All the world’s a stage: Gucci, Louis Vuitton and Chanel go global for cruise
The luxury brands launched their collections in lavish locations from Monte Carlo to the California coast
UniCredit and Commerzbank merger talks derailed by Ukraine war
Italian and German chief executives scheduled talks earlier this year but shelved tie-up
UniCredit and Commerzbank were on the cusp of merger talks this year before the Ukraine war scotched a deal that could have kickstarted European banking’s long-awaited cross-border consolidation wave.
Three people with direct knowledge of the matter told the Financial Times that in early 2022 UniCredit’s chief executive Andrea Orcel planned informal discussions about a potential combination of the Italian lender’s German HypoVereinsbank subsidiary with his opposite number at Commerzbank, Manfred Knof.
The transaction would have formed Germany’s second largest lender with €785bn in assets, 1,000 branches and 48,000 employees.
Analysts have long seen a tie-up between UniCredit and Commerzbank as one of the most attractive combinations in European banking as there is relatively little regional overlap between the lenders’ German operations.
HypoVereinsbank, which Milan-based UniCredit acquired in 2005 and is more profitable than its German peer, has a strong local footprint in Bavaria and the Hamburg area, while Commerzbank is present across Germany.
The deal, which UniCredit previously explored in 2019 as an alternative to Commerzbank’s subsequently-aborted tie-up with Deutsche Bank, would have been the first big cross-border deal in Europe’s fragmented banking sector.
Orcel arranged a meeting in early 2022 in Germany to discuss the merger with Knof, according to people with knowledge of the discussions. But before details could be thrashed out by the CEOs, Moscow had invaded Ukraine.
UniCredit instead decided it needed to manage its exposure to Russia before embarking on any large dealmaking. UniCredit is one of a handful of western banks with large operations in Russia.
Orcel has said the group is considering exiting the country and has revealed it stands to lose €5.3bn on the business in a worst case scenario. It has already begun swapping credit portfolios with local lenders.
The prospect of higher interest rates had buoyed European lenders’ shares until the war started, with Commerzbank disclosing a week before the invasion that higher interest rates in Europe would deliver a billion-euro windfall to its bottom line by 2024.
But concerns over the economic fallout of the war, and potential disruptions of Russian energy supplies, have sent share prices downwards since late February -- UniCredit has lost more than a third and Commerzbank fell by 26 percent.
US investors like Capital Group pulled out of European banks over the past three months, selling large stakes in Commerzbank, Deutsche Bank and Barclays. The US fund manager was UniCredit’s largest shareholder, but last week cut its stake from 6.8 per cent to below 4 per cent.
The fragmented nature of Europe’s banking market has been considered a handicap for its lenders, which have lost ground to US rivals on profitability and market share.
EU regulators and policymakers have urged banks to consider combining to improve economies of scale - but no large cross-border deals have taken place with banks complaining that EU capital requirements and differing regulatory regimes make mergers too punishing.
A tie-up between the two banks is still considered the most likely large deal, in part because Commerzbank has the German state as a 15 per cent shareholder after a €23bn bailout in 2008 and 2009, and is seen by analysts as sub-scale.
After a shareholder rebellion that followed years of failures to cut Commerzbank’s bloated cost base, Knof was parachuted in January last year as part of a last-ditch effort to restore profitability. In the first quarter of 2022, the bank’s net profit more than doubled to €298mn, following a better-than-expected performance in 2021.
UniCredit initially approached German officials about a tie-up with Commerzbank in 2017 and prepared a bid three years ago, according to people with knowledge of the moves.
Under the original plans, UniCredit would have amassed a sizeable stake in Commerzbank and merged it with HypoVereinsbank.The combined entity would have been based in Germany while UniCredit would maintain its headquarters and listing in Milan. Commerzbank would retain a free float of shares listed on the Frankfurt stock exchange.
Commerzbank’s market capitalisation has since shrunk from €9bn at the time to €7.8bn, while UniCredit’s stock market value is €21bn, down a third from three years ago.
UniCredit and Commerzbank declined to comment.
