TheChek News Flow

Europe’s stock market rally had to end sooner or later. Germany slipping into recession makes that seem like sooner. But there are still great companies to buy on the Continent.

European equities went on a tear last fall when fears for the region started to look overblown. A warm winter, plus deft policy responses, avoided calamities expected when Russia cut off most natural gas exports. China scrapped its zero-Covid regime, expanding a key market for European, particularly German, manufacturers. The iShares MSCI EurozoneEZU +1.05% exchange-traded fund (ticker: EZU) has soared by 40% over the past eight months. The good news looks priced in by now. “The market has recovered to more reasonable levels,” says Andrew Clifton, an equities portfolio specialist at T. Rowe Price.

New dangers are massing. China’s recovery is sputtering. Colder weather might bring a new energy squeeze this year. Euro zone inflation remains above 6% (the U.S. is below 5%). The European Central Bank is likely to hike interest rates further to contain it. “We won’t see cuts from The ECB until some crisis absolutely requires it,” says Fred Copper, senior portfolio manager at Columbia Threadneedle Investments.

Germany, which accounts for 30% of euro zone gross domestic product, is cooling with these macro winds. First quarter GDP numbers were revised down to -0.3%. That’s a second straight quarter of economic shrinkage, technically a recession. Industry had a positive quarter, though, and companies added 56,000 jobs at the latest reading, says Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “In value-added terms, I don’t see a recession,” he says.

Whatever you call it, Germany’s economic might is in slow decline, argues Carsten Brzeski, chief euro zone economist at Dutch bank ING. A retreat from globalization hurts the country, which sells both East and West. The fabled German auto industry dawdled while China grabbed the lead in electric vehicles and batteries. “Will we see a rebound of the German economy? We will not,” he concludes.

All’s relative in investing, however. Schroders still favors European shares over a U.S. that teeters near recession itself, says Bob Armstrong, the asset manager’s investment strategist. They are cheaper, for one thing, trading at an average 13 times forward earnings, compared with 18 for U.S. stocks. The German market’s p/e ratio is 11.

Germany’s industrial machine, diminished or not, still offers attractive names, T. Rowe’s Clifton adds, like Siemens (SIE.Germany), SAP (SAP) or Deutsche Telekom (DTE.Germany). “Some of the criticism out there is doing the German economy a bit of a disservice,” he says. He also cites “defensive” stocks like Danish drugmaker Novo Nordisk (NVO), which has an inside track on treatments for diabetes and obesity, and United Kingdom-based AstraZeneca (AZN), a leader in anticancer drugs.

Columbia’s Copper is keen on Dutch grocery store chain Koninklijke Ahold Delhaize (AD.Netherlands).

Germany’s downturn marks an end to the dartboard phase of profit in European stocks. You can still make money with some homework, and luck.

The Biden administration’s war on corporate takeovers is chilling the merger arbitrage market.

The Federal Trade Commission under Chair Lina Khan has been particularly aggressive in seeking to block mergers. The FTC is using what many legal experts view as dubious arguments, which may not hold up in the courts, to challenge such deals as the $68 billion offer from Microsoft MSFT +0.85% (ticker: MSFT) for Activision Blizzard ATVI +0.37% (ATVI) and the $28 billion Amgen AMGN +1.77% (AMGN) deal for Horizon Therapeutics HZNP –0.47% (HZNP).

By trying to stop large deals, the government may be trying to deter more mergers, a strategy that looks as if it’s working, with the number of U.S. merger-and-acquisition deals down 20% this year relative to the weak pace of 2022.

That has made life difficult for merger arbitrageurs, practitioners of a decades-old strategy that involves purchasing the shares of companies that are subject to takeover offers. Deals have crumbled, shares of takeover targets have tumbled, and funds dedicated to the strategy have suffered losses.

Investors, though, may want to get exposure to the sector, despite the regulatory crackdown, because returns are finally looking more appealing, and compensate for higher regulatory risks at home and abroad.

“The environment is as attractive as we’ve seen in two decades,” says John Orrico, chief investment officer at Water Island Capital, which runs the $1.1 billion Arbitrage FundARBFX +0.25% (ARBFX).

Merger arbitrage, or risk arbitrage, is fairly simple. Most arbitrageurs buy shares of a takeover target and short the stock of the acquirer, betting that the two will converge when the deal closes. As the risks of government challenges have risen, so have spreads between the current stock price of target companies and the takeover price.

