% lo

After Hours Summary: FDX -8.1% falls on EPS miss, lowered guidance; UPS -2.6% lower in sympathy; GH -12.5% lower as FDA panel sets review date; SCS -9.3% lower on earnings; RUSHA +6% to join S&P SmallCap 600

After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: EPAC +2.4%
Companies trading higher in after hours in reaction to news: RUSHA +6% (to join S&P SmallCap 600), WPRT +4% (awarded a development program by global heavy truck manufacturer), CMPS +2.4% (COMP360 psilocybin treatment was well-tolerated in phase 2 study), FULT +1.8% (increases dividend; approves $125 mln share repurchase program), LESL +1.5% (Chairman to retire from board), VYX +1.5% (to move to S&P SmallCap 600 from S&P 400 MidCap), IMXI +1.2% (IMXI announces collaboration with Visa to enhance its money transfer services), INBK +1.2% (files $200 mln mixed shelf securities offering), PCG +0.2% (Nuclear Regulatory Comm determines that its License Renewal Application is sufficient for its review), SHEL +0.1% (Final Investment Decision for Sparta to begin production in 2028), FMAO +0.1% (increases dividend), CPK +0.1% (acquires the propane operating assets of J.T. Lee and Son's)

After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: SCS -9.3%, FDX -8.1%, WOR -2.9%
Companies trading lower in after hours in reaction to news: GH -12.5% (FDA Advisory Panel tentatively scheduled to review PMA application for Shield blood test), UPS -2.6% (in sympathy with FDX earnings), NNBR -2.3% ($10 mln new business win in automotive electrical wiring), LUNR -1.8% (provides IM-1 Lunar Mission launch update), PRU -1.3% (subsidiary enters into $9.2 bln longevity risk transfer agreement with NN Life), LIAN -1.2% (CEO resigns), MOS -0.7% (releases Oct/Nov volumes), RTX -0.6% (CTO to retire), LTHM -0.4% (to join S&P 400 MidCap), BTBT -0.3% (no disruptions to its Iceland ops following volcano eruption), SPCE -0.2% (Galactic 06 flight window will open January 26), V -0.1% (IMXI announces collaboration with Visa to enhance its money transfer services), GM -0.1% (halves the size of its Buick dealership network in the US through a buyout program, according to CNBC), GS -0.1% (considering significant changes to its mgmt committee, according to Business Insider)

FT : Turkish brewer to acquire AB InBev stake in Russian joint venture

Turkish brewer to acquire AB InBev stake in Russian joint venture
Anadolu Efes will not pay for the share with western companies continuing their difficult exit from Russia


Turkish brewer Anadolu Efes has agreed to acquire AB InBev’s stake in a $1.3bn Russian joint venture in a sign of Turkey’s continued close corporate ties to Russia, as Western companies struggle to offload their assets in the country.

Anadolu Efes will become the sole owner of a group it formed with AB InBev in 2018 to sell beer in Russia and Ukraine, according to a regulatory filing on Tuesday. No cash will change hands as part of the pact, but Anadolu Efes will make future payments based on the joint venture’s performance, the filing to Turkey’s Capital Markets Board said.

In April last year the brewer of Budweiser and Stella Artois announced it was in talks to sell its stake in AB InBev Efes, the Russian joint venture, as many Western companies looking to exit Russia scrambled to find buyers for their subsidiaries following Moscow’s full-scale invasion of Ukraine. 

The regulatory filing on Tuesday said KPMG assessed the Russian joint venture to be worth $1.1-1.3bn. 

AB InBev still owns just under a quarter of the broader Anadolu Efes group, whose eponymous pilsner is widely sold across restaurants and convenience stores in Turkey. In addition to marketing alcoholic beverages, Istanbul-listed Anadolu Efes also controls a large soft-drinks business that bottles Coca-Cola products in Turkey. 

After announcing its intention to leave Russia, AB InBev said it was forfeiting “all financial benefit” from the joint venture and reported a $1.1bn impairment in its first-quarter earnings.  

Anadolu Efes’s purchase of AB InBev’s stake highlights how Turkish companies have retained strong links with Russia even as Ankara’s western allies have sought to cut off Moscow’s access to international capital. Arçelik, one of Turkey’s leading industrial companies, for example purchased US-based Whirlpool’s Russian business for around €260mn last year. 

The US and EU, in particular, have grown more frustrated recently with Turkey’s decision not to sign up for western sanctions and have alleged that Moscow is using the country to dodge export controls. 

In a statement, AB InBev said no amount would be paid to the brewer on closure of the deal. 

“There can be no assurances on when and whether these approvals will be obtained,” the brewer said. “Any payments received by ABI after completion will be subject to additional regulatory approvals and are expected to be not material.”

Selling assets in Russia has become increasingly difficult following the Kremlin’s introduction of punitive legislation. This allows Russian entities to acquire the assets of “naughty” western companies at knockdown prices. 

Companies have to jump through complex regulatory hoops to have their applications considered, and even if they do find a buyer, will have little chance of extracting proceeds. 

In October the FT reported that Russia was blocking companies that sell their Russian assets from withdrawing the proceeds in dollars and euros, in an effort to strengthen the rouble.

Those companies deemed “unfriendly” by Russian authorities also face the risk of seizure by the Kremlin. AB InBev’s main competitor in Russia, Carlsberg, had its subsidiary Baltika Breweries seized and placed under “temporary management” by the state earlier this year. 

Former Carlsberg executives have since been arrested on fraud charges and held without bail, while the new, Kremlin-appointed president of Baltika has called for the full nationalisation of the company, according to local reports.