After Hours Summary: DLO +16.9%, AGYS +13.9%, TCS +10.3% higher on earnings; DOCS -16.7% falls on earnings; NCMI +17.9% jump as AMC discloses stakeAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: DLO +16.9%, AGYS +13.9%, TCS +10.3%, APPN +1.9% (reaffirms guidance; also Chief Revenue Officer to leave)
Companies trading higher in after hours in reaction to news: NCMI +17.9% (AMC discloses 6.8% stake in NCMI), SPNT +9% (Chairman and CEO resigns to pursue other opportunities), AMC +3.1% (AMC discloses 6.8% stake in NCMI), BAH +2% (wins NASA cybersecuirty contract, according to FedScoop), AMR +1.7% (responds to report from activist short-selling firm), AMWL +0.3% (to shorten earnout period with acquisition of SilverCloud Health), MAA +0.2% (increases dividend), CWK +0.2% (acquires Cresa Partners of Los Angeles), RNR +0.2% (files for $1 bln mixed securities shelf offering), GRIN +0.1% (sells medium range product tanker, acquires a supramax bulk carrier), APPS +0.1% (to restate results for JunQ, SepQ and DecQ)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: DOCS -16.7% (also authorizes up to $70 mln for share buybacks), NXGN -2.4%, KEYS -0.5%
Companies trading lower in after hours in reaction to news: LAB -4.3% (stock offering), ACRE -3.7% (stock offering), CASA -2.1% (stock offering), ROOT -1.5% (launches Root Insurance in Alabama and Florida), LMT -1% (awarded $630 mln Navy contract), DWAC -0.9% (to delay 10-Q filing), HVT -0.1% (increases dividend), RES -0.1% (CEO to transition to Exec Chairman role), FE -0.1% (names new board chair)
Closing Stock Market SummaryThe S&P 500 rose 2.0% on Tuesday, as the market was supported by a contrarian mindset and a reprieve in growth concerns. The Nasdaq Composite (+2.8%) and Russell 2000 (+3.2%) raced ahead the benchmark index with about 3% gains while the Dow Jones Industrial Average rose 1.3%
Ten of the 11 S&P 500 sectors closed higher by at least 1.0%, including five sectors with gains over 2.0%. The information technology sector (+2.9%) claimed the top spot, while the consumer staples sector (-1.2%) was the lone holdout amid an 11% drop in Walmart (WMT 131.35, -16.86, -11.4%) following its disappointing earnings results and guidance.
The contrarian mindset today was rooted in a BofA Global Fund Manager Survey that showed cash levels at their highest position (6.1%) since 9/11 and the largest underweight position in equities since May 2020. Growth concerns were alleviated by the following developments:
Home Depot (HD 300.95, +4.93, +1.7%) reported better-than-expected earnings results and guidance, United Airlines (UAL 46.97, +3.43, +7.9%) increased its Q2 unit revenue outlook, total retail sales for April rose 0.9% as expected, retail sales excluding autos rose 0.6% (Briefing.com consensus 0.3%), and industrial production for April jumped 1.1% (Briefing.com consensus 0.9%).
In addition, Shanghai reported no new COVID cases for three straight days outside quarantined zones, further supporting its reopening initiative. On a related note, Hong Kong plans to relax coronavirus restrictions later this week while Japan plans to allow small groups of tourists to enter the country this month.
An improved growth perspective helped tame inflation concerns, which were highlighted by Walmart and Fed Chair Powell at a Wall Street Journal virtual event. Home Depot also mentioned inflation pressures, which contributed to an 8.2% yr/yr decline in customer transactions in the first quarter.
Mr. Powell said the Fed will be more aggressive with rate hikes if inflation doesn't come down in a clear way, but he did preface the comment with an observation that the Fed can be less aggressive if inflation does clearly come down. This was largely consistent with his prior view on monetary policy.
The Treasury market was in sync with rate-hike and inflation expectations, as well as with the general upbeat mood on Wall Street. The 2-yr yield rose nine basis points to 2.67%, and the 10-yr yield rose nine basis points to 2.97%. The U.S. Dollar Index fell 0.8% 103.35. WTI crude futures fell 1.4%, or $1.59, to $112.21/bbl.
Reviewing Tuesday's economic data:
- Total retail sales increased 0.9% month-over-month in April ( consensus 1.1%) following an upwardly revised 1.4% increase (from 0.5%) in March. Excluding autos, retail sales rose 0.6% ( consensus 0.3%) after increasing an upwardly revised 2.1% (from 1.1%) in March.
- The key takeaway from the report, which is not adjusted for inflation, is that higher pricing helped in the sales growth, yet spending increased across most discretionary categories.
- Total industrial production increased 1.1% month-over-month in April ( consensus 0.5%), marking the fourth consecutive month of gains of 0.8% or greater. The capacity utilization rate increased to 79.0% (consensus 78.6%) from a downwardly revised 78.2% (from 78.3%) in March.
- The key takeaway from the report is that it shows ongoing strength in industrial production and exposed the potential for further strength as motor vehicle production is expected to improve with any improvement in supply chains, particularly for semiconductors.
- The NAHB Housing Market Index for May decreased to 69 (consensus 75) from 77 in April.
- Business inventories increased 2.0% m/m in March ( consensus 1.9%) following a revised 1.8% increase (from +1.5%) in February.
