TheChek News Flow

Activist group’s investment comes as UK drugmaker's performance lags rivals

Activist hedge fund Elliott Management has built a multibillion-pound stake in UK drugmaker GSK, setting up a potential battle over the company’s future after it underperformed peers and lagged in the race to develop a Covid-19 vaccine. 

The stake taken by Elliott, the $42bn fund known for its campaigns at BHP, SoftBank and Whitbread, was confirmed by people with knowledge of the investment and is a “significant” position, according to one of them. 

Elliott’s investment comes as GSK shareholders have become increasingly disillusioned with the leadership of chief executive Dame Emma Walmsley, who is breaking up the company from next year by separating the consumer health business from its pharma and vaccine division. 

Shares in GSK, which has a portfolio ranging from toothpaste to cancer medicines, are down 14 per cent since Walmsley took up the post in April 2017. Shares in British-Swedish drugmaker AstraZeneca have risen 49 per cent in the same time, while US-based Pfizer is up 16 per cent, with both groups now producing Covid-19 vaccines. 

Elliott and GSK, which has a market value of £65bn, both declined to comment.

Some leading shareholders have privately expressed concerns over the company’s performance. They have pointed to disappointments in its drugs pipeline, raising questions about its allocation of research and development spending. 

Walmsley’s lack of a scientific background increasingly troubles some investors, particularly when contrasted with Pascal Soriot’s leadership of AstraZeneca.

Despite missteps over its Covid vaccine, Soriot is seen to have revived the company’s fortunes dramatically over the past seven years, in part because of his understanding of the potential of AstraZeneca’s drugs pipeline.

One person familiar with the mood of some GSK shareholders suggested that, although Walmsley was unlikely to be pushed out given the imminent business split, they would prefer her to head the consumer health business — taking advantage of her background in that field — rather than her stated intention of running the demerged pharma business.

There would be “significant concerns” if she insisted on the latter role, said the person, suggesting investors might even make it a condition of voting through the demerger that she did not do so.

Other shareholders, however, backed Walmsley. A top 30 shareholder said the strategy to split the divisions “broadly makes sense”, as did addressing the “unsustainable dividend”, which would free up “capital for inorganic investment in the pipeline”. 

“The CEO is understandably impatient for success but the nature of pharma R&D means it takes a long time to turn such a business around, particularly given the paucity of the legacy she inherited,” the shareholder said. But they warned that the next 12-18 months would be critical. 

Elliott was founded in 1977 by billionaire Paul Singer and has launched dozens of activist campaigns globally. Its London-based European division is run by Singer’s son Gordon. 

The group wagered a multiyear campaign at US rare disease specialist Alexion Pharmaceuticals, urging it to sell itself to take advantage of a surge in the valuation of biotech stocks. In December, AstraZeneca agreed to buy Alexion in a $39bn deal.

Tiffany & Co. has canceled its decades-long daily ad in the New York Times as Anya Taylor-Joy is spotted shooting a campaign for the jeweler.

Tiffany & Co. is seeing major changes to its marketing mechanics. The first tides of the jeweler’s overhaul by LVMH Moët Hennessy Louis Vuitton are being felt in the company’s public positioning and advertising.

WWD has learned that after 30-plus years, Tiffany has recently discontinued its daily print ad within the New York Times. The jeweler’s stalwart ad had appeared each day in the top right corner of page three, a premium placement that was essentially at eye level as soon as readers turned the page from the paper’s cover. Tiffany is said to have run its first ad in the New York Times in the late 1800s.

Tiffany is reevaluating its ad strategy under the direction of Alexandre Arnault — who had previously pivoted Rimowa’s marketing strategy toward mostly digital buys. Tiffany is said to be continuing its relationship with the New York Times with nearly similar spends, just on a primarily digital front. There are also plans for more impactful print ad packages. A Times spokesperson did not respond to requests for comment.

This comes as Tiffany sharpens its messaging, particularly on social media where the jeweler’s account is now taking a decidedly less corporate tone. There is a new emphasis on the jeweler’s rich archives and more enterprising designs. Arnault himself has also opened up his personal social media account for questions and comments as he steers Tiffany in a new direction.

--> This Story is going to be nex Netflix hit!!!

Disgraced payments provider issued credit cards used by officers during criminal investigations

Germany’s top police agency co-operated closely over several years with Wirecard until late 2020, showing the extent to which the disgraced payments provider was intertwined with the country’s law enforcement establishment.

Wirecard, once a high-flying start-up seen as one of Germany’s rare technology success stories, crashed into insolvency last summer after it was revealed that €1.9bn of corporate cash did not exist. The scandal, which is one of Germany’s biggest postwar accounting frauds, continues to reverberate as it is probed by a parliamentary inquiry in Berlin.

Wirecard’s former chief operating officer Jan Marsalek, who according to people familiar with the matter had ties to the secret services in Austria and Russia, fled Germany last summer and is on Interpol’s most wanted list.

