TheChek News Flow

Turkey-based Arçelik fears high energy prices and rising borrowing costs will weigh on consumers

Arçelik, one of the world’s biggest household goods’ manufacturers through its Beko branded refrigerators and washing machines, has warned that next year will be “very tough” for Europe’s home appliance market as persistently high energy prices and rising borrowing costs hit consumers. 

Turkey-based Arçelik expected the European appliances market to shrink 5 per cent on a unit sales basis in 2024, said chief executive Hakan Bulgurlu. He added that the contraction could reach 10 per cent “if things go bad”.

“I see headwinds pretty much everywhere at the moment in Europe,” Bulgurlu said in an interview with the Financial Times, adding that “it’s increasingly looking very likely that 2024 will continue to be very tough”.

The gloomy outlook from one of Europe’s biggest appliance makers highlights how the region’s economy is sustaining an outsize blow from elevated energy prices, rising interest rates and cooling Chinese demand.

“We’re predicting very, very low [economic] growth for Europe as a whole,” Bulgurlu said. He pointed to Germany as a particular weak spot, saying Europe’s economic powerhouse was “really slowing down”.

Germany’s federal statistical agency said on Monday that Europe’s largest economy had contracted for a third quarter in a row, pointing particularly to a slump in consumer spending amid high interest rates. 

Large German chemical groups such as BASF, Evonik and Covestro have likewise in recent months warned of slowing demand for consumer goods, as they have reported severe slumps in sales of chemicals that go into a wide range of products ranging from plastics to cosmetics and furniture. 

Industry-wide shipments of major home appliances in Europe fell 7 per cent in the third quarter on a year-on-year unit sales basis and were down 10 per cent in 2022, according to an estimate by Sweden-based Electrolux, which competes with Arçelik. Electrolux has also said it has a “negative” outlook on European sales volumes for 2023 as a whole. 

Arçelik’s revenue in Europe was steady at €787mn in the third quarter of this year compared with the same period in 2022, according to the group’s quarterly earnings figures. The company had been helped by a rise in eastern European revenues and as price increases and an improved product mix dulled the impact of sharp unit declines in western Europe, Bulgurlu said.

Bulgurlu said he thought the cycle of price rises in Europe “is kind of through”. Still, he said “geopolitical risks” represented a major source of uncertainty since Arçelik’s business is sensitive to commodity prices. International crude benchmark Brent is up 20 per cent since the start of June and analysts say the oil price could rise more if the Israel-Hamas conflict escalates into a broader regional conflagration.

Despite the struggles in Europe, Arçelik is pushing ahead with a deal that will hand it control of Whirlpool’s European home appliance business. The EU approved the deal this month, but the UK has opened an in-depth review of the tie-up on concerns it “could reduce choice in the supply of washing machines, tumble dryers, dishwashers and cooking appliances”.

In contrast to the European market, Turkish demand for appliances has been high this year as soaring inflation has prompted consumers to buy up white goods as a store of value.

The government has been attempting to cool consumer demand through interest rate and tax rises that are part of a broad economic overhaul that began after President Recep Tayyip Erdoğan’s re-election in May. But Bulgurlu said Arçelik’s home market was still holding up “surprisingly well”. 

Arçelik generated revenues in Turkey of TL22.4bn (€770mn) in the third quarter, up 121 per cent from the same period in 2022. The increase was a slimmer 37 per cent on a euro basis, according to FT calculations. Overall, the group’s operating profit before financial expenses rose 120 per cent in the third quarter to TL4bn, a rise of 37 per cent in euro terms.

Bulgurlu said he was “confident” Erdogan’s new economic team would be successful in reviving Turkey’s $900bn economy and luring back foreign investors who have fled after years of unorthodox economic policies. Arçelik issued a $400mn dollar-denominated bond in September, making it the first Turkish non-financial company to sell a bond on international markets since January 2022. 

Bulgurlu said he expected Turkish consumer demand would eventually falter as the new economic programme took effect. “There will be a big slowdown. We will all suffer from it, but we’ll come out the other side a much healthier economy,” he said. 

