TheChek News Flow

The KPN foundation is rumoured to have been approached about a formal takeover offer for KPN, the listed Dutch telecoms group, and may willing to accept an offer.

People following the situation have heard talk the foundation has been presented with formal bid for KPN and is willing to accept the deal if other stakeholders approve the transaction.

The KPN foundation was set up to protect key national infrastructure when the former state-owned monopoly was being privatized. It was instrumental in blocking America Movil's EURO 7.2 billion takeover offer in 2013 by exercising an option to buy certain shares that will gave it almost 50 percent of KPN’s voting stock.

However, people following the situation said the timing of the announcement of the deal is still unclear. Some people had heard the transaction could be announced "imminently" while other people had heard the acquirer and KPN were looking to wait until after the outcome of the Dutch general election on March 17.

People following the situation have heard the offer presented to the KPN foundation may be higher than than between the EURO 335 and EURO 344 a share that was previously rumoured as the take out price, with one person following the situation a new offer has been pitched at EURO 380 incuding a dividend.

One person following the situation said the offer is being structured so that the Dutch government becomes a major shareholder in the new vehicle. EQT is said to be providing debt and equity financing.

Talk of a higher price has has triggered speculation a rival offeror may have trumped EQT's proposal, said people following the situation.

It's not clear, though, which company is the rival bidder, said these people following the situation.

Deutsche Telekom, the German telecoms giant, was previously rumoured the circling KPN and late last month its chief executive, Tim Hoettges, said Europe’s telecoms industry needs to consolidate.

Hoettges told Reuters that “the industry is in a dilemma that it can only escape through cost synergies I believe deeply that European consolidation is necessary.”

However, he also told Reuters Deutsche Telekom is not in "active merger" talks.

People following the situation had also heard talk BT Group, the London-listed telecoms company, had been looking at KPN. However, people close to the situation poured cold water on the speculation.

The talk came about prior to the news about the chairman of BT Group, Jan Du Plessis, falling out with the chief executive, Philip Jansen, over the pace of strategic change at the FTSE 100-listed company.

Other people following the siutation speculated Orange, the France-listed telecoms group, might be mystery rival suitor for KPN.

Online takeout giant Just Eat Takeaway.com will invest heavily in marketing and delivery to lure diners in Europe. The U.S. will likely be next.

Just Eat Takeaway.com TKWY +3.80% is coming aggressively for its competitors’ lunch in Europe. This is a good indicator of how the company will likely behave in the U.S.

The Amsterdam-based business—which is set to become the world’s biggest food delivery player by revenue outside China once its i$7 billion takeover of Chicago-based Grubhub GRUB 4.82% completes this year—said on Wednesday that sales rose 54% in 2020. Like most online food businesses, it benefited as major restaurant chains, including McDonalds, signed up to sell through its site and more consumers logged on to order food during the pandemic. The company’s shares were up 4% in early trading.

Growth has been expensive, though. JET made an annual loss of €151 million, equivalent to around $180 million at current exchange rates, leaving it deeper in the red than before the pandemic. It has been pouring money into the U.K. to fend off Uber Eats and Amazon -backed Deliveroo, which is preparing for an initial public offering in London. The Just Eat brand, which the former Takeaway.com acquired last year, has been losing market share and wants to take it back in 2021. The company also plans to invest heavily in France and Spain. Higher costs may explain why the stock has only risen 16% over the past year.

JET’s business model also put it at a slight disadvantage during the crisis. As restaurants spent much of 2020 closed, players like Uber Eats that specialize in delivering food to customers’ doors had an edge. Just Eat Takeaway.com has a bigger marketplace business that simply links diners and restaurants via a digital platform. Orders where it also fulfills delivery were a relatively low 26% of last year’s tally.

However, that mix should turn into an advantage as the company pushes into the U.S. with the Grubhub acquisition. JET will be able to use the cash generated in countries like Germany and the Netherlands, where the lucrative marketplace setup still dominates, to lure American diners. Management is betting that by keeping delivery fees at less than half the rate charged by others in certain markets, rivals will be forced to slash their prices and deepen their losses, or begin to shed customers.

For U.S.-based rivals DoorDash and Uber Eats, trends in Europe could be a preview of what is on the menu for their domestic market. Like Just Eat in the U.K., Grubhub has been losing market share in the U.S. Competition could become even more cutthroat when well-funded industry veteran JET comes to turn its latest acquisition around.

Sportswear maker vows to double shareholder payouts as it seeks to boost profits through direct sales

German sportswear giant Adidas has vowed to double payouts to shareholders to up to €9bn over the next five years, as it seeks to lift profits by increasingly selling direct to consumers.

Chief executive Kasper Rorsted on Wednesday unveiled a plan to lift revenues by roughly a third to more than €30bn a year by 2025, promising that 80 per cent of that growth would be generated by Adidas’s own online and physical stores.

Ecommerce is expected to be the single biggest driver of growth as the world’s second largest sports brand seeks to double online sales by 2025 to up to €9bn. The group plans to increase marketing spend by €1bn over the period and invest another €1bn into its digital operations.

