TheChek News Flow

Mining and trading group lifts return to shareholders as profits fall from record level

Swiss mining and trading group Glencore has reported a plunge in first-half profits as the surge in commodity prices that followed the invasion of Ukraine eases.

The FTSE 100 group said on Tuesday that its earnings before interest, tax, depreciation and amortisation fell by 50 per cent to $9.4bn in the first six months of the year, driven in part by coal prices coming off their highs.

A resurgence in coal prices, which started before Russian’s invasion of Ukraine, helped send Glencore’s profits to a record last year, but they also drew scrutiny over the company’s plans for the heavily polluting business.

Alongside its first-half results, Glencore said it would increase its dividend by $1bn and buy back another $1.2bn of shares in a move that takes the amount it has returned this year to $9.3bn.

Return to profit for Vision Fund can’t stem red ink for the investment company

TOKYO—Japanese technology investor SoftBank 9984 1.52%increase; green up pointing triangle Group on Tuesday reported its third straight quarter of net losses despite a rebound in technology shares helping its investment portfolio return to profit.

SoftBank posted a net loss of 477.6 billion yen, equivalent to about $3.3 billion, for the quarter ended June 30. That compares with a ¥3.163 trillion net loss in the same period a year earlier.

Reflecting the tech-share recovery, the Vision Fund business, SoftBank’s main investment vehicle, posted a profit of ¥61 billion. It was the first time in six quarters that the Vision Fund unit was profitable.

The company had been cautious about making new investments as its investments were hit hard by higher interest rates and the global tech selloff. In a measure to preserve cash, it has sold down its stake in Chinese e-commerce giant Alibaba Group Holding.

Chief Executive Masayoshi Son said at the company’s annual shareholders meeting in June that SoftBank was getting ready to go on a counteroffensive.

The handbags start from 1,070 pounds and range up to 26,300 pounds, while the jewelry ranges from 970 to 1,450 pounds.

LONDON — Matches is taking its luxury handbag and fashion jewelry category to new channels by collaborating with Sellier, a resale store in London’s Knightsbridge and in Monaco.

Chanel, Hermès and Louis Vuitton handbags and jewelry will land on the luxury retailer’s website from Wednesday. The selection of items have been chosen by Dina Ibrahimova and Hanushka Toni, the mother and daughter duo who founded Sellier in 2019.

Each item has been inspected by Sellier’s in-house authenticators, as well as using third-party examiners to confirm the authenticity of the handbags.

The handbags start from 1,070 pounds and range up to 26,300 pounds, whlie the jewelry ranges from 970 to 1,450 pounds.

Sellier was the one to initiate the conversation with Matches via the partnerships team, which snowballed into partnering together.

“What was really interesting was the amount of really desirable stock they get through their consignment stores. We saw that some of these products were barely used and our customers are looking for these collectible pieces regardless of price,” Cassie Smart, head of womenswear at Matches, told WWD.

The retailer saw an uptick when it introduced fine jewelry onto its website. Last year, Jessica McCormack launched bridal diamond designs on Matches, proving to be a success. The jewelry designer will open her second London store at 140 Sloane Street toward the end of the year, WWD learned in July.

The first drop, part of a continuous project with Sellier, will encompass 50 handbags, including a Louis Vuitton and Supreme duffle bag; a Goyard leather tote bag, and Chanel collectibles such as a wooden box bag, heart-shaped crossbody bags from the ‘90s and a plastic see-through bag.

“What’s interesting about bags is obviously the lifecycle of the products; it’s longer and customers really invest in them. At the moment, we’re doing incredible business with brands like The Row, Loewe and Bottega Veneta,” said Smart.

Current owners Style Capital and the Zimmermann family will retain a significant minority stake.

Zimmermann, the hot Australian luxury brand, has changed hands again.

Advent International, one of the world’s largest private equity investors, has reached an agreement to acquire a majority stake in the company. Terms of the transaction weren’t disclosed.

Founded by sisters Nicky and Simone Zimmermann in 1991 and headquartered in Sydney, Australia, Zimmermann has established a loyal following for its feminine dresses and swimwear that emphasize original prints and color. The company has 58 stand-alone stores across Australia, the U.S., the U.K., Europe and China, along with wholesale distribution in department and specialty stores, online luxury fashion retailers and Zimmermann.com.

