FT : EasyJet board member steps down over her Wirecard role

EasyJet board member steps down over her Wirecard role
Anastassia Lauterbach had chaired risk and compliance committee at collapsed German payments group

An easyJet board member has resigned following scrutiny over her role at Wirecard, the collapsed German payments company. 

Anastassia Lauterbach quit on Monday as a non-executive director of the low-cost carrier with immediate effect after less than two years’ service. 

Her exit came days after influential shareholder advisory group ISS questioned her place on the board, given that she had been a member of the supervisory board of Wirecard, the scandal-hit German company that filed for insolvency in June after revealing a multiyear fraud and a €1.9bn hole in its accounts.

Ms Lauterbach had joined Wirecard’s supervisory board in 2018. As a non-executive director, she chaired the newly created risk and compliance committee that pushed to improve Wirecard’s internal controls and governance.

People familiar with the discussions on Wirecard’s supervisory board told the Financial Times that Ms Lauterbach had been internally calling for the dismissal of Wirecard’s chief executive officer Markus Braun and its operating officer Jan Marsalek months before the company collapsed.

She stayed on the supervisory board until it dissolved itself this summer after Wirecard’s insolvency.

“Although she was a relatively recent appointment to the Wirecard board, the failures in risk management, oversight, and governance at the company are of a category that would stain the record of any director,” ISS said as it advised investors to abstain when voting on her re-election to easyJet’s board at Wednesday’s annual meeting.

Two other shareholder advisory groups, Glass Lewis and Pirc, recommended that shareholders support her re-election.

Ms Lauterbach’s re-election had been in the balance as it emerged that easyJet’s biggest shareholder, Stelios Haji-Ioannou, a longstanding critic of the airline’s leadership, would vote against the board.

Mr Haji-Ioannou, who along with members of his family own almost 30 per cent of the airline, plans to also vote against the remuneration policies and the reappointment of PwC as auditor and abstain on a motion clearing the way for the board to raise fresh capital from shareholders if needed.

EasyJet appointed Ms Lauterbach as a non-executive director in December 2018 to help it better focus on its digital operations and use of data. A German national from Bonn, she had previously held roles at companies including Qualcomm, Deutsche Telekom and McKinsey. Ms Lauterbach declined to comment.

In a statement issued earlier this month after the ISS recommendation was published, easyJet had said that “we believe that Anastassia was a key driving force in efforts to improve the governance and risk oversight structure at the company and made a material contribution to bringing irregularities to the fore”.

Roger Barker, director of corporate governance at the Institute of Directors, said that “boards succeed or fail as a team” regardless of the individual efforts of a director.

“There is no escaping from the reputational impact of being associated with a team that fails in its basic responsibility of ensuring that the governance framework as a whole is fit for purpose,” he said.

EasyJet usually holds its annual meeting in February but brought it forward this year ahead of the end of the Brexit transition period and as the coronavirus pandemic disrupts its business.

Rivals Ryanair and British Airways-owner IAG both faced significant shareholder revolts over executive pay at their annual meetings, but easyJet’s remuneration report received the backing of the major shareholder advisory groups. One, Pirc, that recommended shareholders oppose the new remuneration policy, which includes changes to executive pay structure.

>>> US Gapping Up

Gapping up
In reaction to earnings/guidance:

  • RADA +8.2% (guides 2021 revenue above consensus), NKE +6%, FDS +1.4%,

M&A news:

  • AJRD +26.5% (to be acquired by Lockheed Martin Corporation (LMT) in an all-cash transaction with a total equity value of $5.0 bln or $56.00/share)
  • MNR +4.8% (approached by Blackwells)  

Select financial related names showing strength:

  • JPM +3.9% (intends to maintain its dividend of $0.90/sh for Q1; co has also authorized a new $30 bln share repurchase program, co intends to begin share repurchases in Q1 )
  • MS +3.2% (to resume repurchases of common stock in the first quarter of 2021)
  • C +2.9% (plans to resume stock repurchases in Q1 )
  • BK +1.7% (expects to maintain dividend and resume stock repurchases)
  • WFC +1.4% (Comments on Federal Reserve's Stress Test Results; co is allowed to pay dividends and make share repurchases)  

Other news:

  • MYOV +2.7% (announces FDA approval of ORGOVYX as treatment for adult patients with advanced prostate cancer )
  • ONE +1.4% (restructures investment portfolio of small-class business to focus on premium personalized tutoring business)
  • OTIC +1.1% (announces initiation of expansion cohorts in phase 1b study of ORIC-101)
  • MRNA +0.8% (announced that the FDA has authorized the emergency use of mRNA-1273, Moderna's vaccine against COVID-19 in individuals 18 years of age or older)  