Orrico says investors stand to earn double-digit returns based on current arbitrage spreads, up from mid-single digit levels a year ago. “A diversified portfolio can absorb setbacks from delayed or blocked deals and still deliver attractive returns,” he says.

Investors can play the sector through mutual funds like the Arbitrage Fund, the Merger Fund (MERFX), and NexPoint Merger Arbitrage (HMEZX), or exchange-traded funds such as IQ Merger Arbitrage (MNA). These funds are down 1% to 2% this year after a tough May, and most have posted lackluster three-year annualized returns of about 1%.

The recent losses reflect a widening in arbitrage spreads and busted deals like Toronto-Dominion Bank ‘s (TD) attempted purchase of regional bank First Horizon (FHN). With arb spreads more attractive than in recent years, investors shouldn’t look backward, though that should be a given now that risk-free Treasury bills yield 5%, up from near zero.

Investors can take a do-it-yourself approach to investing in takeover situations by purchasing the target company’s stock. Many deals now are all or mostly in cash, so buying the target is a reasonable strategy. Berkshire Hathaway CEO Warren Buffett is a skilled arbitrageur and has periodically invested in merger situations over his 80-year investing career. Based on its most recent filing, Berkshire is a holder of Activision, the maker of the popular Call of Duty videogame. Its stock trades at just $80, despite Microsoft’s $95 takeover price. The reason: United Kingdom regulators have opposed the transaction, arguing that Microsoft’s strength in cloud computing could give it an unfair advantage as videogaming moves to the cloud. Wall Street figures the deal has a 33% chance of getting done, at best.

Activision stock could score even if the deal dies. Financial results have been good in recent quarters, and the company could be sitting on $17 a share in net cash by year-end 2023, including a $3 billion breakup fee if the deal isn’t completed, according to Citi analyst Jason Bazinet, who has a $90 price target on the stock. Activision currently trades around 20 times 2023 earnings estimates.

Other situations look attractive, as well. Software maker VMware (VMW) trades at about $136, roughly $37 below the current value of chip maker Broadcom ’s (AVGO) cash and stock offer, due to concerns over possible antitrust objections from the FTC and overseas regulators.

Roy Behren, co-manager of the Merger Fund, views the risk/reward as favorable, in part because the run-up in technology valuations lessens the downside risk if the deal falls apart. The downside to VMware stock could be $105 a share if the deal doesn’t happen, offering a good risk/reward with an upside to about $173, up 27% from the recent price.

Horizon Therapeutics stock, at $100 and a discount to Amgen’s $116.50 cash offer, is down 10% since the FTC sued to block the deal under a novel theory that the transaction could potentially lessen competition in the future, a decision that also has depressed shares of Seagen (SGEN), which is being acquired by Pfizer (PFE).

“The FTC has brought a terrible case,” Behren says. He sees a good chance that the judge assigned to the case, an appointee of President Donald Trump, will rule against the FTC by the end of October. Investors stand to make about 15% on Horizon Therapeutics within six months if the deal closes.

Merger arbitrage has been likened to picking up nickels in front of a steamroller because investors often risk a lot to make relatively little. That has changed. The risks still exist, but investors are playing for $100 bills rather than for pocket change.

BRUSSELS, June 3 (Reuters) - A majority of EU countries have rejected a push by Europe's big telecoms operators to force Big Tech to help fund the rollout of 5G and broadband in the region, people familiar with the matter said.

Telecoms ministers from 18 countries either rejected or criticised the proposed network fee levy on tech firms at a meeting with EU industry chief Thierry Breton in Luxembourg on Thursday, the sources said.

That echoed comments made last month by EU telecoms regulators' group BEREC.

Deutsche Telekom (DTEGn.DE), Orange (ORAN.PA), Telefonica (TEF.MC) and Telecom Italia want Big Tech to shoulder part of the network costs and have found a receptive ear in the European Commission's industry chief Breton, a former chief executive of France Telecom and French IT consulting firm Atos.

Alphabet Inc's (GOOGL.O) Google, Apple Inc (AAPL.O), Meta Platforms Inc (META.O), Netflix Inc (NFLX.O), Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) have rejected the idea of a levy, saying that they invest in the digital ecosystem.

The ministers cited the lack of an analysis on the effects of a network levy, the absence of an investment gap and the risk of Big Tech passing on the extra cost to consumers in the form of higher prices, the people said.

