TheChek News Flow

Gapping up
In reaction to earnings/guidance:

Other news:

Analyst comments:

Gapping down
In reaction to earnings/guidance:

Other news:

Analyst comments:

Investment in Aleph Alpha involves equity injection, research grants and commitments to joint business development

The owners of the Lidl supermarket chain are among those investing more than $500mn in German artificial intelligence start-up Aleph Alpha, as it seeks to capitalise on a global rush into the sector.

Schwarz Group, which controls Lidl and is building out a new IT division, is co-leading the deal alongside an AI hub based in the south-west German city of Heilbronn that was jointly set up by a foundation established by Dieter Schwarz, the Lidl founder.

Other investors include the venture capital unit of Bosch, Europe’s largest car parts supplier, according to an Aleph Alpha statement.

Founded in 2019, Aleph Alpha is among the most prominent European start-ups that focus on generative AI, the software that can create sophisticated text, imagery or computer code that mimics human ability.

But the German start-up may struggle to break through in an increasingly crowded generative AI market, with better funded competitors such as Microsoft-backed OpenAI, Google and Facebook parent Meta all investing heavily in the space.

Aleph Alpha, which has about 70 employees, aims to distinguish itself by offering data protection, security and transparent software to clients including in sensitive sectors such as law enforcement and healthcare. It has already raised about €28mn.

“We need to make sure we have a hand on the wheel of how the future will turn out,” Aleph Alpha chief executive Jonas Andrulis told the Financial Times. The company’s clients “have full sovereignty over what’s going on”.

Roughly a quarter of the funding comes via an equity investment, with the remainder composed of research grants and commitments for joint business development that will not dilute shareholders, said people familiar with the deal. They added that Aleph Alpha’s equity would be valued at roughly €500mn in the transaction.

The company did not disclose its valuation.

Schwarz Group, an unlisted and family-controlled giant with €154bn in annual revenue and 575,000 staff worldwide, is best known for its Lidl discount supermarkets. But it has also branched out into food manufacturing, recycling and IT services. In September, it pooled its cloud and cyber security offerings into a standalone unit, Schwarz Digits, which services the rest of Schwarz operations as well as external clients.

Dieter Schwarz this year backed the Heilbronn hub, Innovation Park Artificial Intelligence, which is also funded by the state of Baden-Württemberg and aims to become Europe’s largest AI cluster.

“Cash is necessary, but not sufficient,” said Andre Retterath, a partner at the venture capital firm Earlybird and an Aleph Alpha board member. The partnerships will give the company “access to compute, access to talent, and distribution into the market”, he said. Earlybird led a 2021 funding round for the German start-up.

Aleph Alpha wants to accelerate its expansion as it sees a window over the coming 12 to 24 months during which companies will test and select which AI software they plan to use.

While some of Aleph Alpha’s competitors have developed close corporate relationships with the largest technology groups, the company stressed that it is independent.

Other investors in the consortium include IT business Hewlett Packard Enterprise and German software company SAP, as well as VC group Burda Principal Investments, and existing backers, the statement said. The company has been previously supported by VC groups UVC Partners, LEA Partners, 468 Capital, Cavalry Ventures and Lakestar.

Largest shareholder ‘deeply regrets’ acceptance of private equity’s firm offer of up to €22bn for fixed-line network

Telecom Italia is being threatened with legal action from Vivendi, its single largest shareholder, after accepting KKR’s offer of up to €22bn for the telecoms group’s fixed-line phone and internet network.

Telecom Italia’s board of directors approved the sale on Sunday in a majority vote. It comes two years after the private equity firm’s first €33bn takeover offer which envisaged taking the company private.

In response, the French media conglomerate said in a statement that it “deeply regrets” the board accepting the offer without requesting a “vote from its shareholders”. It added that it will “use any legal means at its disposal to challenge this decision”.

However, the board said the decision to accept the offer was of its “exclusive competence”. It also mandated chief executive Pietro Labriola to sign contracts and verify the possibility of receiving a binding offer at a higher value for its submarine network Sparkle.

Under the deal, expected to close next summer, Telecom Italia said it will reduce its €26bn debt pile by around €14bn. The junk-rated company also said the transaction will reduce regulatory constraints in its domestic market, which have hindered its growth, and will help it to maintain strategic flexibility.

Telecom Italia hopes the plan will improve the company’s share price but it has long been opposed by Vivendi. The conglomerate, owned by the Bolloré family, holds a 23.75 per cent stake and more than 17 per cent of Telecom Italia’s voting rights.

Shares in Telecom Italia were down 3.6 per cent to €0.25 in morning trading on Monday. Shares in Vivendi were down 0.4 per cent to €8.63.

The French group has invested more than €4bn in building the stake over the past eight years and has had to write down its investment twice as Telecom Italia’s valuation has fallen amid high debt, multiple management overhauls, lower margins and increased domestic competition. 

Vivendi has previously rejected plans to separate the network from the group’s services business, saying Telecom Italia had undervalued it. 

Labriola was put in place, with Vivendi’s backing, two years ago after his predecessor was ousted over KKR’s first offer. He has since become the main sponsor of KKR’s plan to split and turn round the business.

“Two years of hard work with our heads down wrap up with a historic decision which will see the creation of two separate companies with entirely new development perspectives,” he said in a statement.

The Italian government, which can veto deals involving telecommunications infrastructure, greenlighted the deal last month. Rome’s department of the Treasury plans to spend more than €2bn in taking a 20 per cent stake in the network company, alongside KKR, to oversee an asset which it deems strategic.