Analyst comments:

  • RPT +3.7% (upgraded to Neutral from Underweight at JP Morgan)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up: AJRD +27.5%, KBE +4.8%, NKE +3.8%, RNET +3.7%, MYOV +3.7%, JPM +3.7%, C +2.8%, MS +1.9%, BK +1.5%, ONE +1.4%, OTIC +1.1%, WFC +1%, MRNA +0.3%
  • Gapping down: CPE -11.8%, FGEN -11.3%, FANG -8.3%, RDS.A -5.5%, VALE -3.7%, IMGN -2.1%, GSK -2%, LMT -1.8%, AZN -1.8%

FT : Stranded assets: oil be off

Stranded assets: oil be off
Expect more soul-searching and more asset impairments in 2021

Not even Greta Thunberg, Gen Z’s most notable climate change activist, could have expected the reappraisal of oil to have come about as quickly as it did this year. The possibility of stranded assets in the oil and gas industry has been discussed for years. But a pandemic-induced economic shutdown forced an implicit acceptance of the idea by hydrocarbon producers. At a minimum, every oil company had to reassess the economic viability of their portfolio after oil prices fell as much as 70 per cent in the first months of the crisis.

Stranded assets are defined by the International Energy Agency as “investments which have already been made but which, at some time prior to the end of their economic life, are no longer able to earn an economic return”. In 2020 the largest oil producers had to ask hard questions about the viability of projects. In February, Lex estimated that as much as $900bn of their market value could be at risk for the 13 largest oil producers.

Some producers, such as BP, France’s Total, and Italy’s Eni made brave strategy calls on the future of their businesses and set clear targets for carbon emissions. Including Royal Dutch Shell, which announced more writedowns on Monday, these companies announced more than $55bn in impairments this year.


Not all will see the charges as acceptance that hydrocarbon assets are stranded. Some will view them merely as near-term accounting adjustments. Oil consumption has collapsed this year and may take some time to recover. Global oil demand dropped more than 16 per cent year on year by June 2020 to 83m barrels a day, according to the IEA. But ExxonMobil thinks the decline in prices is temporary. It still believes oil and gas have more to offer.

Yet even if the world’s energy companies are simply accounting for macroeconomic realities, the fact is that 2020 was just another in a series of bad years for the energy sector. Even after a doubling of oil prices since late April, the largest 13 oil groups have lost $326bn of their collective enterprise value this year. Expect more soul-searching and more asset impairments in 2021.

FT : Defensive all-share mergers: desperate measures

Defensive all-share mergers: desperate measures
All-stock deals this year almost resembled a scarlet letter

Corporate debt was ultra-cheap in 2020. Nobody understood that better than shareholders of companies for sale. Despite an exuberant stock market, few elected to sell themselves for stock alone. Buyers could not borrow for free to pay cash for target companies. It just felt like it. The average investment-grade triple B bond yield was only 2.1 per cent by late December. All-stock deals almost resembled a scarlet letter, signalling that the buyer and seller were distressed, or at least desperate. 

US independent oil drillers finally decided to consolidate to survive in the second half of the year. From July, four oil companies — Noble Energy, WPX Energy, Concho Resources and Parsley Energy — sold themselves to rivals who paid with shares. Premiums were absent, with cost savings the prize. A November rally in commodity prices made these combinations look smart. Even so, shares in WPX acquirer Devon Energy remain at half the levels they were in early 2020. Joining forces is still the best chance for survival in the shale fields.

Food delivery is supposed to be a growth industry but the profits have been scant so far. A perpetual price war spurred consolidation this year. Uber, after failing to strike a deal for Grubhub, paid $2.7bn in shares for Postmates. Grubhub shareholders decided instead to take a $7.3bn offer from Europe’s Just Eat. For an ostensibly nascent industry, taking shares may not be such a bad outcome, giving selling investors upside exposure.

How compelling is cheap debt? Imagine a company could borrow at a 3 per cent coupon — a veritable high yield these days. On an after-tax basis, the cost of debt is just above 2 per cent. The reciprocal of that figure, 40 to 50 times, is the price-to-earnings ratio that a company’s stock would have to trade at in order for its shares to be competitive with a cash bid. Until interest rates normalise, sellers will know that they can demand to be paid a premium in upfront cash.

WSJ : Why Are So Many Italians Dying of Covid-19?

