TheChek News Flow

UK government warns it could intervene if a full bid is launched

Patrick Drahi’s telecoms investment group Altice has increased its stake in BT to 18 per cent but said it was not currently planning to take control of the former UK telecoms monopoly.

The company has been on alert since takeover restrictions on Altice, which built a 12 per cent stake in June, were lifted last week. Drahi said on Tuesday that he had “engaged constructively with the board and management of BT” and that he did not intend to make a bid.

BT was told of Altice’s latest move on Monday after markets closed when Drahi contacted BT chair Adam Crozier to inform him that it now had 18 per cent of the voting rights.

The UK government has since fired a shot across Altice’s bows. “The government is committed to levelling up the country through digital infrastructure, and will not hesitate to act if required to protect our critical national telecoms infrastructure,” it said, citing the National Security & Investment Act that is due to come into force in January and could be used to block a takeover of BT.

BT issued a statement saying that it would continue to operate the business “in the interest of all shareholders”.

The UK company, like many of its European peers, has been under pressure for five years because of low growth, a poor share price performance and the need for high levels of capital spending to invest in fibre broadband and 5G.

Under chief executive Philip Jansen, who joined in 2019, it has pinned its strategy on a £15bn fibre investment plan, which is supported by Drahi, and an overhaul of its business to save £2bn of annual costs.

Drahi’s call to Crozier followed a meeting between Jansen, Crozier and Nadine Dorries, the culture secretary, earlier on Monday to discuss BT’s strategy, its fibre investment plan and the future ownership of the company with Drahi circling and private equity and infrastructure funds also linked to a potential investment.

Jerry Dellis, an analyst at Jefferies, said that the “serious intent from Altice contrasts with continuing lack of clarity in the government position over BT”.

Drahi’s strategy of building a stake gradually is a new one for the billionaire who has previously acquired undervalued telecoms assets outright in France, the US and Portugal using debt before stripping out huge amounts of cost.

Altice surprised BT when it became its largest shareholder in June with a £2bn investment. Drahi set up a new company, Altice UK, to make the move having taken Altice, which was listed in Amsterdam, private due to its low valuation.

Drahi reiterated on Monday that he did not intend to make an offer for BT but said that could change if a third party announces an intention or if Altice had agreement from the UK company’s board.

In the statement, Drahi said of BT’s management: “We continue to hold them in high regard and remain fully supportive of their strategy, principally to play the pivotal role in delivering the expansion of access to a full fibre broadband network”.

National Express is to buy Stagecoach in an all-share deal that will bring together two of the UK’s largest public transport operators, as the sector rebuilds from the pandemic.

Stagecoach shareholders will receive 0.36 new National Express shares for each Stagecoach share, handing them about 25 per cent of the combined company. That would value the Perth-based group at about £468m, based on the National Express share price on Tuesday.

Shares in Stagecoach rose 6.8 per cent following the announcement but remain half of the level they were at before the pandemic.

The combined company will be the UK’s largest road transport provider with 40,000 vehicles and a workforce of approximately 70,000 people. The deal combines the UK’s largest coach fleet and extensive international operations of National Express with the operator of more than 25 per cent of the country’s buses.

Ignacio Garat, chief executive of National Express, said that the deal would “create a leading multi-modal passenger transport business in the UK”.

The consolidation of the UK bus and coach sector follows a difficult period for operators after the coronavirus pandemic hit revenues and with the sector facing the end of state aid early next year. Meanwhile, transport providers are increasing their investment in expensive electric and hydrogen buses.

The two companies expect to achieve cost savings of £45m, up from their previous expectations of £35m when the National Express approach was first announced in September.

Standards setter for global derivatives industry reflects ‘unique’ quirks of crypto

Disruptions unique to cryptocurrency markets will be incorporated into contracts for the global derivatives industry for the first time, in a move intended to broaden digital assets’ appeal to institutional investors.

Isda, the derivatives trade association, said on Tuesday it was developing common legal standards and templates for derivatives linked to the $3tn crypto market to cover “potential disruption events”.

