TheChek News Flow

Discussions threaten to widen split between the group’s political leaders in Doha and its militant wing at war with Israel

DOHA, Qatar—Hamas’s political leaders have been talking with their Palestinian rivals about how to govern Gaza and the West Bank after the war ends, a fraught negotiation that threatens to put them at odds with the militant wing fighting Israel.

The talks are the clearest sign that Hamas’s political faction is starting to plan for what follows the conflict.

“We don’t fight just because we want to fight. We are not partisans of a zero-sum game,” Husam Badran, a member of Hamas’s Doha-based political bureau, told The Wall Street Journal during an interview at a villa on the outskirts of the Qatari capital. “We want the war to end,” he said.

The Hamas leader’s statement marks a sharp turn from Oct. 7, when the militant wing of the group led an assault that killed more than 1,200 Israelis. Now, after more than two months of war, and about 20,000 Palestinian casualties in Gaza, according to health authorities there, Hamas’s political wing is talking about an end to the conflict.

“We want to establish a Palestinian state in Gaza, the West Bank and Jerusalem,” Badran said.

Hamas’s Doha-based politburo is, on paper, in charge of the group’s affairs around the world, including in Gaza. But the divisions between the politburo and its officials inside Gaza, which includes a military wing, have sharpened since the war began.

According to the people familiar with the discussions and an Israeli official, the political leadership’s talks with Fatah have created tensions with Yahya Sinwar, the head of Hamas’s military wing based in Gaza. Sinwar, according to those people, doesn’t want Hamas to continue to govern Gaza, but believes the war isn’t lost yet and says it is too early to compromise.

Sinwar, who wasn’t informed about the political leadership’s talks, demanded they be stopped when he found out they were taking place, according to the people familiar with the talks.

The U.S. has been pressing Israeli and Palestinian leaders to begin thinking about what happens after the conflict in Gaza ends. Israel has said it doesn’t want to reoccupy Gaza, but that means putting in some other security force.

Some of the options being considered are a multinational peacekeeping force involving Arab nations, which Hamas and the Palestinian Authority reject. Another option is a revitalized Palestinian Authority with its own security force.

While Hamas has long had a conflicted relationship with the Palestine Liberation Organization, which represents Palestinians at the United Nations and other international meetings, Badran and other Hamas political leaders now say they want to join its umbrella of political groups.

The entrance hall of the villa—lined with the portraits of Palestinians killed by the Israelis—speaks to that vision. It includes founder Yasser Arafat’s second in command, Khalil al-Wazir; the leaders of two Marxist groups; and Hamas founders Sheik Ahmed Yassin and Abdel Aziz Rantisi.

In recent days, Hamas has been secretly reaching out to the leaders of Fatah, the dominant faction of the Palestinian Authority in the West Bank. Badran and other Hamas officials say the talks have also included Mohammed Dahlan, a former Gaza security chief with close Emirati and Egyptian connections, and former Palestinian Prime Minister Salam Fayyad. Dahlan said in a separate interview he is in daily contact with Hamas.

“I am no friend of Hamas,” he said. “But do you think anybody is going to be able to run to make peace without Hamas?”

Senior Hamas political leaders, including Ismail Haniyeh and Khaled Meshaal have been directly involved in those talks, which on the Fatah side include Hussein Al-Sheikh, the No. 2 in the PLO, people familiar with the discussions said. Al-Sheikh is in charge of its negotiations as well as the top liaison to the Israeli government, and is regarded as a potential successor to Mahmoud Abbas, the current head of the organization. Al-Sheikh declined to comment. Badran said Al-Sheikh hadn’t met Hamas’s political leaders in Doha.

Badran said being part of a coalition would facilitate talks with the international community, particularly European nations reluctant to work with Hamas, which is under sanctions.

The Hamas political leaders in these talks indicated that they would be willing to join the PLO and support negotiations under a unity government for a Palestinian state within 1967 borders.

But Badran said that Hamas had no plans to demilitarize or change its stance on Israel, which it refuses to recognize, at least as long as the occupation continues. “The world has no right to ask when people are being killed,” he said. “It’s not logical to ask this question at this time.”

For some, Hamas’s outreach is a sign of desperation as Israeli operations expand and Gaza slips away from the group’s military control.

“The political leadership thinks that Gaza may be lost,” said Ehud Yaari, a fellow with the Washington Institute for Near East Policy. “They don’t believe that Sinwar and his people can withstand the Israeli offensive for long, so they want to make a deal now.”

Badran denied any rift between Hamas’s Gaza branch and its political leadership in Doha. “The leadership of Hamas, both inside Gaza and outside it, is in complete agreement on strategies and political positions across various issues,” he said.

Publicly, the political and militant wings of Hamas say they agree on the issues. A spokesperson for the militant wing in Gaza couldn’t be reached for comment.