Why Are So Many Italians Dying of Covid-19?
Italy thought it could prevent a repeat of spring’s tragedy, but the surging death toll suggests otherwise

ROME—Italy, the first non-Asian country hit by the coronavirus pandemic early this year, once again is struggling with one of the world’s deadliest outbreaks.

Around 611 people are dying of Covid-19 in Italy on an average day, behind only Brazil and the U.S. This year Italy has recorded about 68,900 confirmed deaths from the virus, the highest total in Europe and fifth in the world after the U.S., Brazil, India and Mexico—which all have much bigger populations.

Once again, Italians are asking themselves: Why is Covid-19 killing more people here than almost anywhere else?


The answer lies partly in demographics, public health experts say. Italy has one of the world’s oldest populations, second only to Japan. Nearly one in four Italians is over 65, an age group much more likely to succumb to the disease.

Another factor: Multigenerational homes are especially common in Italy, potentially exposing older people to infection from their younger relatives.

Since the pandemic began, 95% of those killed by the virus in Italy have been over 60, and 86% over 70. Deaths in many other countries have also been concentrated among older people, but there are proportionately more of them in Italy.

Italy’s death toll also looks bad on a per capita basis. The country has recorded 15.9 coronavirus deaths for every 100,000 residents over the past two weeks, compared with 6.3 in Spain, 6.9 in Germany and 8.3 in France, according to the European Center for Disease Prevention and Control.

In March, images of army trucks carrying the bodies of Covid-19 victims out of the overwhelmed city of Bergamo became a symbol of Italy’s tragedy—and a warning for the rest of the world.

After Italy suppressed the first wave with help from a long and stringent lockdown, few Italians thought the high death toll would repeat itself. Virus infections slowed to a trickle in the summer. Millions of Italians adopted mask-wearing. Hospitals and the government appeared better prepared.


Italy’s infections remained modest even in early fall, when a second wave of contagion swept over Spain, France and the U.K. But as winter begins, Italy is back where it was in March: the worst-hit place in Europe.

On Friday, the Italian government announced another lockdown, over the Christmas and New Year holidays, for fear that hospitals could overflow and deaths rise even higher in January.

From Dec. 24 to Jan. 6, bars and restaurants will have to close and there will be travel and movement restrictions across the country. On specific days, such as on Christmas Eve and weekends, most stores must stay shut, too.

“Among our experts there are strong fears the curve of infections could surge during the Christmas holidays,” Italian Prime Minister Giuseppe Conte said Friday in explaining the new rules.

Despite policies aimed at sheltering older people, the virus has again spread in nursing homes and hospitals, affecting numerous people over 65.

Yet age alone doesn’t explain Italy’s grim tally. A national health-care system that was overstretched and understaffed before the pandemic is also to blame, said Antonella Viola, a professor of pathology at the University of Padua.

“Yes, the population is old and frail, and there are pre-existing conditions. But that can’t be that different from the rest of Europe,” said Dr. Viola. “There is a clear problem in the way that local health care is organized. There are too few doctors. GPs have too many patients to properly care for each of them.”

In the spring, hospitals in badly hit parts of northern Italy didn’t have enough beds to treat all severely ill Covid-19 patients. To avoid a repeat, the government sought to increase the number of intensive-care beds across the country.

But many hospitals have struggled with the influx of Covid-19 patients this fall anyway because they didn’t have enough doctors and nurses to care for them, partly a consequence of decades of spending cuts.

And little has been done to improve care outside hospitals. Many Italian regions have long neglected local health-care networks, including family doctors, public health experts say. Thus, many Covid-19 patients who stay at home have received little or no support. Many severely ill people come to the hospital too late, if they make it at all.

Even in the wealthy northern region of Lombardy, which has some of Europe’s best hospitals, the local network of physicians and smaller clinics is poorly equipped to care for Covid-19 patients who remain at home, especially in remote rural or mountainous areas.

“It’s a system that prioritizes hospital care. We have excellent specialized care, such as ICUs and transplant units,” said Guido Marinoni, a Lombardy representative for the Italian doctors association. “But everything that has to do with local medicine and prevention was put in second place. That’s become clear.”

Since the start of the pandemic, around 3.5% of Italians who tested positive for the virus have died, according to official data collated by Our World in Data, a nonprofit research project based at the University of Oxford—a higher percentage than in any other major European country. In Germany, around 1.7% of those who tested positive succumbed.

The true rate of fatalities among infected people is significantly lower, experts say, because many virus-carriers are never tested.

While Italy spent $3,650 on health care per inhabitant in 2019, Germany spent $6,650, according to data from the Organization for Economic Cooperation and Development. Average spending among OECD nations was $4,224 per person.