They also warned about the potential violation of EU net neutrality rules which require all users to be treated equally, barriers to innovation, and a lower quality of products.

The critics included Austria, Belgium, the Czech Republic, Denmark, Finland, Germany, Ireland, Lithuania, Malta and the Netherlands, the people said.

Cyprus, France, Greece, Hungary and Italy backed the idea while Poland, Portugal and Romania either took a neutral stance or had not adopted a position, they said.

Breton is expected to issue a report by the end of June with a summary of feedback provided by Big Tech, telecoms providers and others which will indicate his next steps.

Any legislative proposal needs to be negotiated with EU countries and EU lawmakers before it can become law.

Beijing is within striking distance of its wind and solar power targets, but the boom is a mixed blessing for investors

The sun is shining down out of a blustery sky on China’s renewable energy ambitions. But investors in the country’s green power stocks are bracing for more difficult weather.

China added 62 gigawatts of solar and wind power capacity in the first four months of this year. In comparison, the country added only around 26 gigawatts during the same period in 2022. That will bring non-fossil fuel generating capacity above half of the nation’s total power mix for the first time by the end of the first quarter, according to Fitch Ratings: around 80% of the new power capacity added this year so far came from renewable sources.

Capacity addition in solar has been particularly rapid, as the government pushes for installations of rooftop solar panels. Solar capacity has risen by 44% since the end of 2021.

While actual renewable power generation still lags behind that from fossil fuels, there are encouraging signs there too. Fitch expects more than 17% of China’s power consumption in 2023 will be met by renewable sources, excluding hydropower. China has set a target for 18% of 2025 power consumption to come from non-hydro renewable power. China is already a massive hydropower power generator, so the total renewable percentage will likely be much higher.

China’s renewable exports are also booming: The country controls more than 80% of the global market for key manufacturing stages of solar panels, according to the International Energy Agency. Exports of solar products, including silicon wafers and modules, rose 80% year-over-year in 2022 to $51 billion, according to the China Photovoltaic Industry Association.

Europe was a major destination, accounting for nearly half of those exports, after Chinese exports to the region more than doubled in 2022. Shipments abroad are still growing though the pace has slowed. Exports of solar modules in the first four months rose 15% year on year, according to China’s customs data.

Yet many Chinese renewable stocks have been struggling this year. Shares of Shanghai-listed Longi Green Energy Technology 601012 2.13%increase; green up pointing triangle, one of the world’s largest solar manufacturers, have roughly halved since the end of 2021. Hong Kong-listed Xinyi Solar 968 4.17%increase; green up pointing triangle has lost more than a third of its value over the same period.

The reasons are intense competition and oversupply. After a monstrous rally in 2021 and early 2022, prices of polysilicon—a key component for solar panels—have come crashing down as more supply comes online. Polysilicon prices have dropped 54% in the past year, according to Morgan Stanley. That has driven down prices of products throughout the supply chain—from silicon wafers to solar modules. The correction could eventually lead to more consolidation in the industry.

China’s immense renewable build-out is good news for the planet—and for maintaining the country’s dominance of the industry. But so far, it has proven tougher to make money from Chinese renewable stocks.

As in steel and cement before, enormous excess industrial capacity is helping the nation rapidly transform its economy. The transformation is impressive, but for investors, the best play might be to stand by and watch the show.

Companies can team up in cartel-like coalitions if they make up a fifth of a market or less

The European Commission has relaxed antitrust guidelines for companies that team up to solve climate problems, in response to concerns about cartel-like green coalitions driving up energy prices.

Republican politicians in the US have accused initiatives that push for a phaseout of fossil fuels of breaching antitrust rules, piling pressure on competition authorities around the world to take a stance.

And in a win for rightwing US groups, global insurers quit the Net-Zero Insurance Alliance (NZIA) last week for fear of being accused of breaching competition law, plunging the financial sector climate group known as Gfanz into crisis. The insurers included Allianz, Axa and QBE.

The EU commission said that as of July 1, it will create a “safe harbour” from prosecution for some groups of companies that set “sustainability standards”, for example a boycott of plastics, fossil fuels or steel from coal-fired power plants, even if this pushes up prices. Companies must not make up more than one-fifth of a given market, and must not exchange commercially sensitive information unless necessary or prevent other companies from joining the agreement.