Looking ahead, investors will receive Housing Starts and Building Permits for April and the weekly MBA Mortgage Applications Index on Wednesday.
- Dow Jones Industrial Average -10.1% YTD
- S&P 500 -14.2% YTD
- Russell 2000 -18.0% YTD
- Nasdaq Composite -23.4% YTD
In addition to the mauling suffered by the OG of all tech investors, Tiger Global, which we profiled earlier and which saw widespread sales and liquidations in its tech-heavy portfolio, a rundown of the latest 13F data reveals that many other hedge funds also cut their exposure to the stock markets worst performing sectors in the first quarter - primarily tech - while significantly increasing their holdings of surging energy shares, according to a Bloomberg analysis of the data. Overall, the moves have been beneficial to the funds with the sectoral trends continuing into the second quarter, and adverse to those funds - like Tiger and its offspring - which retained an overweight exposure to tech.
The S&P 500 fell 5% in the first three months of the year, but there was a wide variance in sector performance. Energy stocks led the way, soaring by 38%, while the worst performing groups were information technology (-8.6%), consumer discretionary (-9.2%) and communication services (-12%), all of which are especially sensitive to rising interest rates.
According to a summary of the latest trends courtesy of Bloomberg's Justin Zacks, investors decreased technology holdings by 1.4%. Among the largest aggregate sales in the group were Microsoft Corp., which saw its stock price decline 8.3% in the quarter, PayPal Holdings Inc. down 39%, and Shopify, down 51%.
The consumer discretionary sector saw a -0.8% decrease in its weighting by large investors. Home Depot Inc. had several large exits as mortgage rates soared to multiyear highs. Nike Inc. and Starbucks Corp. also saw large drops in aggregate holdings as supply chain issues and worries over demand in China due to Covid-19 lockdowns plagued the companies. Polen Capital Management reduced its stake in Starbucks by 12.3 million shares to 849,854 shares in the first quarter.
Funds decreased their exposure to the communications sector by 0.8%, led by large sales of Meta Platforms Inc., which lost 34% in the quarter. Edgewood Management sold 8.4 million shares of Meta in the first quarter, almost its entire position.
Institutional investors increased their weighting in the energy sector by 1.2% in the first quarter, led the sectors largest company, Exxon Mobil Corp., up 35%, as well as oilfield service companies Schlumberger NV, up 38%, and Baker Hughes, up 51% (as we have been saying since late 2020, these names have much upside). West Texas Intermediate crude rose 33% in the quarter as Russias invasion of Ukraine curtailed supply amid strong reopening demand as a spike in Covid-19 cases waned.
Energy is the top performing S&P 500 sector in the second quarter, up 8%, while consumer discretionary (-21%), information technology (-16%) and communication services (-16%) comprise the bottom three again. This is likely helping hedge fund performance in the second quarter relative to an 11.5% decline in the S&P 500.
The best performing S&P 500 stock in the first quarter, Occidental Petroleum Corp., saw its overall weighting increase due to a 96% rise in its share price. But several large holders used the run-up to take profits. Carl Icahn sold his entire stake of 32.1 million shares, while MFN Partners Management exited its position of 10.9 million shares in the quarter.
Epam Systems Inc., the information technology services company with a significant employee presence in Ukraine, Russia and Belarus, was the worst performing in the S&P 500 index in the first quarter, down 56%. Many institutional investors rotated out of the name, including Morgan Stanley, which sold 3.8 million shares.
13F filings from some of the most prominent investors are moving stocks Monday.
- Carl Icahn also cut his exposure to LNG producer Cheniere Energy Inc. by 40% to 9.72 million shares. A purchase of 644,510 shares of International Flavors & Fragrances Inc. was his only new position.
- Sachem Head Capital Managements largest position, representing 22% of disclosed assets, is International Flavors, which it cut slightlyby 410,850 shares to 6.43 million in the first quarter.
- Sachem Head was a buyer of beaten up tech stocks during the quarter, including 253,100 shares of Salesforce Inc., down 16% in first quarter, 2.84 million shares of Opendoor Technologies Inc., down 41%, and 5.72 million shares of Momentive Global Inc., down 23%.
- Soros Fund Management pared its holdings in transportation and automotive stocks, exiting its 860,002 share position in General Motors Co., its 529,297 share position in Uber Technologies Inc. and its 35,550 share position in Lithia Motors Inc.
- Soros did not sell any shares of its largest holding, Rivian Automotive Inc., which represents 19% of its disclosed assets, despite a 52% drop in shares during the quarter.