Under the terms of the acquisition, Advent will acquire a majority stake in Zimmermann from Style Capital, which together with the Zimmermann family will retain a significant minority shareholding. The founders and the Zimmermann management team will continue to drive the brand’s growth.

Reports in the Australian Financial Review last month about a potential Advent acquisition valued Zimmermann at 1.75 billion Australian dollars, or $1.15 billion at current exchange.

Style Capital, the Milan-based investment fund, acquired a 70 percent stake in Zimmermann in late 2020 for a reported 408 million Australian dollars, or $268.12 million at current exchange, with the Zimmermann family owning 30 percent. As part of that transaction, American private equity firm General Atlantic, which had acquired a minority stake in the brand in 2016, exited the Australian company.

While Zimmermann declined to reveal its current volume, last year the company said that global topline sales increased an average of just over 30 percent each year over the past five years. Industry sources have estimated Zimmermann’s annual revenue at 400 million Australian dollars, or $263 million at current exchange, and 125 million Australian dollars, or $82.2 million, in earnings before interest and taxes.

At the time of Style Capital’s acquisition, the company said its strategy was to help Zimmermann’s global trajectory with a focus on European and Asian retail markets; digital growth; increasing its wholesale footprint, and expanding into new categories.

Style Capital’s portfolio includes L.A.-based denim brand Re/Done and two Italian labels, Forte Forte and MSGM.

The investment from Advent looks to take that strategy further, allowing Zimmermann to build on its strong multidecade performance by accelerating the brand’s international expansion in existing and new key luxury markets, such as Asia and the Middle East; to further expand its product categories and accessories, and strengthen its online and omnichannel presence.

Advent, established in 1984 with $95 billion in assets under management, seeks to leverage its considerable experience within the consumer sector, which includes the June 2023 investment in Parfums de Marly and Initio Parfums Privés, as well as the 2012 investment in Douglas, the Germany-based specialty retailer of premium beauty products, including perfumes; Orveon, owner of the BareMinerals, Buxom and Laura Mercier cosmetics brands acquired in 2021, and Lululemon Athletica, which Advent originally invested in in 2005. Advent first made a minority investment of $74 million in Lululemon, which went public, and by 2009 had sold all its shares, reportedly making about $600 million on its investment. Advent then made another investment in Lululemon in 2014.

Advent also bought Olaplex in 2019 before it spun it out in an initial public offering in 2021, giving the beauty company a reported valuation of $16 billion at the time, as reported.

In revealing the Zimmermann news, Ranjan Sen, managing partner at Advent International, said, “Zimmermann presents a rare and exciting opportunity to acquire a fast-growing iconic luxury fashion brand with significant potential for further expansion. The Zimmermann team has successfully created a distinctive and desirable global luxury brand, which has built a loyal customer base around the world. We look forward to supporting the management team around the CEO, Chris Olliver, and Nicky and Simone Zimmermann, to help build on the company’s strong foundations and deliver superior continuous growth.”

Olliver added, “We welcome Advent as a successful global and like-minded investor. They bring proven experience supporting luxury brands in taking this next step and we are thrilled by the opportunity to work together.”

Nicky Zimmermann, chief creative officer and cofounder, said, “We are really excited to partner with the teams at Advent and Style Capital as we continue on our journey to build a unique global luxury brand from Australia. There are so many exciting opportunities for Zimmermann ahead and Simone and I feel extremely fortunate to be going on this journey with our team, one that started nearly 30 years ago at Paddington Markets in Sydney. For us, the opportunity to work alongside so many talented and passionate people each day is a privilege and there is so much we want to achieve together. We look forward to working collaboratively with our new partners to achieve our shared ambitions for the brand, with our loyal clients at the center of that vision.”

Roberta Benaglia, CEO of Style Capital, added, “We are delighted to partner with Advent and to continue to support the Zimmermann team. Early in our conversations with the Advent team, it became clear that they recognized the considerable potential within the brand and shared a common vision for further expansion over the long term.”

Since its establishment in 1984, Advent has invested in more than 410 private equity investments across 42 countries. The firm focuses on investments in five core sectors — business and financial services; health care; industrial; retail, consumer and leisure, and technology.

