TheChek News Flow

Deal could be sealed in coming days, though it is still possible there won’t be one

Exxon Mobil XOM -2.25%decrease; red down pointing triangle is closing in on a deal to buy Pioneer Natural Resources PXD -0.17%decrease; red down pointing triangle, a blockbuster takeover that could be worth roughly $60 billion and reshape the U.S. oil industry.

A deal could be sealed as soon as in the coming days, though it is still possible there won’t be one, people familiar with the matter said.

After posting a record profit in 2022, Exxon has been flush with cash and exploring options that would push it deeper into West Texas shale.

An acquisition of Pioneer, with a market cap of around $50 billion, would likely be Exxon’s largest deal since its megamerger with Mobil in 1999. It would give Exxon a dominant position in the oil-rich Permian Basin of West Texas and New Mexico, a region the oil giant has said is integral to its growth plans.

The Wall Street Journal reported in April that the two companies were holding preliminary talks.

Exxon has a market value of $436 billion, so the deal, which would be the biggest takeover of the year, should be easily doable.

A deal would eclipse the U.S. oil industry’s most recent blockbuster, Occidental Petroleum’s 2019 acquisition of Anadarko Petroleum for about $38 billion, and top Exxon’s 2010 purchase of XTO Energy for more than $30 billion.

It would also be a legacy-shaping move for Exxon CEO Darren Woods, whose tenure at the company has seen its peaks and valleys.

Woods, an Exxon-lifer who became CEO in 2017, initially promised to dramatically grow Exxon’s oil production only to see his plans felled by the pandemic. An oil-market collapse in 2020 led to Exxon’s first annual loss in decades—more than $22 billion. It lost a historic proxy fight in 2021 to investment firm Engine No. 1, which excoriated Exxon’s finances and argued it had no long-term strategy.

But Exxon rebounded to a record profit of $55.7 billion last year, buoyed by soaring global demand for oil and gas as economies reopened. Exxon has used its prolific cash flows to reward investors with buybacks and dividends and pledged disciplined spending, though many wondered whether the company would dip into its coffers for a megadeal in the oil patch.

The acquisition marks Woods’s second significant acquisition, coming only a few months after Exxon scooped up CO2 pipeline operator Denbury for $4.9 billion. It would add vast swaths of West Texas acreage considered the core of the U.S. shale boom.

Pioneer’s acreage in the Midland Basin—the eastern portion of the Permian Basin, which straddles West Texas and New Mexico—is seen as one of the largest collections of fertile oil land in the U.S., and the company holds one of the largest numbers of untapped drilling locations of any Permian player, analysts have said.

In the wake of the pandemic, Pioneer snapped up two other large Permian operators, Parsley Energy and DoublePoint Energy, for a combined $11 billion in 2021.

Pioneer’s CEO, Scott Sheffield, started work for predecessor company, Parker & Parsley Petroleum, in 1979. That company merged with another in 1997 to form Pioneer. He had retired in 2016 but returned to the job in 2019.

In April, Sheffield had announced he would retire at the end of this year, and that he would be succeeded by his longtime top lieutenant Richard Dealy, the company’s chief operating officer.

“I’m almost 71, we celebrated Pioneer’s 25th anniversary last year,” Sheffield told The Wall Street Journal in an interview in April. “And so [the] timing was right.”

Pioneer’s balance sheet has been in increasingly good shape since oil prices surged, with its debt declining by more than 20% since the end of 2021, according to FactSet.

The tie-up could presage a wave of consolidation among shale companies. The industry has shifted from the rapid growth it pursued for more than a decade to a mature business underpinned by fiscal restraint and hefty investor payouts. But producers are contending with dwindling drilling locations. Drilling for new oil discoveries has fallen out of favor with investors, leaving many companies with few options other than to acquire rivals to extend their runway.

Producers have deep coffers at their disposal to pursue deals after Russia’s invasion of Ukraine last year sent global prices soaring to more than $127 a barrel. Prices have retreated and been volatile since then. Exxon’s acquisition of Pioneer could be the first of a series of deals in the Permian, which contains shale wells that produce rapidly and don’t bind companies to decadeslong megaprojects that have fallen out of favor with some investors who fear a future decline in oil demand.

Environmentalists, lawmakers and others have hoped oil and gas companies would invest their record profits into green energy. Woods has pledged Exxon will invest $17 billion through 2027 in cutting the company’s carbon emissions and building a business that would help other companies reduce theirs too, investing in areas including carbon capture, biofuels and lithium mining.

Exxon’s move to purchase Pioneer, even after its acquisition of Denbury, the CO2 pipeline operator, signals the company is still primarily planning to lean on its traditional oil-and-gas business for decades.

A disappointing sale at Sotheby’s Hong Kong suggests that China’s art-buying spree may be over

England’s biggest water and sewage provider says shareholder support is conditional on regulatory changes

Thames Water has said it will need regulatory changes including a limit to pollution fines and an increase in permitted returns to persuade shareholders to inject much-needed equity into the debt-laden business.