- Trian Fund Management sold its entire 20 million share stake in Comcast Corp., which fell 7% in the first quarter amid a subscriber slowdown due to a pandemic pull-forward and increased competition. The telecommunications providers success will likely depend on its high margin broadband business, Bloomberg Intelligence analyst Geetha Ranganathan wrote in a research note Monday.
- Trian took a new 450,267 share stake in food company Mondelez International Inc. in the first quarter. Unilever Plc is down 1% Monday after Trian disclosed it did not make any purchases of the consumer goods companys stock in the first quarter despite press reports to the contrary.
- Appaloosas only two new buys in the first quarter were casino stocks, 525,000 shares of Las Vegas Sands Corp. and 225,000 shares of Wynn Resorts Ltd.
- In contrast, the fund, whose founder David Tepper told CNBC on May 10 that he covered his Nasdaq short, exited 12 of its holdings in the first quarter including the sale of a 1.28 share position in T-Mobile US Inc. and a 2.25 million share position in General Motors Co.
- Soroban Capital Partners was a seller of big tech in the first quarter, exiting its 1.58 million share position in Meta Platforms Inc., down 34% in the first quarter, and its 531,135 share position in Netflix Inc., down 38%. Its sole new purchase was a 2.03 million share position in Yum! Brands, Inc.
- Berkshire Hathaway Inc. was a seller of pharmaceutical stocks in the first quarter exiting its 3.03 million share stake in AbbVie and its 5.2 million share stake in Bristol-Myers Squibb Co.
- Berkshire, which already holds 1.01 billion shares of Bank of America Corp., a position which was unchanged during the quarter, opened a new 55.2 share position in competitor Citigroup Inc., while exiting its 675,054 share stake in Wells Fargo & Co.
Here are some other moves made by prominent funds tracked by Bloomberg:
APPALOOSA
- Top new buys: LVS, WYNN
- Top exits: TMUS, GM, DHI, PHM, KMX, ALIT, EWY
- Boosted stakes in: UBER, AMZN, MSFT
- Cut stakes in: FB, MU, PCG, M, XLE, GT, GOOG, XOP
BAUPOST GROUP
- Top new buys: GTN, NE
- Top exits: PSTH, NLOK
- Boosted stakes in: EHC, FISV, DBX, GOOG, IS, NUVB, QRVO
- Cut stakes in: FB, INTC, VRNT, MU, DBRG, ATRA, JOBY
BERKSHIRE HATHAWAY
- Top new buys: OXY, HPQ, C, PARA, CE, MCK, MKL, ALLY
- Top exits: ABBV, BMY, WFC
- Boosted stakes in: CVX, ATVI, FND, RH, GM, AAPL
- Cut stakes in: VZ, STOR, RPRX, KR
COATUE MANAGEMENT
- Top new buys: DOCU, LCID, NVAX, PANW, ENPH, AMD, BYND
- Top exits: BZ, LRCX, PFE, CFLT, SHOP, AMAT, MA
- Boosted stakes in: SQ, PTON, DASH, MRNA, TSLA, UBER, PARA
- Cut stakes in: RIVN, DIS, AMZN, PYPL, BNTX, BEKE
CORVEX MANAGEMENT
- Top new buys: CEG, AES, FMX, CRC, SWX, PSTH
- Top exits: PLAN, EXC, CRM, TMUS, DIS, ZNGA, MA, V
- Boosted stakes in: FIVN, AMZN, UBER
- Cut stakes in: MGM, GOOGL, JPM, CCEP, MSFT, EQRX
DUQUESNE FAMILY OFFICE
- Top new buys: TECK, CTRA, PXD, PNC, CVE, ZEN, WDAY
- Top exits: GOOGL, PANW, CVNA, ABNB, SBUX, LYV
- Boosted stakes in: CVX, MSFT, SMAR, TMUS, KBR, PLTR
- Cut stakes in: BKNG, SNAP, FLEX, SE, EXPE, DISH
ELLIOTT INVESTMENT MANAGEMENT
- Top new buys: SU, DO
- Top exits: DELL, HTA, DUK, ARNC
- Cut stakes in: EVRG, VAL, NE
- Boosted stakes in: MPC, ETWO
GREENLIGHT CAPITAL
- Top new buys: SWN, WFRD, INSW, SNX, XLE, FCG, OIH
- Top exits: JACK, SONO, TWTR, CNXC, FREY, SATS
- Boosted stakes in: KD, GLD, CIVI, CC, LIVN, REZI
- Cut stakes in: GRBK, CPRI, BHF, GPRO, VSCO, ME
ICAHN
- Boosted stakes in: IFF
- Top Exits: OXY
- Cut stakes in: LNG, NWL, DK
JANA PARTNERS
- Top exits: M, LPSN
- Boosted stakes in: ZEN
- Cut stakes in: THS, LH, SPY, EHC, MRCY
LONE PINE
- Top new buys: TSM, FB, TEAM, DKS, BILL, TMO, HUBS