The potential issues the London-based body singled out in a white paper included cyber attacks; forks, when a blockchain effectively splits into two branches; and airdrops, when the market is flooded with tokens, usually for free.

Isda’s master agreements are widely used as the legal template for most of the world’s derivatives trades in bonds, equities, currencies and other mainstream assets. Market participants generally follow its guidance on how to adjust contract terms if an unexpected event disrupts a derivative’s performance.

Scott O’Malia, chief executive of Isda, said the standards and definitions for digital derivatives would align with the underlying, or spot, market. “We must respect crypto assets are a unique product class and draft the definitions and legal terms accordingly,” he said.

The move comes as the crypto derivatives market soars in value and activity, and products such as bitcoin and ether futures on the Chicago Mercantile Exchange draw in more users. Last month, average open interest for bitcoin and ether futures hit $4.3bn and $1.2bn respectively — the first time the exchange had seen monthly open interest in ether average more than $1bn, according to data from CryptoCompare. The derivatives market now represents 55 per cent of the total crypto market, it added.

As it grows, some of the biggest crypto market participants are stepping up their lobbying of regulators to try to shape the rules.

Last week Coinbase, the crypto exchange, and FTX.US, the derivatives trading market, both joined Isda, a long-established trade association whose members consist mainly of the world’s big investment banks and asset managers.

“Institutional market participants will be more willing and able to invest and trade in cryptoassets if the mechanisms to do so reflect current processes and standards,” said Kevin McPartland, head of market structure research at Coalition Greenwich.

If a cryptocurrency forks, market infrastructure providers such as trading venues, custodians and index providers may need to choose which branch of the asset to support, it said. Airdrops could have an impact on a derivatives transaction by causing an increase in the market value of the digital asset native to the benefiting network, it said.

Isda has begun a body of work to adapt its standards as traders and IT programmers explore the opportunities to trade derivatives contracts that are governed by computer code. Earlier this year it digitised its vast booklet of legal documents, the biggest overhaul to its rule book since 2006.

FTX has also pushed into the regulated derivatives markets by buying LedgerX, a cryptocurrency futures and options exchange and clearinghouse, for an undisclosed amount in October.

Portuguese project aims to process 35,000 tonnes a year of vital material for electric vehicle batteries

Portuguese oil and gas company Galp is joining forces with Swedish battery start-up Northvolt to develop Europe’s largest lithium processing plant as part of a shift away from fossil fuels.

The 50-50 joint venture called Aurora will target annual production of 35,000 tonnes of battery-grade lithium hydroxide, enough for 50 GWh of battery capacity, which could power about 700,000 electric vehicles.

The plant will be in Portugal, the site of western Europe’s largest lithium deposit, with total investment of up to €700m, “based on similar projects”, and creating as many 1,500 jobs, the companies said.

The joint venture hopes to source the lithium for the project from the Iberian peninsula and is aiming to use renewable energy to power the refinery, which is aiming to start commercial operations in 2026 once a final investment decision is taken.

“This is a once-in-a-generation opportunity to reposition Europe as a leader in an industry that will be vital to bringing down global CO2 emissions,” said Galp’s chief executive Andy Brown.

Galp, already one of the biggest solar power generators in Spain and Portugal, is seeking to cut investment in fossil fuels in favour of cleaner energy, partly in response to pressure from investors.

Demand for lithium, a vital material for electric vehicle batteries, is forecast to grow by as much as 4,000 per cent by 2040, according to the International Energy Agency. A typical electric vehicle battery pack contains about 8kg of lithium.

However, Europe and the US have very little domestic processing capacity.

In a report this year, the US Department of Energy said China refined 60 per cent of the world’s lithium and its dominance presented a “critical vulnerability to the future of the US domestic auto industry”.

The price of lithium has soared this year as supply struggles to keep pace with rising demand. An index of lithium carbonate and hydroxide prices compiled by Benchmark Mineral Intelligence has risen 240 per cent this year.

Northvolt, which is backed by investors including Goldman Sachs, BMW and Ikea, is the most advanced of a series of battery start-ups in Europe. It will open its first factory in northern Sweden this month and has an extensive partnership with German carmaker Volkswagen. It has agreed to purchase half of the joint venture’s production for use in its battery manufacturing.