Sanctions-hit billionaire’s properties in Paris and southern France searched

Police in France detained Russian billionaire Alexei Kuzmichev and carried out a dramatic raid involving 60 officers on two of the oligarch’s properties on Monday as they investigate allegations of tax avoidance, money laundering and violating sanctions.

Kuzmichev, a co-founder of the Alfa Group conglomerate in Russia and UK-based LetterOne, is being questioned by police and remained in custody on Monday night, according to a French judicial source.

Searches were carried out at his home in Paris and an estate in the Var region of southern France, the person added.

The preliminary investigation relates to allegations of violations of international sanctions, tax avoidance and money laundering, although no charges have been filed to date.

Financial prosecutors in France have three inquiries under way against Russian oligarchs, while another prosecutor in Paris is investigating others, including billionaire Nikolai Sarkisov.

Kuzmichev, who could not be reached for comment, is one of the few Russian oligarchs to be detained in the west since president Vladimir Putin ordered the invasion of Ukraine last year.

The EU imposed sanctions on Kuzmichev alongside his partners Mikhail Fridman, Petr Aven and German Khan in March 2022 for “actively supporting materially or financially and benefiting from Russian decision makers responsible for the annexation of Crimea or the destabilisation of Ukraine”.

It said that Kuzmichev was also “one of the leading Russian business persons involved in economic sectors providing a substantial source of revenue” to the Kremlin and claimed that he was “one of the most influential persons in Russia [with] well-established ties to the Russian president”. 

The UK’s National Crime Agency arrested Fridman last year in a dramatic raid with 50 officers on Athlone House, his £65mn mansion in Highgate in north London, but quickly scaled back the investigation and dropped the final remaining charge against the oligarch in September.

Kuzmichev was in Switzerland on a skiing holiday when the war broke out, then moved to France, where he has lived with his wife and three children most of the time since the early 2000s, according to people close to him.

Kuzmichev, who has a Cypriot passport, is one of the few sanctions-hit Russian oligarchs to have remained in Europe during the war, along with Aven, who lives in Latvia.

France previously targeted two yachts he owns on the French Riviera as part of an asset freeze last year. Judges later ruled that French customs authorities had “clearly misused” their authority in raiding the yachts. Kuzmichev’s court victories, however, were largely symbolic as he is still unable to move the yachts under the asset freeze.

Kuzmichev first met his fellow Alfa partners in the 1980s while studying at the Institute of Steel and Alloys in Moscow during perestroika.

The group largely moved to the west after selling their stake in oil company TNK-BP to state-owned Rosneft in 2013 and invested the proceeds in European companies through LetterOne.

Since the early 2000s, however, Kuzmichev had stepped back from Alfa’s businesses to a great extent, according to people familiar with the matter, leaving management of their empire to Fridman, Khan and Aven.

Unlike Khan, who returned to Russia last year, and Fridman, who went back to Moscow earlier this month, Kuzmichev and Aven have not visited the country since the invasion, the people said.

Following EU and UK sanctions against the four oligarchs, Kuzmichev and Khan sold their stakes in LetterOne and Alfa-Bank last year to Andrei Kosogov, another Alfa-Bank shareholder who is not under sanctions.

Kuzmichev’s arrest was first reported by Le Monde newspaper.

With the Kioxia tie-up apparently dead, the question is whether another transaction is in the works

Eighteen months ago, Elliott Management declared that Western Digital could be worth $100 per share or more by the end of 2023. To meet that target, the tech company has to more than double its share price in the next two months.

This is not likely. But on Monday, Western Digital announced that it would follow Elliott’s advice and separate its hard disc drive and flash memory segments into listed companies. The decision comes as a long-rumoured tie up with Japan’s Kioxia to create a fortified, East-West NAND memory chip colossus collapsed last week when Western Digital walked away from discussions.