Arguably one of Australian fashion’s biggest success stories, Zimmermann began in Sydney with Nicky Zimmermann designing dresses and selling them at Paddington markets. After getting two pages of editorial in Australian Vogue, she started to receive orders for the dresses from boutiques around Australia and opened a small store in Darlinghurst. In 1991, her sister Simone, cofounder and chief operating officer, joined the company, and together they began building the brand. Zimmermann’s dresses became recognizable for their flowy chiffon fabrics, use of ruching, tulle, colors and prints. Over the years, their fan base has grown to include fellow Aussie Margot Robbie, Kendall Jenner, Katie Holmes, Laura Dern, Beyoncé and Kate Middleton.

Today, Zimmermann has been aggressively opening freestanding stores around the world, with 22 stores in the U.S., 20 in Australia and 14 in the U.K. and E.U.. In the U.S., stores are in such locations as SoHo, Meatpacking District, Madison Avenue, East Hampton, Southampton, and Americana Manhasset in New York; Atlanta; the Miami Design District, Bal Harbour and Palm Beach in Florida; Dallas and Houston in Texas; Honolulu; Melrose Place in Los Angeles, and San Francisco. Internationally stores have popped up in cities such as London; Paris, Cannes and Saint-Tropez in France; Milan, Florence and Capri in Italy; Madrid; and Shanghai.

Zimmermann’s products run the gamut from ready-to-wear, including dresses, knitwear, denim, skirts, pants, tops, outerwear, jumpsuits, and T-shirts, to swimwear, shoes, accessories, jewelry and kids’.

Charlie Ergen Nears Deal to Merge Dish, EchoStar

A deal between the companies, controlled by the billionaire, could be announced Tuesday

Charlie Ergen is nearing a deal to merge his major holdings, Dish Network DISH 0.66%increase; green up pointing triangle and EchoStar SATS 21.26%increase; green up pointing triangle, a move aimed at giving him the financial flexibility to build a nationwide wireless network strong enough to take on the likes of AT&T and Verizon.

A deal could be announced as soon as Tuesday, barring any last-minute snags, according to people familiar with the matter.

Precise terms couldn’t be learned, but the price could be a discount to where EchoStar stock closed following a surge of more than 20% on Monday ahead of the company’s earnings report. The price will still be a premium to where the shares changed hands in recent weeks, when they were around $17, the people said.

The current CEO of EchoStar, Hamid Akhavan, is expected to serve as president and chief executive of the combined company upon the closing of the deal.

Dish has a market value of about $4 billion, while EchoStar’s is about half that.

A transaction would reunite Dish’s pay-TV business and fledgling 5G network with EchoStar’s satellite-communications infrastructure.

Ergen, the billionaire telecommunications entrepreneur, controls both companies, each of which contains different parts of an empire built over four decades. Dish serves millions of pay-TV and cellphone customers through brands including Sling TV and Boost Mobile and has amassed a cache of spectrum licenses to support its wireless ambitions. EchoStar runs a fleet of satellites that serve HughesNet home-internet users as well as business and government clients.

Ergen co-founded EchoStar as a satellite-television equipment distributor in 1980. In 2008, the company changed its name to Dish Network and spun off its technology arm as EchoStar.

The two companies have shifted assets over the years. Dish acquired certain assets in 2017 and struck another deal in 2019 to buy EchoStar’s broadcast-satellite business. Ergen, who stepped down as CEO of Dish in 2017, remains chairman of both companies.

Dish, a longtime presence in satellite television, has spent more than a decade laying the groundwork to be a major player in the wireless sector.

Ergen has said his company aims to pivot its operations away from a shrinking pay-TV service as cord-cutting accelerates. Dish has said it expects its overall 5G, or fifth-generation, wireless network to cost more than $10 billion to build.

Heavy spending on the new network tipped Dish’s free cash flow into negative territory last year, causing its debt to trade at distressed levels. Ergen in May said the debt market was essentially closed to Dish but hinted that the asset-rich company still had several options at its disposal.

EchoStar had $1.7 billion in cash on its balance sheet as of March 31. It continued to generate cash in the March quarter and is primed for more growth as it brings its new Jupiter 3 satellite online. The company had been set to report its second-quarter results Monday but recently delayed the release until Tuesday morning.

Ergen has been trying to win back investor confidence in his wireless strategy. Dish shares have hit lows not seen in more than two decades this year as analysts question whether his project will pay off before billions of dollars of debt come due in the coming years.