Portugal hopes to use its mineral deposits to build an “end-to-end lithium chain” to supply the electric vehicle industry in Europe, which at present imports almost all its battery-grade lithium from outside the EU.

However, a rush for lithium mining rights in Portugal in recent years has triggered demonstrations and petitions by local communities and other groups concerned about their environmental impact.

Galp has been in talks about a potential investment in the Portuguese operations of the Savannah Resources mining company that owns the Barroso lithium ore mine in northern Portugal.

Shares in Savannah rose in January after Galp signed a preliminary agreement to buy a 10 per cent stake in the mine, which, according to Savannah, has the potential to become the first significant lithium producer in Europe.

The UK company announced in June that the agreement had expired, but said it remained in talks with Galp and other interested investors.

The Galp-Northvolt joint venture is the second announcement this week about lithium refineries in Portugal. On Monday, Portugal’s Bondalti Chemicals and Reed Advanced Materials unveiled a plan to build a 25,000 tonnes-a-year processing plant.

Savannah’s chief executive David Archer said the announcements showed the “strong lead” that Portugal has taken in European lithium production. “It’s only a matter of time before Europe takes its place as a leader in EV battery production,” he said.

DAX:

MDAX:

SDAX:

Nikkei -0.73% Hang seng -1.42% CSI -0.52% Shanghai -0.41% Shenzen -0.06%

Eur$ 1.1279 CNH 6.3703 CNY 6.3640 JPY 113.56 GBP 1.3205 CHF 0.9230 RUB 73.4764 TRY 13.9493 WTI$ 71.22 -0.10% Gold 1,787.20 +0.25% BTC 46,910 +80 ETH 3,755 -16

S&P +0.19% Nasdaq +0.09% EuroStoxx +0.25% FTSE +0.40% Dax +0.20% SMI -0.10%

Macro :

- Macron Sees Path to Solve EU’s ‘Existential’ Rule-of-Law Crisis

- Blinken Hits Out at China, Seeks to Rally U.S. Allies in Asia

Keep an eye on :

- AALB NA : Aalberts Divests Standard Hidraulica Group

- AUTO NO : Ocado Wins Key Ruling in AutoStore Fight Over Robot Warehouses

- BAMI IM : Banco BPM Interested in M&A to Create Third Banking Group: CEO

- BMW GY : BMW to Make Two More Models in China: Handelsblatt

- BONAVA SS : Bonava Targets 6,000 Project Starts for 2022 to Meet Sales Goal

- CEC GY : Ceconomy FY Sales Meet Estimates

- DSC2 NA : SPAC Dutch Star Companies TWO in Exclusive Talks to Buy Cabka

- HSBA LN : HSBC Says Clients Must Have Plan to Exit Coal by End-2023: Rtrs

- NDX1 GY : Swift Current Energy Secures 196MW in Wind Supply From Nordex

- NOVN SW : Mesoblast Says Novartis to Terminate Pact Prior to Closing

- OCDO LN : Ocado Wins Key Ruling in AutoStore Fight Over Robot Warehouses

- RDSA NA : Bank of America Hires Lilly From Shell for Power Deals

- SGO FP : Saint-Gobain to Exit U.K. Plumbing, Heating, Sanitaryware Brands

- SIKA SW : Sika Expands Production for Adhesives, Sealants in India

- SOW GY : Silver Lake Invests $388 Million in Germany’s Software AG

- TEF SM : Telefonica’s Lock on Spanish Soccer Ebbs as DAZN Wins Rights

- TEF SM : Telefonica to Take Steps to Guarantee Full Access to Games

- TEK LN : Innovative Eyewear Files for Nasdaq Listing

- TSLA US : Elon Musk Sells $906.5 Million Worth of Tesla Shares

- VWS DC : Vestas to Send Higher Costs Through to Customers, Borsen Reports

- VIFN SW : CSL Agrees to Buy Vifor Pharma for $179.25/Share