- Top exits: BEKE, ADBE, SNOW, NTES, CFLT, PVH
- Boosted stakes in: SQ, MSFT, RH
- Cut stakes in: SHOP, SNAP, MA, UNH, DASH, BBWI
MAVERICK CAPITAL
- Top new buys: SQ, WSC, COUP, COST, FIVE, BURL, LULU
- Top exits: ATVI, ASO, SE, DD, CFLT, PCOR, BHG
- Boosted stakes in: TMUS, OSH, ULTA, DKS, SEAS, UAA
- Cut stakes in: CPNG, NFLX, LRCX, FB, ADBE, V, AMAT
SACHEM HEAD CAPITAL MANAGEMENT
- Top new buys: ZEN, MNTV
- Top exits: KBR, DEN
- Boosted stakes in: LIVN, CVNA
- Cut stakes in: IFF, UBER, FLEX, USFD
SOROBAN CAPITAL
- Top new buys: YUM
- Top exits: FB, FIS, NFLX, MA
- Boosted stakes in: CVE, X, AA, NTR
- Cut stakes in: LOW, MSFT, ADI, V
SOROS FUND MANAGEMENT
- Top new buys: ZNGA, FRSH, TEAM, LCID, TJX, MGM, STRY
- Top exits: ATVI, GM, ALLY, UBER, MQ, OMF, HAIN
- Boosted stakes in: CERN, GOOGL, JPM, NKE, ACN, INTU, CRM
- Cut stakes in: DHI, LBRDK, ARMK, PTRA, ELAN, OPEN
STARBOARD VALUE
- Top new buys: HUM, MRCY, KSS, LPSN, ETAC, IRRX, TGR
- Top exits: SST
- Boosted stakes in: GDDY, CYXT, WTW, ARTE, ACAQ, IQMD
- Cut stakes in: ACIW, CERN, ON, CTVA, CVLT, IWM
THIRD POINT
- Top new buys: CSX, AA, OVV, SU, MOS, IR, CVE, WDC
- Top exits: GOOGL, UPST, ACN, CSGP, BURL, DIS
- Boosted stakes in: S, EQT, ZEN, HTZ, DD, CANO
- Cut stakes in: AMZN, INTU, MSFT, RIVN, DHR
TIGER GLOBAL
- Top new buys: STRY, DAVE
- Top exits: NFLX, ADBE, COUP, RUN, PYPL, ASAN
- Boosted stakes in: CRWD, LI, MNDY, SQ, BZ, S, TOST
- Cut stakes in: ZM, FB, DASH, UBER, AMZN, DOCU
TRIAN FUND MANAGEMENT
- Top exits: CMCSA
- Boosted stakes in: IVZ, MDLZ, GE, JHG, FERG
- Cut stakes in: SYY, PG
VALUEACT
- Top new buys: BLD
- Boosted stakes in: NSIT, KKR
- Cut stakes in: STX, TRN, BHC, SLM
Fed Chair Powell: There is broad support on FOMC for having 50bps hikes on the table for next two meetings; That is short of a prediction, though - WSJ event comments
- If economy performs as we expect, then 50bps hikes will be on the table
- We know this is a time for the Fed to be tightly focused on getting inflation back down to 2%; Ongoing rate increases are appropriate
- We need to see growth moving down from high levels; We need supply side to have chance to catch up
- Financial conditions have tightened quite a bit
- It's very difficult to think about giving forward guidance
- We have the tools and resolve to get inflation down
- We need to see inflation coming down 'in a clear and convincing way'; If we do not see that, we'll have to move more aggressively; If we see inflation coming down, can slow pace of hikes
- Monetary policy like to work through expectations; Markets are pricing in a series of rate hikes
- By standards of central bank practice, we're moving as fast as we have in several decades
- Underlying strength of the US economy is really good right now; Labor market remains extremely strong
- No one should doubt Fed's resolve
- We are raising expeditiously to a more normal level, Will reach it in Q4
- We don't know where neutral is or where tight is; Will be looking meeting by meeting and data point by data point about what's happening in the economy
- We will continue raising rates until we see inflation coming down; There will be no hesitation about that
L Catterton Buys Bellami, Building in Hair Extension Business
The private equity giant sees a wellness angle and plenty of room to grow in the category.
L Catterton is going bigger in hair extensions — and sees plenty of opportunity for more growth as the category develops.
The consumer private equity giant started in the area last year, acquiring control of extension specialist Beauty Industry Group. Now, BIG has closed a deal to buy Bellami Hair, expanding its portfolio to 14 extension brands and opening up a new avenue of distribution.