Semafor last month reported that Ergen was exploring a deal between EchoStar and Dish.

Streaming losses forecast to eat into profits when media group reports results this week

Bob Iger’s retirement from Disney only lasted 11 months, but since his return as chief executive in November he has admitted to being surprised by the number of problems he has discovered at the company. 

The decline of the traditional television business has been worse than he thought, leading to a serious drop-off in advertising — and questions about whether the networks remain “core” assets for Disney.

A number of box office disappointments, including the recent Haunted Mansion, have prompted analysts to conclude that Disney’s vaunted movie studios have lost their creative spark.

“In some cases the challenges are greater than I had anticipated,” Iger told CNBC last month. “The disruption of the [traditional TV] business has happened to a greater extent than even I was aware of.”

For years the thriving TV business helped pay for splashy acquisitions that marked Iger’s first 15-year tenure, including the hit machines Pixar and Marvel. Later, TV subsidised its expensive push into streaming. But it has now become a drag on the company.

“He’s got some very tough decisions” to make, said a top shareholder. “What do you do with linear [TV]? Linear is a big problem. It still spits tonnes of cash but it’s a declining [business]. And if you try to sell it, I don’t know who’s going to buy it.”

With the stock down 21 per cent over the past year, Iger has been unusually willing to publicly float ideas about which parts of Disney he might want to get rid of.

He wondered aloud earlier this year whether the Hulu streaming service remained essential to Disney, only to say later that it was. He told CNBC that the business model behind traditional TV networks, including ABC, is “definitely broken”, noting that they “may not be core to Disney”.

Iger recently retained two former Disney executives, Kevin Mayer and Tom Staggs, to help him examine options for the TV business, including ESPN, the sports network that for years was the company’s growth engine. Iger is said to be seeking partners to run ESPN, which could include sports leagues or other media groups. It is also examining options for its Indian TV business, according to three sources.

While the TV business is a big headache for Iger, he also faces the challenge of slashing the huge losses in Disney’s streaming businesses, which the company has forecast will not turn its first profit until 2024. 

Streaming and the TV networks are expected to be a drag on Disney’s earnings when it reports quarterly results on Wednesday, along with the weaker-than-expected box office performance of summer films including Indiana Jones and the Dial of Destiny.

Disney is expected to earn 96 cents a share, down from $1.09 a year earlier, on revenue of $22.4bn. Operating losses in the Disney+ streaming service are expected to total $760mn, up $100mn from the previous quarter, according to Citi estimates. Its streaming business is expected to lose 3mn subscribers from the previous quarter.

Investors are also expecting an update on the $5.5bn cost-cutting initiative Iger announced shortly after his return, which has eyed 7,000 job cuts.

Iger’s return was cheered by investors and employees, who hoped that the veteran chief could stabilise Disney following the pandemic and the bumpy tenure of his successor, Bob Chapek. But he has recently drawn criticism after being awarded a two-year extension to his contract, which renewed old doubts about his willingness to leave the job and Disney’s succession planning. Iger’s latest contract ends in 2026.

“Already a two-year tenure has become four years,” noted one former employee. Potential successors “wouldn’t wait for that long, especially when they don’t know if Iger will leave even then”.

Iger, long considered the voice of Hollywood, has also come under fire from striking writers and actors when he said that their expectations were “not realistic”.

There have been internal tensions, including with former chief financial officer Christine McCarthy, who had played a role in unseating Chapek. Disney cited medical reasons when it announced in June that she was stepping down, but three people familiar with the situation told the Financial Times that she departed after tensions arose between her and Iger.

“This is pretty well known in the company,” said a former employee. “She was independent minded and Iger thought that she wasn’t sufficiently loyal to him and his agenda.” McCarthy could not be reached for comment.

McCarthy has been replaced on an interim basis by Kevin Lansberry, but the company has started to search for a full-time CFO.

As it looks to cut costs, Disney is also examining its options in India, where it lost the rights to stream Indian Premier League cricket matches last year in a record-breaking $6.2bn auction. It retained the broadcast rights, however.

“They are certainly looking at options to pare down the liabilities in India,” said an executive familiar with the business. “I suspect an outright sale will be one of the options but it’s not the first or the only option. Iger would want to spin it into a strategic pivot rather than a fire sale.”