The utility, which provides water and sewage services to about 25 per cent of the population in England, has asked shareholders, which include sovereign wealth, private equity and pension funds, to inject more than £2.5bn of equity into the business to stabilise its finances. It is also seeking approval from the regulator Ofwat for a 40 per cent increase in customer bills by 2030.

However, in a business plan submitted to Ofwat on Thursday, Thames Water said the equity injections were conditional on the regulator agreeing a “material move up in the allowed rate of return”.

It also said it required an agreement on the “maximum level of penalties we can incur”. Last week it received a £100mn fine for performance failures but it faces other court cases and penalties, which could weigh heavily on profitability. In a statement on Thursday, it said it was “actively discussing the changes with the regulator”.

Thames Water said it would not be able to deliver its £18bn business plan, which covers spending between 2025 and 2030, if it does not receive the equity injection.

The demands highlight the fragile state of Britain’s largest privatised water utility. The company is struggling with higher financing costs on its £16bn debt, as well as a public outcry over sewage overflows and leakage. In June its chief executive Sarah Bentley stepped down amid concerns over the company’s financial stability. The government has drawn up contingency plans for a temporary renationalisation.

Worries have also risen about other UK water companies. More than half of the sector’s estimated £60bn in debt is inflation linked. Although interest rate pressures have reduced slightly in recent months, rating agency S&P has a negative outlook or credit watch on three-quarters of water company ratings.

Thames Water also warned in its business plan that ageing infrastructure such as water pipes and sewage treatment plants were increasingly vulnerable and it was having to spend more on repairs. “This results in less money to invest in improvements,” it added.

The company announced last year that shareholders had pledged £1.5bn, but by March this year it had received only £500mn. In July, it said investors had agreed to stump up £750mn next year, subject to conditions, and that it needed a further £2.5bn from shareholders by 2030.

However, its largest investor, the pension fund Omers, took a 30 per cent write down on its Thames Water stake last year, raising concerns over investors’ willingness to put more cash into the business.

Ofwat said: “Companies have now set out their plans, how they intend to deliver them and the returns they feel their investors should receive. This is the first step of the process and we will now scrutinise and test those plans.”

“We will go through all plans and challenge them individually and comparatively. Our initial view will be published in May/June with a final determination made in December 2024.”

Thames Water said: “Our plans are ambitious and aim to deliver on what our customers have told us are their priorities.”

The Swiss fragrance and flavors supplier has upped its share in the pigment and powder specialist to 49 percent.

PARIS — Swiss fragrance and flavors supplier Symrise AG has raised its stake in Kobo Products Inc., a U.S.-based pigment and powder specialist for the beauty industry, to 49 percent.

Financial terms of the deal were not disclosed, but in a statement Symrise said the funds raised are expected to expand capacity and enhance Kobo’s supply chain.

“The transaction creates further opportunities for both companies in the fields of mineral UV filters and decorative cosmetics,” Symrise said. “Kobo customers will also benefit from expanded capacities and global supply chains. With this step, both partners have expressed their strong commitment to this partnership and the added value it will create for customers and consumers.”

The fragrance and flavors suppliers keep expanding their reach through acquisitions in the realms of well-being, cosmetics and naturality.

Symrise initially took a 25 percent stake in Kobo in 2021, in a bid to step up its growth in cosmetics ingredients. At the time, Symrise said it had agreed with Kobo on the future disposition of shares in the group’s capital and governance. Symrise also became a distribution partner with Kobo for inorganic UV filters. As part of the new deal, there has been another agreement signed concerning Kobo’s shares and governance.

“With its innovative product range, Kobo perfectly complements our own portfolio,” said Jörn Andreas, the executive board member responsible for scent and care at Symrise. “The corporate cultures of Kobo and Symrise also harmonize on all levels. For all these reasons, we feel very happy about this second investment and the expression of our confidence in Kobo that it makes.”

Comme pour les restaurants, la Clef Michelin distinguera chaque année des établissements remarquables. Le premier palmarès sera dévoilé au premier semestre 2024.

Près de cent ans après avoir lancé ses étoiles, le Guide Michelin crée la réplique pour les hôtels: la Clef Michelin. Comme dans la restauration, il entend créer l'événement chaque année, en révélant son palmarès d'hôtels à l'occasion d'une cérémonie. «Nous répondons à une demande, déclare Gwendal Poullennec, directeur international des Guides Michelin. L'utilisateur du Guide Michelin recherche une expérience réussie, quand il réserve une table ou un séjour. Nous travaillons depuis plusieurs années à lui offrir un service complet dans l'hôtellerie, de la recommandation d'adresses jusqu'à la possibilité de réserver sur notre site Internet».