Bellami, which was founded by Nikki Eslami and Julius Salerno in 2012, skips the distributor and sells its 100 percent Remy human hair extensions directly to salons with independent sales reps, a digital approach and educational support specialists.
That’s another angle on a category that Derrick Porter, chief executive officer of BIG, said is still in the early days of a dramatic growth curve.
“Right now only about 15 to 20 percent of hairdressers are offering hair extensions as a service,” Porter told WWD. “And only about 3 percent of American women are using hair extensions as a product.”
It took Porter a while to see the modern consumer potential in the age-old practice of applying hair extensions.
“Fifteen years ago we were convinced that hair extensions were a fad,” said Porter, who had a third-party logistic company with his wife that worked with the Donna Bella Hair brand. “It was something that was really for the rich and famous movie stars and wasn’t talked about at all.”
But after getting a closer look at Donna Bella’s business, Porter went to the owner and said: “Your business is way better than mine. You have the ability to scale.”
That led to Porter becoming a partner, but still not a believer in the long term.
“We jumped in with both feet,” he said. “The first four or five years we were convinced that it was a fad and that it would end any day.”
After it didn’t fade, he thought maybe it was a trend that would go a little longer before finally realizing there was a more substantial business there.
“Wow, we’ve actually created a category where stylists are making a sizable amount of income from the service of hair extension,” he recalled thinking as the business solidified.
“Hair extensions might even be the wrong word for what we do now,” Porter said. “What we’re learning is that almost 67 percent of our customers purchase hair extensions to solve a problem.”
These include alopecia, thinning hair and other hair issues that can take an emotional toll and give BIG a powerful connection to consumers.
Porter compared hair extensions to hair color, a category that over the past 50 years has grown to become transformative for both the beauty industry and consumers.
“Hair extensions are ready to go prime time,” Porter said. “It’s already starting when you look at the data; we just have really never gone out and talked about it.”
Looked at as an emotional bastion — and one with big growth potential — the category also sits into a sweet spot for L Catterton, which takes a thematic approach to the market and has been putting money into the wellness category broadly with investments in Peloton, the Wells Group fitness company in China and others.
L Catterton, which has backing from LVMH Moët Hennessy Louis Vuitton, touts itself as the world’s largest consumer-focused private equity company. In addition to BIG, it owns Birkenstock, Bliss, Ganni, Etro and many others while holding minority stakes in Rihanna’s Savage x Fenty, Rhone, Gentle Monster, The Honest Company and more.
Avik Pramanik, a partner at L Catterton, said BIG plays in an area that is “completely misunderstood by both observers in the beauty category and by consumers.”
Where the perception might be that it’s the 25-year-old Ariana Grande fan looking for hair extensions, the reality is that most of the consumers are over 35 years old and are more concerned with self esteem, Pramanik said.
“It has never been more important to help this consumer address hair problems,” he said, adding that engagement opens up other opportunities. “We want to, over time, help that consumer in other ways that address her hair challenges.”
In the meantime, the category is simply good business.
“The profit pool in hair extension is good for almost everyone that touches it,” Pramanik said.
That extends from the people who sell their hair — giving about 15 percent to 20 percent of their hair in the process — to the stylists who specialize in the process. (BIG is a member of the United Nations Global Compact and publishes an environmental, social and governance report detailing priorities and safeguards in its operations.)
Pramanik said there are always new artists who are coming up with hair extension techniques and building new brands that can develop to become potential acquisitions for BIG, which has back-end teams that handle finance, demand forecasting, media buying and so on.
“After joining BIG, they have the opportunity to do what they love and not get bogged down,” he said.
Salerno, who leads BIG’s latest brand as CEO, said: “This transaction is an exciting milestone for Bellami as we continue cultivating methods to reach our consumers through authentic and effective channels. I look forward to working closely with the entire BIG team to bring Bellami to even more customers and accelerate our important investment in stylist education.”
Eslami, the brand’s other founder, will stay on as an adviser to BIG, noting: “Their like-minded focus on elevating the hair solutions category marks a natural evolution of Bellami’s mission over the past decade. With BIG’s support, Bellami will expand its reach in meeting the diverse hair needs of women, whether it be thinning, alopecia, dryness, postpartum hair loss, damaged hair, or length. It is no surprise that hair is emotional, and a critical part of many people’s identity. We want it to be a source of confidence.”
Terms of the deal were not disclosed.
China pledges support to tech companies after market rout
Beijing’s top economic official holds meetings with executives and industry experts on Tuesday
China’s top economic official met dozens of executives and industry experts on Tuesday, pledging “support” for technology companies amid a deepening economic slump.