Elliott’s thesis is that Western’s 2016 acquisition of SanDisk for $19bn proved confusing to investors. Today, Western’s total enterprise value is roughly $20bn. With the Kioxia tie-up apparently dead, the question is whether some other transaction is in the works. Otherwise, Western Digital needs some other means to achieve the sum-of-the-parts valuation Elliott cobbled together.

Western Digital’s struggles look stark when compared with the HDD leader, Seagate Technology. Seagate’s enterprise value to trailing annual revenue ratio is approaching 3 times. Western Digital trades at under 2 times. In the past five years, Western Digital shares are down more than 15 per cent while Seagate has rallied more than half.

Elliott has pointed out that by simply applying roughly the Seagate multiple the market to the Western hard disk business, the remaining implied worth of the flash business is only a few billion dollars, too low. Back in 2022, it said that it was willing to invest a billion dollars into the flash segment at as much as a $20bn valuation.

In the end, Elliott and Apollo Global Management teamed up earlier this year to buy $900mn of convertible preferred stock in Western Digital. This pays a juicy 6.25 per cent dividend. It also converts into company stock at just under $48.

Forget $100, this is the threshold Elliott will be focused on.

The fashion brand is said to be looking at the path forward with the investment bank.

Tory Burch might just be ready for a change.

The fashion brand is working with Morgan Stanley to explore its strategic options, WWD has learned.

That opens up the possibility of an initial public offering — something the company is said to be preparing for, just in case; some other kind of transaction that would bring in new investors, or an outright sale.

“As an independent, private company we do not comment on our strategy,” a company spokesperson said. “We are focused on growing our global brand with a priority on creativity, innovation and operational excellence.”

A spokesperson for Morgan Stanley declined to comment.

Tory Burch founded the company at her kitchen table in 2004 and quickly became a mainstay in fashion, known early on for her ballerina flats and then for successfully projecting her refined, preppy aesthetic around the world.

Along the way, there’s been a slow evolution in the company’s investor base.

The Mexico City-based Tresalia bought a 20 to 25 percent stake in 2009, giving the company a valuation of around $1 billion.

Then in 2012, General Atlantic and BDT Capital Partners each bought minority stakes, picking up shares sold by Burch’s ex-husband Chris Burch at a valuation of $2.25 billion. (That transaction came as the Burches settled a roiling legal dispute over the sale of Chris’ stake as well as his competing venture, C Wonder.)

With two top-shelf financial investors on board, speculation rose that Tory Burch — a designer who had successfully crossed over and built a big business — could be bound for some kind of deal or for Wall Street eventually.

But Burch never seemed keen on the idea of going public and, in 2015, told WWD, “Being private is a luxury and that is something I have always thought.”

And that is a luxury Burch has held on to.

Tresalia hired Goldman Sachs to sell its shares in 2018 only to have the Tory Burch company buy out the stake, concentrating the ownership among the designer, General Atlantic, BDT and other smaller stockholders investors.

General Atlantic and BDT have now held onto their stakes for coming up on 11 years — an eternity in an investment world where many private investment houses have three- to five-year investment horizons.

While it’s not clear exactly how much of the business is owned by Tory Burch, the designer is certainly the one in charge.

Burch is not only the creative force behind the brand, her name is on the front door and her husband, Pierre-Yves Roussel, has been chief executive officer since 2019.

Any investor buying in would likely have to be in sync with Burch.

Alternatively, were Tory Burch to pursue an IPO, the fashion brand would find it has some company and some competition.

Even though the pricing of the much-watched Birkenstock IPO proved to be too aggressive this month, prompting the stock to fall once it hit the open market, there are other fashion companies said to be gearing up for, or weighing the prospects of, an offering. The contenders range from Kim Kardashian’s Skims to fast-fashion megabrand Shein.

While those companies and Tory Burch might not compete for customers, they could compete for investors and attention span as they would all fall under the heading of “consumer” on Wall Street.