Disney declined to comment.

Other former executives said it would be a mistake for Disney to exit the India business altogether. “It hasn’t been pretty, and there’s a lot of sunk costs there,” said one former Disney executive. “But selling would mean they lose their foothold in what’s going to be the fastest-growing market that they can get into, because they’ll never get into China.”

Also hanging over Iger is a looming transaction with Comcast, which owns one-third of the Hulu streaming service. In 2019 the companies agreed that either side could force a transaction starting in January 2024, with Comcast holding the right to “put” the stake to Disney, or Disney being able to “call” the stake from Comcast.

Disney is expected to buy out the Comcast stake, which could fetch $9bn or more. 

“Comcast is going to strangle him [Iger] on the price at a time when he can least afford another . . . acquisition,” said the shareholder. “He’ll be getting further into debt.”

Franco-Israeli entrepreneur makes first comments since Portuguese authorities opened investigation into longtime partner

Billionaire Patrick Drahi has cast Altice, the sprawling telecoms group he built, as the victim of alleged fraud perpetrated by his longtime partner Armando Pereira in his first public comments since the scandal erupted last month.

“This has come as a shock and as a huge disappointment to me,” the Franco-Israeli businessman said on a call with debt investors on Monday. “If the allegations are true, I feel betrayed and deceived by a small group of individuals, including one of our oldest colleagues,” he added.

Altice has been rocked since Portuguese authorities disclosed a criminal investigation in July. The probe centres on whether Pereira and others were involved in a scheme to enrich themselves by rigging the French group’s local procurement processes in Portugal. Pereira has been placed under house arrest by judges while the police probe continues.

Pereira has previously denied wrongdoing.

The crisis comes as the group’s debt pile has ballooned to more than $60bn amid rising interest rates. Drahi added that the investigation in Portugal would have no impact on the business or the group’s ability to pay its debts, and promised that Altice was co-operating with authorities.

“I assure you that we take this matter very seriously, and we are taking swift proactive action to understand the truth and protect the group from any harm in the event that the allegations are substantiated,” he said.

The billionaire, who built Altice via a series of debt-fuelled deals, also sought to reassure investors that the group did not have any short-term maturities and would be able to deleverage and refinance its borrowings.

Drahi and Pereira have worked together for decades and people who know them both have said they formed a close tandem internally, with Pereira being in charge of cost-cutting each time Altice bought a new company. Although the pair have often been described as co-founders, Drahi sought to distance himself on Monday by calling Pereira a manager he had hired in 2003. 

Drahi clarified that Pereira did not have a direct stake in Altice, nor the Next holding company above it, but confirmed that he did make a small investment in Altice’s first acquisition of less than 1 per cent of the equity and received a carried interest indexed on Altice’s private equity investors.

“Over time, the form of his economic interest evolved, and since 2005 he did not own a single share or right in any of the Altice entities but simply maintained a carried interest of around 20 per cent of my personal economic interest,” said Drahi.

The fallout from the probe has shaken Altice, which has mobile and broadband operations in the US and Europe and rose to prominence during an acquisition spree under Drahi that included the €17bn takeover of France’s SFR in 2014.

Drahi, who has an almost 25 per cent stake in UK telecoms group BT, said on Monday that he would meet creditors in New York and London in September, a step bondholders see as a further effort to allay their concerns over the probe and to lay the groundwork for ways to address its debts.

Speaking alongside Drahi on the call, Altice executives said they were focused on refinancing debt maturing in 2025 and 2026 — a move that will be more expensive given the rapid rise in interest rates over the past 18 months.

Prices for the group’s bonds, which remain in distressed territory, ticked higher after the call with a $1.56bn bond issued by Altice France maturing in 2027 climbing more than 3 cents on the dollar to 49 cents, according to activity reported to Finra.

“The story [for Altice] has always been we’ll lever up to do a deal and then we will use the cash flows from our operational improvement to pay down debt,” said John McClain, a portfolio manager with Brandywine, which has invested in Altice debt. “The last part never manifested itself. It is just continuously borrowing more money to buy more things.”

In the earnings statement released before the call, Altice said it was carrying out internal audits across its businesses, which include broadband and mobile operators in France, the US and Israel.

Altice promised a “full review and thorough reinforcement of the approval process on all procurement, payments, purchase orders and related processes”.