“Germany is better equipped and better prepared in general,” said Luciano Gattinoni, an Italian professor of anesthesiology and intensive care who currently teaches at Germany’s University of Göttingen.

Corrections & Amplifications
A caption for a photo showing military medical personnel transporting coffins depicted a scene in Ponte San Pietro, Italy. An earlier version of this article incorrectly said the photo was taken in Lucca, Italy. (Corrected on Dec. 20, 2020)

WSJ : China’s Liquor Giants Intoxicate Investors

China’s Liquor Giants Intoxicate Investors
Baijiu makers Kweichow Moutai and Wuliangye Yibin are riding a hot streak thanks to China’s growing thirst for pricier drinks

A dizzying rally this year has put China’s top distillers firmly in the ranks of the world’s most valuable consumer-goods companies.

Shares in Kweichow Moutai Co. 600519 -0.14% , which at the start of 2020 was already the world’s biggest alcoholic-drinks company by market capitalization, have gained 56%, valuing it at about $354 billion as of Monday. That means not only does the state-owned enterprise tower over Western rivals like Diageo PLC, and brewing giant Anheuser-Busch InBev SA, but it is also bigger than Coca-Cola Co. , LVMH Moët Hennessy Louis Vuitton SE or Toyota Motor Corp.


Rival Wuliangye 000858 1.82% Yibin Co.’s share price has more than doubled, for a market cap of $167 billion. An index of 36 drinks companies whose shares trade in Shanghai or Shenzhen rallied 86.7% this year, compared with a 23% increase in China’s CSI 300 benchmark, according to Wind.

The index also includes beer companies, but the most valuable players are mostly distillers who specialize in baijiu, a fiery Chinese spirit made by fermenting sorghum or other grains. Moutai’s drinks, which have an unusual aroma reminiscent of soy sauce, have traditionally been served at state banquets, making them a homegrown status symbol for affluent Chinese.

Investors and analysts credit China’s quick recovery from the new coronavirus, Chinese drinkers’ growing thirst for pricier drinks, and some smart corporate initiatives for the hot streak.

“The industry is riding on the power of the middle class,” said Allen Cheng, an equity analyst at Morningstar in Singapore.

Lockdowns hit the country hard in the first quarter, but a swift turnaround since then has put China on track to be the only major economy to grow this year. As of the third quarter, disposable incomes were growing again, rising 0.6% from a year earlier, official statistics show.

Foreign institutions are among the industry’s fans. As of September, Moutai was one of the biggest holdings in U.S. money manager Capital Group’s New World Fund, for example. The fund’s stake was worth nearly $627 million.

Eva Wang, a Greater China research analyst at J.P. Morgan Asset Management, said Chinese consumers were buying higher-end products as their incomes rose, favoring market leaders in alcohol and in consumer staples more broadly. That meant Moutai and Wuliangye have grown sales and earnings faster than rivals, boosting their market share, she said. Analysts polled by FactSet expect the duo to grow earnings by 13% and 17%, respectively, for 2020.

The two giants have both overhauled parts of their business, too. Moutai is reducing its reliance on traditional distributors and is selling more drinks directly online, which lets it boost profit margins without dampening demand. Mr. Cheng at Morningstar said Moutai had struggled to end long-term relationships with distributors last year, but the pandemic helped it move faster.


For its part, Wuliangye has spent more on branding. It has also embraced a digital approach, such as using QR codes to track sales and manage inventory. This has made it more efficient and more responsive to consumer demand, analysts say.

Shen Zhifeng, an analyst at UOB Kay Hian in Shanghai, said the changes set the companies up well for 2021. “Their good performance can continue through next year,” he said.

The run-up has sent valuations soaring. Moutai and Wuliangye shares trade at 42 and 43 times forecast earnings respectively, according to FactSet. Over the last five years, the average ratios have been 25 and 22 times, respectively.

Some observers see other reasons for caution. Euan McLeish, an analyst at Sanford C. Bernstein, said a fresh anticorruption drive seemed to be on its way. In 2012 and 2013, a crackdown on graft in China pummeled Moutai stock, since the drink is popular at official dinners and for gifts.

In July, a social-media account run by the People’s Daily, the Communist Party mouthpiece, said Moutai shouldn’t be used for speculation or bribes, causing a brief stock selloff.

In addition, Mr. McLeish said he had more corporate-governance concerns about Moutai than Wuliangye, since it is rather opaque about targets and strategy. Moutai is controlled by a local government in the southern Chinese province of Guizhou.