A special investigator, who was appointed by parliament to examine Wirecard’s links to law enforcement authorities, has established that from 2013 the Munich-based payments group had close ties to Germany’s Federal Criminal Police Office (BKA), whose operatives used Wirecard credit cards during criminal investigations.

Email correspondence between Wirecard and the BKA, seen by the Financial Times, suggests that the company issued at least some of the credit cards under fake identities that were then used by police officers to pay bills during criminal investigations. Wirecard waived its usual fee and provided the cards free of charge.

The special investigator concluded that about a third of all credit cards used by BKA officers in criminal investigations during this period were issued by Wirecard.

“We will become the BKA’s house bank at one point,” Wirecard executive Alexander von Knoop wrote in 2014 in an email to colleagues seen by the FT. There is no suggestion that he was personally involved in the issuance of the fake-ID credit cards.

“In hindsight, the BKA units — surely unwittingly — put the fox in charge of the henhouse,” the special investigator’s report, which was seen by the FT, concluded. Wolfgang Wieland, the special investigator, noted that the BKA was in charge of fighting money laundering and organised crime and should have scrutinised “its partners more critically”.

Wieland observed that Germany’s foreign intelligence service, the BND, also used credit cards issued by Wirecard, though to a much lesser extent than the BKA.

Wirecard had been the subject of repeated allegations of money laundering and balance sheet manipulation since at least 2015. Munich prosecutors now accuse former senior executives at the company of having run a criminal enterprise that embezzled billions.

Wieland noted that Wirecard “acted properly” when it was working with the BKA and that there was no evidence that the company abused the payments data generated. However, the special investigator noted that the collaboration helped the company to improve its image as it sought to reposition itself as a reputable partner for government agencies.

Fabio De Masi, an MP for the leftwing Die Linke party, said that the BKA’s ties to Wirecard were “embarrassing and absurd”, arguing that they had put Germany’s national security interests “at risk”.

The BKA did not immediately respond to a request for comment. The special investigator declined to comment.

Online retailer to spend more on acquisitions than previously planned

Online retailer THG has recorded a hefty loss for 2020 after taking a charge of more than £300m for share-based payments to staff, but the group said trading in the first quarter had been ahead of expectations and it intended to spend more on acquisitions than previously planned.

Equity participation for staff was widespread at THG even before it floated last September, and most of the share plans have vested in full owing to the strong performance of the shares, which have risen by two-fifths since listing.

As a result, the group booked a £332m non-cash charge to reflect the value of the awards. Along with a £105m impairment charge on assets held for sale, that turned a £45m pre-exceptional profit into a £481m operating loss. Sales jumped 41 per cent, led by the core beauty and nutrition businesses.

Manchester-based THG said it was too early in the year to amend full-year forecasts, but “confidence and visibility” in its existing guidance of 30-35 per cent revenue growth had increased.

It also expects to spend up to £250m on bolt-on acquisitions this year, up from an earlier forecast of £150m, although capital spending as a proportion of sales will be lower overall than last year.

Food delivery company issues trading statement with shares about a third below the IPO price

Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.

https://www.ft.com/content/0e004c93-9366-4f2a-9e4a-feb7cd34f96a

Deliveroo said its order volumes more than doubled to 71m in the first quarter, with customer numbers also increasing sharply, as the food delivery group attempts to win over investors after its disastrous initial public offering.

In its first trading statement since its shares tumbled after they began trading two weeks ago, Deliveroo said that growth accelerated for the fourth quarter in a row, with gross transaction value rising 130 per cent year on year to £1.65bn. GTV is primarily made up of customers’ spending, before sharing that income with restaurants and other partners.

The company’s monthly active customer base leapt 91 per cent to an average of 7.1m people.

Metrics disclosed on Thursday for the first time show that Deliveroo’s customers typically order 3.3 times a month, up from 3 times a year ago, before the pandemic hit. GTV per order — an indication of what many in the industry call “basket size” — rose 8 per cent year on year to £23.20.

Deliveroo however did not raise its guidance for the year, cautioning that it was “difficult to say how much of this growth has been driven by the special circumstances of the current lockdown restrictions in some of our markets”.

Deliveroo indicated in its IPO filings that it expected growth in gross transaction value to slow to between 30-40 per cent this year, after the pandemic drove 64 per cent growth last year, with gross margins at 7.5-8 per cent.

“We are mindful of the uncertain impact of the lifting of Covid-19 restrictions,” Will Shu, Deliveroo’s chief executive, said. “So while we are confident that our value proposition will continue to attract consumers, restaurants, grocers and riders throughout 2021, we are taking a prudent approach to our full-year guidance.”

Deliveroo is London’s biggest new listing in several years but investor appetite has been limited by concerns over corporate governance, regulatory risk and profitability. The stock was still trading almost a third below its IPO price on Wednesday ahead of the announcement.

Amsterdam-headquartered rival Just Eat Takeaway.com this week reported that gross merchandise volumes — a slightly different metric to Deliveroo’s GTV — increased 88 per cent to €4.5bn, including €1.4bn growing at the same rate in the UK, with total orders up 79 per cent to 200m.