Liu He, a vice-premier and President Xi Jinping’s closest economic adviser, said China “must support the platform economy, and sustain the healthy development of the private economy”.
He added that China should better “balance the relationship between the government and the market, and support digital companies to list on domestic and foreign exchanges”, according to state media.
Video footage from state broadcaster CCTV showed Baidu founder Robin Li and Qihoo 360 founder Zhou Hongyi at the meeting.
Markets were closely watching news of the meeting put on by China’s top political consultative body in the hope it could signal an end to Beijing’s regulatory crackdown on internet companies.
But in remarks aired by the state broadcaster on Tuesday evening, Liu made pledges similar to those he had made two months ago, when he first intervened to urge a quick conclusion of China’s tech crackdown and pledged to boost the ailing economy.
Shares of Chinese companies such as Alibaba and Pinduoduo were up more than 5 per cent in early trading in New York.
Since Liu’s March 16 remarks, little public progress has been made on resolving the national security investigation into ride-hailing giant Didi or the restructuring of Jack Ma’s fintech company Ant Group.
Didi’s apps have been stripped from online stores for nearly 11 months. The company will next week hold a vote on delisting from the New York Stock Exchange, a step the company said was necessary to wrap up the government probe, while its Hong Kong IPO is also on hold.
China’s top political consultative body, the Chinese People’s Political Consultative Conference, routinely holds meetings to bring together leaders in the private sector, religious and academic spheres who serve on the ceremonial body. Tuesday’s meeting focused on China’s digital economy, a reference to the tech sector.
Amid the economic downturn caused by Xi’s zero-Covid policy and regulatory tightening, China’s state media and leaders have used pledges of support for the economy to boost market confidence.
“It’s not accurate to say the crackdown is going to ‘end’, how can it end?” said an investment manager at a leading Chinese tech company, adding that Liu’s remarks served only to stabilise market expectations.
Larry Hu, chief China economist at Macquarie, said that “what’s more important is the meeting itself as a gesture, in order to boost the confidence among investors and corporate”.
Wang Yang, a member of the politburo standing committee, told the conference the tech sector should study Xi’s words on the digital economy and balance the need for “development and security”.
ENI defies Brussels by opening rouble account for Russian gas payments
EU reiterates move would breach bloc’s sanctions against Moscow
Eni is to open a rouble account with Gazprombank to comply with Russian demands for gas sales, a move that puts the Italian energy group on a collision course with Brussels over EU sanctions against Moscow.
Eni’s announcement comes days before it is due to make its next payments for Russian gas from state-owned supplier Gazprom. Russian gas accounts for nearly 40 per cent of Italy’s total gas imports.
Russian President Vladimir Putin in April issued a decree requiring companies from countries deemed “unfriendly” to pay in roubles for gas, by opening one account in euros and another in roubles at Gazprombank, the financial arm of Gazprom.
The European Commission responded that the revised terms were an attempt to force European companies to circumvent sanctions on the Russian central bank, imposed in retaliation for Moscow’s invasion of Ukraine in February.
After Poland and Bulgaria decided not to comply with Russia’s decree, Gazprom halted gas supplies to both countries. But other companies and countries have sought a workaround to keep gas flowing and protect their economies, heralding possible clashes between the commission and the 27 member states, which enforce sanctions.
Commission spokesperson Eric Mamer reiterated on Tuesday that the opening of a rouble-denominated account at Gazprombank would be a breach of the bloc’s sanctions.
“Anything that goes beyond the guidance given to member states — opening an account in the currency foreseen in the contract, paying in that currency and making a statement that the payment is concluded once that gas delivery is paid in that currency — is in breach of the sanctions,” Mamer said, adding: “Opening a second account, in roubles, is going beyond the guidance we gave member states, indeed.”
Eni said it had discussed its plan with “Italian institutions” and disputed it would breach EU sanctions.
“The company is going to temporarily open the two accounts without prejudice to its contractual rights, which still envisage payment in euros. This explicit conditionality will be included in the payment procedure,” it said in a statement.
The company, which is 32 per cent owned by the Italian state, said it would receive invoices and make its payments in euros — the currency agreed in its long-term gas purchase contract — by depositing them into the euro account.
Within 48 hours of payment, an agent operating from the Moscow Stock Exchange will convert the euros into roubles without involving Russia’s central bank, it said.
It had clarified with Gazprom that its payment obligations would be considered fulfilled once its payment in euros was received, it added. “The new procedure should be neutral in both cost and risk and not incompatible with the existing sanctions.”
However, Eni said that it was still in talks with Gazprom to ensure that any foreign currency risk involved in the system would fall to Gazprom — which the commission had said was a big issue when assessing sanctions violations.