The guidelines, which were published on Thursday, are not legally binding but are designed to help the European Commission, the European Court of Justice and national regulators interpret a prohibition on cartels enshrined in the Treaty on the Functioning of the European Union.

The new guidelines also open up the possibility of immunity for companies that come together to align with the Paris climate agreement on limiting global warming to 1.5C above pre industrial levels. 

Initiatives whose sole goal is to meet the requirements of international treaties are “unlikely to raise competition concerns” and will fall outside the scope of the EU’s competition regime altogether, according to the guidelines.

The disproportionate impact of rising temperatures on developing countries has tested the limits of modern competition regimes, legal experts say. These fail to recognise that some consumers are prepared to pay a higher price for “ethical” products whose positive effects will only be felt by people in other continents, or by future generations.

John Denton, secretary-general of the International Chamber of Commerce, told the Financial Times the EU’s new rules were “without doubt very positive”. But the UK’s competition regulator has been “bolder” in creating the protection “needed to encourage more businesses to take the leap in collaborating with their competitors to accelerate climate action,” he added.

The UK’s Competition and Markets Authority published a draft proposal in February to greenlight climate collaborations as long as these had a substantial and demonstrable impact on climate change, without any express limit on market share. The “sheer magnitude of the risk” represented by climate change and “the degree of public concern” around it justify a more “permissive” approach to this type of agreement, the draft said.

The EU’s new rules are more nuanced, acknowledging that “collective benefits” and “non-use value” can only justify anti-competitive agreements in some cases. “Consumers may opt for a particular washing liquid not because it cleans better but because it contaminates the water less,” they said by way of example. 

The EU “missed an opportunity” to be as ambitious as the UK or the Netherlands, said Maurits Dolmans, an antitrust specialist and partner at Cleary Gottlieb Steen & Hamilton, speaking on his own behalf. “The glass is a bit more than half full, but not as full as it could have been.”

Collective commitments to net zero emission are now likely to be “fine from an EU perspective”. But Dolmans added this would do little to protect groups like the NZIA, given that the invocation of antitrust in the US is about “politics rather than law”.

The Netherlands said last year it would approve sustainability agreements aimed at limiting environmental harm. But, unlike the UK, it is limited by the stance taken by the EU bloc as a whole. The head of the Dutch Authority for Consumers and Markets previously told the FT that companies should challenge the European Commission at the European Court of Justice in Luxembourg if they are prevented from collaborating on the climate.

The bloc was stung in 2014 by a cartel of Europe’s biggest truckmakers, which clubbed together to fix prices and delay the introduction of new emission technologies.

“It is the natural caution of a competition authority that you always have to overcome: if they say something more permissive it will be abused,” said Simon Holmes, a member of the UK Competition Appeal Tribunal and visiting law professor at the University of Oxford.

• A public-private Japanese partnership plans tests to beam space-generated solar power back to earth.
• The cost to install massive solar panels in space to generate 1 gigawatt (GW) of electricity is expected to cost more than $7.2 billion
• China also has ambitious plans to build a solar power station in space at a GW-level

In the latest ambitious project to use solar energy in space for powering the earth, a public-private Japanese partnership plans to test as soon as in 2025 if solar power generated in space can be beamed to the earth and converted into electricity.

The Japanese venture is the latest in a series of plans and experiments in recent months to test if solar power converted into microwaves could be beamed to receiving stations on the earth’s surface for large-scale use.

Scientists and science fiction writers have long dreamed of such a solar energy source: harnessing the sun’s energy regardless of weather or the time of day or night. This would overcome the constraints for solar power on earth, where generation can take place only when the sun shines. In addition, microwaves can pass through clouds, so beaming the energy via microwaves to the earth would not pose limits to solar energy due to weather conditions or the time of day.

The limits, of course, are the technology to do this at mass scale and the costs.

The cost to install massive solar panels in space to generate 1 gigawatt (GW) of electricity is expected to cost more than $7.2 billion (1 trillion Japanese yen), Nikkei Asia reports.

Still, researchers led by Kyoto University professor Naoki Shinohara will try to beam solar power to Earth to potentially prove that solar energy harnessed in space can be used for electricity needs on Earth.

Japan’s project involving industry, scientists, and the government space agency carried out successful tests of microwave power transmission horizontally in 2015 and vertically in 2018, both over a distance of 50 meters (164 ft). Vertical transmission with distances between 1 km and 5 km (0.62-3.1 miles) will be attempted in the future.