“Building direct relationships with its target audience plays an increasingly important role,” Adidas said in a statement at the group’s capital markets day, adding that it would focus “its operating model to address consumers more directly”.

Adidas shares were up 5.5 per cent by lunchtime in Frankfurt. The stock has climbed 35 per cent over the past 12 months — roughly in line with the wider German market but lagging its larger rival Nike, which is up more than 50 per cent over the same period.

By 2025, Adidas aims to sell every other product directly to consumers, compared with 33 per cent before the pandemic. Cutting out independent retailers allows manufacturers to increase profitability as they can keep the retail margins to themselves.

Rorsted pledged to fork out a cumulative €8bn to €9bn in dividends and share buybacks to investors over the coming five years, compared with roughly €4bn between 2015 and 2020. He aims to lift the group’s operating margin to 12 to 14 per cent, compared with 11.3 per cent in 2019.

The company’s new “Own the Game” strategy targets annual revenue growth of 8 to 10 per cent a year. “That means we will outgrow the industry globally,” Rorsted told investors. The wider industry is growing roughly 65-7 per cent, said Adidas.

The looming sale of Reebok, which Adidas acquired in an ill-fated $3.8bn deal in 2006, will temporarily dent financial performance as the company will be left with €250m of stranded costs, it disclosed on Wednesday. It hopes to cut those costs by 2023.

For 2020, when the Covid-19 pandemic led to the first drop in revenue in eight years and a 78 per cent decline in net profit to €432m, Adidas plans to pay €585m in dividends, reversing a temporary suspension of payouts announced last year when Adidas also halted share buybacks.

“With the company’s global store opening rate currently standing at above 95 per cent, Adidas expects a strong top-line recovery in 2021,” the company said.

Adjusted for currency swings, revenue in 2021 is guided to rise 15 to 19 per cent, in line with analyst expectations of 17 per cent.

In the fourth quarter, currency-neutral sales rose 1 per cent, slightly beating analyst expectations. Operating profit fell 8 per cent to €225m in the quarter, well ahead of analyst expectations of €200m.

Alongside its strategy for growth, Rorsted also pledged to bolster Adidas’s green credentials, saying the group planned to increase the share of products made from “sustainable materials” from 60 per cent today to 90 per cent over the next five years.

UK retailer to acquire shares from Warburg Pincus and founding Reiss family

High street fashion retailer Next has acquired a 25 per cent stake in Reiss and could take control of the upmarket UK fashion chain by mid-next year.

The FTSE 100 group will make a £33m equity investment, acquiring shares from majority investor Warburg Pincus and the group’s founding Reiss family in proportion to their existing holdings.

It will also lend the fashion retailer £10m. The transaction implies an enterprise value for Reiss of roughly £200m.

Next also has an option to acquire an additional 26 per cent at a slightly higher price at any time before July 2022, taking its stake to 51 per cent and allowing it to consolidate Reiss’s sales and profits.

Following the acquisition, Reiss’s online operations will migrate to Next’s Total Platform unit, an Ocado-like technology service that allows brands to use Next’s formidable IT, warehousing and distribution infrastructure for their own ecommerce operations.

Analysts expect Total Platform, which at present has a single upmarket childrenswear retailer as a client, to become an increasingly important part of Next’s business.

Adam Cochrane at Citigroup has valued it at about £350m. Paul Rossington at HSBC said it allows Next “to move into the high-margin ecommerce solutions service market” with a fully integrated proposition that includes collecting and returning items in stores.

Lord Simon Wolfson, chief executive of Next, described Reiss as “an outstanding brand with enormous potential” and said he was “excited to see what can be achieved through the combination of Reiss’s exceptional product, marketing and brand building skills with Next’s infrastructure”. 

The acquisition will have no effect on profits in the current financial year but is expected to make a positive contribution thereafter. Next is not usually an acquisitive company but did submit an initial bid for Sir Philip Green’s Topshop chain, which was eventually acquired out of administration by Asos.

Reiss was founded in 1971 by David Reiss, originally as a menswear brand, and now sells classic men’s and women’s fashion from 79 stores and 104 concessions in 14 countries.

In the year to February 1 2020, sales rose 22 per cent to £227m, but the group has been hit hard by the pandemic, which has forced the closure of non-essential retailers in many countries.

Its product lines are heavily biased towards occasionwear and formalwear, and many of its stores are in city-centre locations, which have seen the steepest declines in footfall.

Online sales, which accounted for roughly 35 per cent of the total before the pandemic, have accelerated to two-thirds of revenue this year but have not been sufficient to mitigate the closure of stores and concessions.

Christos Angelides, chief executive of Reiss since 2017, previously worked at Next for 28 years and was a board member for 14 of those. He will remain at Reiss and said the partnership would be “transformational for Reiss’ operational effectiveness”. 

Next shares were little changed in midday trade on Wednesday, though they are up by two-fifths over the past year as initially bleak forecasts about the impact of the Covid-19 pandemic were scaled back.