In the event that it does not receive “complete, exhaustive and contractually grounded answers” from Gazprom, Eni will pursue international arbitration against the Russian energy company.
The looming clash between Eni and Brussels would put Italy’s prime minister Mario Draghi in a delicate position: the former European Central Bank president has been one of the architects of the sanctions against Russia’s central bank and its government is the legal enforcer of sanctions in Italy. Brussels could take legal action against Rome if it determined Italy had failed to enforce the sanctions, a process that could take years.
Other European companies are finalising plans to make upcoming gas payments. French utility Engie declined to disclose details of its agreement with Gazprom, including whether it had opened an account in roubles ahead of an “imminent” payment deadline.
“We have today line of sight for a solution that will allow us to pay using the currency for the contract, which seems to be acceptable for Gazprom and which is in compliance with the EU sanctions,” chief executive Catherine MacGregor said on Tuesday.
Germany’s Uniper, which has payments due at the end of the month, also said it expected to pay for gas in a manner that would respect sanctions and Russia’s requirements. “Uniper will continue to pay in euros,” a spokesperson said, adding that it was in talks with Gazprom about modalities in “close consultation with the German government”.
RWE said: “We are prepared for payment in euros and have also opened a corresponding account. We are thus acting in accordance with European and German regulation.”
Germany’s economy ministry, in a Twitter message, sought to defuse suggestions that sanctions were “being loosened and energy payments in roubles are to be made possible”.
“The German economy ministry knows nothing about this and in our opinion all companies are continuing to pay in dollars and euros, according to their contracts,” it added.
EU prepares to sell more carbon permits to pay for exit from Russian gas
Plan risks pushing up emissions by making it easier to use other fossil fuels
Brussels wants to raise €20bn to fund the EU’s exit from Russian energy by selling surplus carbon emissions permits — a move that risks hitting the bloc’s climate goals by making it cheaper to burn fossil fuels.
The European Commission is looking at auctioning off part of a stock of Emissions Trading Scheme certificates, EU officials and diplomats told the Financial Times. The permits allow their users to emit more carbon.
The commission has a plan for Europe to invest around €200bn by the end of the decade to try to shift away from its dependence on Russian energy, by investing in new infrastructure and alternative supplies.
However one effect of pushing more certificates into the market would be to drive down the carbon price, which will be contentious among some EU member states because it would lower the cost of using coal, oil and gas. That would hit the emissions reduction goals in Europe’s so-called Fit for 55 plan.
“Flooding the market with ETS certificates will only raise emissions and makes the Fit for 55 targets even more difficult to reach. It is bad climate politics,” said one EU diplomat.
Brussels’s RepowerEU energy blueprint, which is due to be published on Wednesday and which could still be changed, says renewables are the best way to fight climate change and achieve energy independence but that the EU will also need fresh sources of fossil fuels to reduce its reliance on Russia.
The commission strategy will also set out measures to save energy, diversify fuel supplies from Russia, and bolster investment in clean energy as part of a drive towards greater self-sufficiency.
The EU wants to phase out Russian fossil fuels by 2027, but the drive is proving politically divisive and difficult to engineer. Efforts to impose an oil embargo on Russia are stalled because member states cannot agree. Landlocked countries such as Hungary want more time to cut their need for Russian oil.
The commission’s plan would involve selling between 200mn and 250mn ETS certificates from a so-called Market Stability Reserve. The reserve has grown since the ETS was established in 2009 because renewable energy was deployed more quickly than expected and slow growth damped industrial activity and therefore emissions.
The commission has not sold the certificates to avoid depressing the price of emissions and now has 2.6bn in the reserve.
Brussels believes it replacing Russian gas will require temporary use of alternatives such as LNG and coal, which have higher carbon footprints. Brussels says it can still hit its target to reduce emissions by 55 per cent of 1990 levels by 2030.
“You can be certain that when this commission proposes such a measure it is done after very thorough analysis and in full respect of the necessary emissions reductions that are set in the Climate Law,” said a commission official.
Some member states may push the commission to guarantee that fewer certificates are issued in future to ensure the binding climate targets are hit.
Claude Turmes, Luxembourg’s energy minister, said: “We cannot go back to more fossil fuels. You need to make sure we don’t slip on the total carbon budget between now and 2030.
“We should use the current crisis to speed up our work on renewables and energy efficiency to keep on track for our climate goals.”
Matthias Buck, Europe director of campaign group Agora Energiewende, said that the plan would lead to more emissions. “These are emissions that would never have happened without this plan. It is good news for Polish and German coal-fired power plants, which can operate for longer.”
The commission declined to comment.