EXCLUSIF - Selon notre sondage Ifop-Fiducial, la candidate du RN dépasserait au premier tour les 30%. Édouard Philippe reste le meilleur candidat de la majorité, loin devant Gabriel Attal.

L’échéance est encore lointaine, mais les premières graines de l’élection présidentielle de 2027 sont plantées. Notre sondage Ifop-Fiducial pour Le Figaro et Sud Radio révèle les premiers rapports de force entre les différentes formations politiques. Il y a d’abord des confirmations: à moins de quatre ans du scrutin, Marine Le Pen arriverait largement en tête du premier tour, quel que soit l’adversaire macroniste.

La candidate «naturelle» du Rassemblement national (RN) caracole en tête avec de 31 % à 33 % des intentions de vote, gonflant d’au moins 7,5 points son score du 10 avril 2022. «Cela atteste d’une structure électorale attrape-tout qui s’apparente à celle d’un parti de gouvernement. Les faiblesses historiques du RN restent, mais sont partiellement gommées», analyse Frédéric Dabi, directeur général de l’Ifop.

«Crédibilité électorale»

Autre confirmation: dans la majorité, seul Édouard Philippe parviendrait à réduire l’écart avec la double finaliste de la présidentielle. Avec 25 % d’intentions de vote, l’ancien premier ministre apparaît ainsi comme le mieux placé pour porter le flambeau macroniste. D’autant qu’il pourrait rallier plus des trois quarts (76 %) des électeurs du chef de l’État en 2022. «Mais il a les mêmes faiblesses que le candidat Macron: il n’est qu’à 22 % chez les salariés et 16 % dans les catégories populaires», souligne Frédéric Dabi, pour lequel «l’incertitude» plane encore sur la succession d’Emmanuel Macron.

Mais tout le monde le sait, à quatre ans de l’échéance, personne n’est à l’abri d’une surprise. Un prétendant pourrait bien en créer une: le ministre de l’Éducation nationale, Gabriel Attal. Testé pour la première fois, le ministre de 34 ans est crédité de 19 % des suffrages, le plaçant comme le deuxième meilleur candidat du camp présidentiel. Il devancerait ainsi deux poids lourds du gouvernement, qui ne cachent pas leurs appétits: le patron de Bercy, Bruno Le Maire (18 %) et le ministre de l’Intérieur, Gérald Darmanin (16 %). «On aurait pu penser que ce n’était qu’un phénomène de popularité, mais Gabriel Attal bénéficie d’une crédibilité électorale», appuie Frédéric Dabi.

Bien que distancé par les autres prétendants du «bloc central», Gérald Darmanin bondit quant à lui de + 5 points depuis mars 2023, passant de 11 % à 16 %. Malgré ses appels du pied aux classes populaires, le ministre de l’Intérieur ne séduirait toutefois que 9 % de cet électorat.

Loin derrière, la droite peine à troubler le match qui se profile une fois de plus entre le RN et le camp présidentiel. Qu’importe l’identité du successeur d’Emmanuel Macron, Laurent Wauquiez ferait légèrement mieux que les 4,78 % de Valérie Pécresse en 2022. Celui qui cultive la stratégie du silence stagne entre 5 % et 6 % des intentions de vote, et perd même 2 points depuis mars 2023 en cas d’une candidature de Gérald Darmanin. «C’est moins un problème d’incarnation que d’espace entre le bloc central et le bloc nationaliste», observe Frédéric Dabi.

Comme en 2022, Les Républicains (LR) seraient même doublés par Éric Zemmour, qui avait obtenu 7,07 % des voix lors du dernier scrutin. Le président de Reconquête! réussirait quant à lui à conserver son socle électoral en décrochant 6 % à 7,5 % des intentions de vote. «La poussée de Marine Le Pen ne se fait pas au détriment d’Éric Zemmour. C’est la preuve que son électorat n’est pas qu’une réserve de voix pour le RN», décrypte le patron de l’Ifop.