For now, Badran says Hamas is seeking a full-scale cease-fire with Israel, rather than a truce, which would lead to talks to exchange all remaining Israeli hostages for all Palestinian prisoners. “If there is a cease-fire, our stance is crystal clear: We want an exchange of all-for-all,” he said.

Badran, who learned Hebrew while in an Israeli jail, said his impression from reading Israeli reaction online was increasingly critical of Prime Minister Benjamin Netanyahu, particularly after the death of three hostages accidentally killed by the Israeli army in Gaza.

Badran said 60 hostages had been killed during the fighting in Gaza out of the 150 Israel says were still held hostage after the first exchange, and that Israel would need to negotiate with Hamas to get them out. “The Israeli army is not suited to retrieve the prisoners alive,” he said. “It can only be achieved through negotiations.”

But any power-sharing agreement between Hamas and Fatah might face opposition from Mahmoud Abbas, 88 years old, who has run the Palestinian Authority since 2005 even after his mandate expired in 2009. The Palestinians “have been deprived of any choice for long, long years,” Badran said, adding that Hamas had held talks with neither Abbas nor the Palestinian Authority.

Years of attempts by Hamas and Fatah to reconcile their differences and form a unity government have failed partly over Hamas’s refusal to disband its military wing. The two sides have also fought over the mechanisms to oversee and enforce national elections.

But the biggest obstacle to any agreement between the Palestinian Authority and Hamas on governing Gaza would likely be Israel, which has consistently said its goal is to destroy the militant group. Asked about the possibility of Hamas joining the Palestinian Authority and playing a role in postwar Gaza, an Israeli official said the idea was “unrealistic.”

The idea could also face opposition from the U.S., which wants a Palestinian Authority security force to crack down on Hamas after the war and to administer Gaza, said Diana Buttu, a former Palestinian peace negotiator. “They essentially want the PA’s role as Israel’s security subcontractor in the West Bank to be expanded into Gaza,” she said.

Buttu said the U.S. is willing to pump more money into the cash-strapped Palestinian Authority, but neither side has presented a sustainable political framework. “There is a longstanding and continuing false promise of Palestinian statehood,” she said.

Buttu places the blame on Americans for pressuring the Palestinian Authority not to work with Hamas, and expresses doubts about the stated goal of destroying the group.

“They have always been part of the political landscape since their founding,” Buttu said. “It’s a fantasy that they can be eliminated.”

Financial Conduct Authority sets out proposals aimed at encouraging companies to float in London

The UK’s top financial regulator has set out plans to press ahead with an overhaul of its stock market listings rule book in the latest stage of a drive to encourage companies to float their shares in London. 

In comments echoing those of government ministers, the Financial Conduct Authority suggested the changes could lead to more UK-listed groups collapsing but argued that this was justified in pursuit of more economic activity. 

“The proposals could entail an increased possibility of failures, but the changes set out would better reflect the risk appetite the economy needs to achieve growth,” the FCA said on Tuesday. 

The plans, which include abolishing the distinction between London’s premium and standard listing segments and removing a requirement for shareholders to approve some large transactions or those with “related parties”, are aimed at boosting the UK’s attractiveness to international companies. 

The proposals come against a backdrop of companies dropping their London listings and a dearth of new companies joining the stock exchange amid an extended decline in initial public offerings globally. 

Tui, Europe’s largest tour operator, this month became the latest high-profile company to consider dropping its UK listing, saying it may shift to a single listing in Frankfurt. 

Dublin-based packaging group Smurfit Kappa, building materials group CRH, plumbing supplier Ferguson and miner BHP are among the companies that have decided to leave the FTSE 100 for primary listings in the US or Australia over the past two years.

Gambling company Flutter is preparing a US listing, opening the door for it to follow suit.

The changes, previously proposed in May and now open for consultation until March 2024, are aimed at simplifying London’s listing regime and making it easier for UK companies to compete as bidders for international businesses. 

Current requirements for advance shareholder approval for large transactions left the UK’s premium listed companies at a disadvantage when bidding for assets in competitive sales processes, the FCA said.

The situation “means UK premium listed companies believe they have to pay a premium, agree to high break fees or lose out on competitive opportunities”, the watchdog added. 

Fund managers and investor groups have previously expressed concern that diluting their voting rights would leave them exposed to more risk. 

But the FCA said its proposed “disclosure-based regime” would give investors enough information and enable them to “influence company behaviour and decide how they want to invest”.

Companies would still need shareholder approval before a reverse takeover or delisting their shares.  

The changes are part of a wider series of government-commissioned reviews and moves to pare back regulations in an effort to make the UK more attractive to international companies and investors. 

The planned listing rule changes were published alongside proposals to increase transparency in bond and derivatives markets, including the creation of a “consolidated tape” to give investors a live database of debt market information.

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

$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.”

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.

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.”

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.

‘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.

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.