Le premier palmarès de la Clef Michelin sera dévoilé au premier semestre 2024. Mais depuis plusieurs semaines déjà, le Guide propose sur son site Internet une sélection de plus de 5000 hôtels dans 120 pays. «Nous nous sommes appuyés sur la sélection de l'agence de voyages en ligne new-yorkaise Tablet Hotels, que nous avons rachetée en 2018», explique son dirigeant. Une infime partie de ces hôtels recevront une Clef Michelin. «Nos équipes sont actuellement sur le terrain pour dénicher ces pépites hôtelières partout dans le monde», prévient Gwendal Poullennec.

Dans un monde de l'hôtellerie, où les classifications et labels sont déjà nombreux, le Guide Michelin compter imposer sa nouvelle distinction, avec des conseils «avisés et vérifiés». «Le Guide Michelin s'est lancé pour combler un manque d'information sur les restaurants, rappelle son dirigeant. Le contexte a changé. Aujourd'hui, les voyageurs sont saturés d'informations et d'avis plus ou moins fiables». Dans ce contexte, l’indépendance qui fait partie de l’ADN du Guide Michelin, est un gage de confiance.

Quant aux classifications et labels d'hôtels, ils sont payants pour les professionnels. Leurs critères dépendent pour beaucoup de la qualité des infrastructures. L'attribution des étoiles dépend notamment de la surface des chambres et des parties communes, de la présence ou non d'un ascenseur... Des subtilités d’autant plus méconnues des voyageurs, qu’elles varient d’un pays à l’autre.

Inspecteur recrutés

La sélection des hôtels du Guide Michel aura une obsession: dénicher les bonnes adresses capables de faire vivre des expériences uniques aux voyageurs. En plus de briller par l'architecture, la singularité de leur établissement et le design intérieur, les lauréats de la Clef Michelin seront irréprochables par la qualité du service et le rapport qualité-prix. Ils doivent être de véritables destinations. «Vous ne retrouverez pas tous les 5 étoiles et les palaces, seulement les plus remarquables, confie Gwendal Poullennec. Il n'y aura pas de resorts, où l'on vit en vase clos. Pas d'hôtels standardisés non plus. Mais la gamme de prix sera large, de moins de cent euros à plusieurs milliers».

Comme dans la restauration, des «inspecteurs» ont été recrutés (leur nombre n'est pas communiqué), pour séjourner incognito dans les hôtels. «Les meilleurs établissements sont souvent récents ou rénovés. Ils sont souvent peu mis en avant sur les plateformes de réservation, constate Gwendal Poullenec. Nous voulons être les premiers à les repérer».

Appartenant depuis toujours au groupe Michelin, le Guide Michelin ne donne aucun chiffre. Ses revenus proviennent essentiellement de partenariats signés avec des grandes marques (montres Blancpain, alcools Rémy Martin, café Illy...) et des territoires, en France comme à l'étranger (Visit California, la région Centre-Val de Loire...). En lançant une distinction dans l'hôtellerie, s’y ajouteront les commissions perçues sur les réservations de chambres effectuées sur le site Internet du Guide. Des commissions comprises entre 10 et 15% du prix de la nuitée.

Group’s shaky finances fuel talk of a fundraising which management denials cannot completely dispel

Late trains irritate British commuters. Investors in Alstom too: the company’s Aventra rolling stock projects in the UK have been delayed. Poor execution means less cash flow for the indebted French train maker.

Nervous traders knocked Alstom’s share price 35 per cent on Thursday morning. The group’s shaky finances fuelled talk of a fundraising which management denials could not completely dispel.

Alstom has a signalling problem. Analysts tuning into an Alstom conference call on Wednesday evening were greeted by chief financial officer Bernard Delpit. Chief executive Henri Poupart-Lafarge did not attend. Delpit only arrived at Alstom three months ago.

He had to explain why consensus forecasts of free cash outflows are ballooning. The predicted figure has widened from €152mn to €1.15bn in the first half, according to data service Visible Alpha. Analysts have been scurrying to increase their net debt estimates too.

Alstom will report interim results in mid November. Hopes that UK projects providing 443 trains would soon deliver better cash flow and reduce debt have been dashed.

Poupart-Lafarge and Delpit have much to do. Alstom’s share price, even before Thursday’s collapse, had trailed the MSCI European industrials index by 30 per cent over two years. Over the past three years, Alstom’s operating cash outflows have summed to minus €426mn. Optimists will highlight a timing problem caused by elevated inventories and point to the group’s net liquidity position (including credit lines) of €3.5bn.

Sceptics will rightly question any dependence on UK infrastructure projects for future cash flows. Net debt to forward ebitda, on Barclays estimates, looks high at over 5 times, even if that should fall in the next year or so. As global bond yields arc ever higher, the bears drive the sentiment train.

If you want credibility, stick to your timetable and front up any apologies when you miss them. That applies to running a train making company, as well as a train service.