If we can demonstrate our technology ahead of the rest of the world, it will also be a bargaining tool for space development with other countries,” Shinohara told Nikkei.

The race for generating solar power in space and beaming it back to Earth is heated.

More than two years ago, the Pentagon successfully tested a solar panel in low-earth orbit as a prototype of potential future power-generating systems capturing light from the sun and beaming it back as energy to Earth.

Early this year, the Caltech Space Solar Power Project (SSPP) launched the Transporter-6 mission, launching in orbit a prototype, dubbed the Space Solar Power Demonstrator (SSPD), which will test several key components of an ambitious plan to harvest solar power in space and beam the energy back to Earth.

“When fully realized, SSPP will deploy a constellation of modular spacecraft that collect sunlight, transform it into electricity, then wirelessly transmit that electricity over long distances wherever it is needed—including to places that currently have no access to reliable power,” Caltech said in January.

China also has ambitious plans to build a solar power station in space at a GW-level, which will make the project operational for commercial use, Chinese experts told the Global Times in April.

Also in April, the European Space Agency (ESA) signed contracts for two parallel concept studies for commercial-scale Space-Based Solar Power plants—a crucial step in the Agency’s new SOLARIS initiative – maturing the feasibility of gathering solar energy from space for terrestrial clean energy needs.

“The studies will look at as wide a range of options as possible, including investigating all the different ways to move the energy, safely and efficiently, down to Earth: radio frequency transmission, lasers and simply reflecting sunlight down to solar farms on the ground,” said Sanjay Vijendran, ESA’s lead for the SOLARIS proposal.

According to ESA, “the concept complements rather than competes with terrestrial renewables, because Space-Based Solar Power can make power available reliably on an ongoing 24/7 basis, providing much-needed stability to the electricity grid as the share of intermittent renewables continues to increase, reducing dependence on large-scale storage solutions.”

With the energy crisis, net-zero targets, and issues with land availability for renewable power installations, space solar power could be part of the solution in the future, if technology and costs allow for it.

New York rewrites the rules on sovereign debt restructurings

What’s a safe harbour worth when the tide is turning?

Proposals to block hedge funds from squeezing money out of sovereign debt restructurings have been floating around for some time, ranging from tweaking bond contracts to entirely new laws.

Such laws have already been enacted in the UK, France, and Belgium. Depending on where you stand, they are usually referred to as ‘anti- vulture-fund’ or ‘safe harbour’ laws. Except for a few distressed funds that focus on exploiting the dysfunctionalities of the existing legal framework, notably Elliott Management and NML Capital, market participants hardly took note.

The perception of safe harbour laws as a fringe idea has drastically changed since Assembly Bill A2970 passed the judiciary committee of the New York State Assembly last month. If enacted, the new law will limit the recovery of sovereign debt through New York courts to the burden sharing standards that have been set for the country in an international initiative for debt relief. In other words, it would make the longstanding Paris Club principle of comparable treatment enforceable as a matter of New York law.

On the day of the judiciary committee meeting, The Credit Roundtable had already issued a last-minute rebuttal. A few days later, law firm Clifford Chance published a client briefing on all three proposals currently pending in the New York legislature. Finally, on May 22, a group of trade associations including the International Capital Market Association and Institute of International Finance issued a joint statement suggesting that New York law would become a sinking ship if the bill was enacted.

As is to be expected from a group of this calibre, the objections reflect serious concerns. As can also be expected, not all are well-founded:

The least convincing concern is the knee-jerk objection that the law would apply retroactively: In a restructuring context this argument only has merit if a law interferes with some but not all types of debt, and thereby benefits other creditors to the detriment of those affected. On the other hand, retroactivity is not an issue if a new law indiscriminately captures all forms of non-preferred debt to achieve equal treatment, as A2970 actually does. In the US, this principle doesn’t seem to have been challenged since 1874, when a federal court in New York confirmed the constitutionality of a statute introducing restructuring by majority vote as an option for all pending and future bankruptcy proceedings.

Because the new law would apply irrespective of the governing contract law, there is also no reason why it should divert issuers and investors to other jurisdictions if they have opted for New York law in the past. No such effect has been observed after the UK introduced a similar statute to enforce debt relief under the HIPC (highly indebted poor countries) initiative in 2010. Indeed, the ability of safe harbour laws to capture types of debt that would otherwise escape the reach of collective action clauses under contract law is the main justification for legislative action.