Une longueur d’avance

En cas d’une nouvelle candidature, Jean-Luc Mélenchon resterait à gauche l’éternel troisième homme de la présidentielle. À la différence que le leader Insoumis renoue difficilement avec son score de 2022 (22 %), qui lui avait permis de tutoyer le second tour. Celui qui avait profité du vote utile atteindrait cette fois au mieux 15 % des voix. Enlisé dans les polémiques depuis l’irruption de la guerre entre Israël et le Hamas, Jean-Luc Mélenchon perd jusqu’à 5 points d’intentions de vote par rapport à mars 2023. «Il est en décalage avec une majorité du peuple de gauche qui ne comprend plus son discours», explique Frédéric Dabi.

Il n’empêche, le triple candidat à la présidentielle garde une longueur d’avance sur ses concurrents de gauche, y compris dans son propre camp. Sondé pour la première fois à la place du chef des Insoumis, le député LFI de la Somme, François Ruffin, n’obtient que 7 % des intentions de vote. Perçu comme un potentiel héritier de Jean-Luc Mélenchon, il serait même dépassé d’une courte tête par le communiste Fabien Roussel (7,5 %). Le patron du PCF, qui a pris ses distances avec la Nupes, parviendrait ainsi à tripler son score de la dernière présidentielle (2,28 %). Ni l’écologiste Marine Tondelier (16 % à 2%) ni le socialiste Olivier Faure (4 % à 6 %) ne bousculeraient le rapport de force dans les urnes.

istral, an artificial intelligence startup founded by former Meta Platforms and Alphabet researchers, plans to raise an additional $300 million from investors just four months after raising $113 million in a seed round led by Lightspeed Venture Partners, according to two people familiar with the discussions.

The round is expected to value the Paris-based startup, which is developing an open-source large language model and has framed itself as the “OpenAI of Europe,” at over $1 billion before the investment, according to another person. It’s unclear which VC firms Mistral has spoken to about investing. Andreessen Horowitz, one of the most active investors in generative AI, is currently seeking an investment in an open-source LLM developer, according to a person familiar with the matter.

THE TAKEAWAY

• Startup plans to raise capital at more than $1 billion valuation

• Ex-Meta and Alphabet researchers started company in May

• Firm is developing an open-sourced large language model

A representative for Mistral did not return a request for comment.

Mistral (pronounced Mis-TRAHL) is building a language model based only on publicly available data. It is open-sourcing its models, taking a different approach than OpenAI. Mistral is also developing its products in line with stricter European regulations, like the European Union’s AI Act, and has emphasized privacy and security, according to its pitch deck. That focus could help it compete with U.S. based rivals such as OpenAI for European corporate customers. Language-specific LLMs that capture the nuances of different cultures may also outperform OpenAI in certain markets.

Though Mistral isn’t yet generating revenue, the startup plans to also offer its models through an application programming interface, similar to OpenAI’s strategy, for a fee, according to its pitch deck. One startup founder has said using Mistral’s LLM halved their costs compared to OpenAI’s ChatGPT 3.5, The Information previously reported.

The five-month-old startup has already run into backlash from some researchers, who have complained that its first open-source model lacked the safety guardrails that other models include. For instance, users were able to ask Mistral’s model how to commit suicide and assault people, said a researcher on X. After researchers pointed out these problems in the days following the model’s release, Mistral co-founder and CEO Arthur Mensch released instructions on how to add guardrails to the model to avoid this.

The company’s financing, which is in the early stages, is yet another example of how much capital is required to train language models. OpenAI’s Sam Altman has privately said that his company may need to raise as much as $100 billion in the coming years, The Information previously reported. It's also indicative of the growing investor appetite for AI startups, which have raised billions so far this year.

Mistral, named after a northern winter wind, was founded by Mensch, a former DeepMind research scientist, as well as Timothée Lacroix and Guillaume Lample, who both left Meta in June. The startup’s seed funding in June valued it at $260 million, according to PitchBook.

In its seed pitch deck, it said it planned to dedicate 1% of its funding to a non-profit foundation focused on open-source community development.