For similar reasons, it seems highly implausible that the new law would affect market access or increase borrowing costs: If a country proceeds to a restructuring under the Common Framework or with the help of the Paris Club, it will inevitably have to obtain a debt sustainability analysis from the IMF. In other words, the size of the pie will have been defined already, and all the law does is to ensure that no creditor can snatch a bigger slice at the expense of others. Unless they reject comparable treatment together, rational investors will therefore have to base their pricing on the assumption that holdout strategies are a zero-sum game, and that the risk to come out at the wrong side of the equation is high for all but the most aggressive creditors. Thus, rather than increasing borrowing cost, enforcing equal treatment can be expected to result in a decrease, as has been demonstrated for collective action clauses.

A more rational concern relates to the use of equitably burden sharing standards set by an international initiative’ as a statutory benchmark. The broad reference means that creditors — and eventually a judge — might have to form a view on what exactly comparable treatment means in a specific scenario. Since the Paris Club has in the past emphasised flexibility at the expense of predictability, the margin of appreciation does indeed imply some ambiguity.

More clarity on how comparable treatment should be assessed will be one of the topics of a workshop announced by the Global Sovereign Debt Roundtable on April 12. In the meantime, it is worth reminding oneself that good faith is an even more generic concept than equitable burden sharing and comparable treatment. Yet the duty to co-operate in good faith has long been enshrined in New York contract law without affecting market confidence.

In the sovereign debt context, professors Lee Buchheit and Mitu Gulati have suggested that good faith could serve as the statutory basis for a new judicial doctrine to counter holdout strategies. Most recently, an unusually candid footnote by the judge in Hamilton Reserve Bank versus Sri Lanka suggested New York courts are finally losing patience:

This Opinion [to deny a motion by Sri Lanka to dismiss the lawsuit] does not address the serious policy concerns raised by the filing of this litigation while the International Monetary Fund (“IMF”) is actively working with Sri Lanka to resolve its financial crisis. Indeed, as recently as March 20, 2023, the IMF approved a $3 billion loan to help Sri Lanka through its financial crisis. This ruling is confined solely to the legal issue presented and should not be construed either as an endorsement of litigation filed by beneficial holders of sovereign debt while the IMF addresses a grave crisis over that debt or an indication that such plaintiffs should be given priority in recovery during any debt restructuring negotiations that occur.

Before a much less predictable judicial storm breaks loose, institutional investors might be well advised not to mistake the safe harbour for a sinking ship

Regulators might put up an obstacle given the Swedish group’s sizeable footprint in the sector

Norse goddess Freya rode a chariot pulled by cats. Sweden’s EQT has borrowed the name for its bid company buying veterinary drugmaker Dechra for £4.9bn, including debt. On Friday, the London-listed group’s board recommended the offer, which is a 40 per cent premium to the three month undisturbed share price. A compliant purr from shareholders seems likely given the deteriorating outlook for vet and pet products.

Dechra is a long-running success story. Listed at the turn of the millennium, it has flourished under the stewardship of chief executive Ian Page. A near 50-fold total return has beaten the UK pharma and biotech sector by more than 10 times since 2000. While its loss is a blow for the diminished UK market, the offer is good enough to get the deal through.

The price is 25 times Dechra’s expected ebitda over the next 12 months. The offer is 5 per cent lower than the initial one in April, before it warned about US destocking and weaker EU trading. Operating profits will be “materially” below the £186mn forecast in February, it said on Friday.

That may push the multiple higher. But it will still be below the 29 times forward ebitda on which US-listed Pfizer spin-off Zoetis trades. The latter’s higher profit margins explains the difference.

Competition regulators may present an obstacle given EQT’s already sizeable footprint in the pet and vet sector. EQT says it has no plans to combine Dechra with IVC Evidensia, a business of 2,500 veterinary centres across Europe it owns alongside other private equity groups. But the UK’s Competition and Markets Authority is already concerned about horizontal integration in vet care. About half of the UK’s independent vets have been rolled up by bigger groups in the past decade.

Vertical overlap between Dechra and IVCE might pique the CMA’s interest. Perhaps hamingja — Norse luck — would have been a better name for the bidco tasked with getting this deal through.