TheChek News Flow

Johnson set to ban sale of new petrol and diesel cars from 2030

Prime minister to roll out measure to bolster electric car market as part of wider UK energy review

The sale of new petrol and diesel cars will be banned within a decade, Boris Johnson is expected to announce this week as part of a broader package of green initiatives.

In February, Mr Johnson announced that the existing ban on selling new petrol or diesel cars would be brought forward from 2040 to 2035.

Now the prime minister is expected to move the date forward to 2030 in an attempt to jump-start the market for electric cars in the UK and push Britain towards its climate goal, according to industry and Whitehall figures.

However, the government is expected to keep the less stringent date of 2035 for the phase-out of the sale of hybrid cars that plug in to charge.

While electric car sales are rising strongly, they are still below 7 per cent of all new vehicles bought across the UK last month, according to figures from the Society of Motor Manufacturers and Traders.

The car industry has long argued that significant funding for infrastructure is required to help convince the majority of motorists to switch to the new technology, which is currently more expensive than traditional petrol or diesel models.

Some £500m of government funding towards charging infrastructure is expected to be rolled out starting next year.

The money will help fund new grid connections to allow remote facilities such as motorway service stations to install a far higher number of fast-charging charging points.

There is still widespread consumer confusion about the differences between battery electric cars that have no engine, and various forms of hybrid that combine batteries and traditional motors.

Last week, the Department for International Trade wrote on Twitter that Nissan’s new Qashqai model would be an “electric” car, when the model is actually a hybrid.

The industry has lobbied hard for the sale of new hybrid cars to be phased out at a later date than traditional petrol and diesel models, arguing that they are a way of getting most consumers acquainted with the technology.

One in four cars sold in the UK contains some form of hybrid technology.

Toyota, which owns two UK facilities, previously warned that outlawing the hybrid models made at its Burnaston plant would jeopardise future investments in Britain.

Mr Johnson has long been planning to make a major green speech setting out his vision for switching to a low-carbon economy, which is at last expected to take place this week.

His predecessor Theresa May committed the UK to achieving “net zero carbon” by 2050, requiring the end of fossil fuel power for the electricity system, transport and household heat.

Mr Johnson is also keen to burnish Britain’s green credentials ahead of next year’s COP26 international climate summit in Glasgow.

This week’s speech is expected to feature pledges on hydrogen, carbon capture and storage, offshore wind and household insulation. Mr Johnson is also set to give the go-ahead to new nuclear power stations — such as Sizewell — and money for small modular reactors (SMRs).

Officials cautioned that Mr Johnson could still plump for the less ambitious target of 2032 for the ban on the sale of new petrol and diesel cars — but he is understood to be leaning towards 2030. The earlier target had been opposed by Dominic Cummings, who quit on Friday as the prime minister’s most senior aide.

Policy documents circulated across government included the date as “203X” in order to prevent the intended date from leaking.

Ed Miliband, the shadow business secretary, has long called for a 2030 cut-off point for the sale of petrol and diesel cars.

The UK government is also drawing up a long-delayed energy white paper which is expected to set out plans for decarbonising the energy sector in line with the 2050 target. 

The entrepreneur has prevailed at Europe’s biggest shopping mall operator, but don’t call him an activist

French billionaire Xavier Niel built his reputation and fortune on telecoms group Iliad and investments in technology start-ups from Paris to Silicon Valley. 

Less visible has been the 53-year-old entrepreneur’s interest in real estate. He has assembled a portfolio of mansions in spectacular locations such as the Place des Vosges, office buildings near the Seine and a five-star hotel on the slopes of Courchevel. 

This side hustle helps explain why Mr Niel intervened in September when Europe’s biggest shopping mall operator, Unibail-Rodamco-Westfield, proposed a controversial capital increase after a steep fall in its share price. Mr Niel believed investors proclaiming the death of retail real estate were wrong and the dilutive share sale was unnecessary.

He mounted an audacious activist campaign against the company, teaming up with Unibail’s founder Léon Bressler. Unusually for cosy corporate France, they triumphed.

But according to people who know him, something else may also have motivated the man that Bloomberg ranks as France’s ninth-richest, with a fortune worth $7.2bn. The computer hacker who grew up in a working-class Paris suburb, never finished college and whose first business success was in sex chat sites, still enjoys disruption.

“He loves opposing the establishment and being unorthodox. I’m sure he’s having a blast” with Unibail, said Solveig Godeluck, who co-wrote a biography of Mr Niel called The Pirate’s Way. “This is also his way to position himself as a new godfather of French business.” 

The tycoon’s influence and image in France has grown and changed since he founded Iliad in 1990, undercutting incumbents’ prices on broadband and mobile to the joy of consumers. Today, Iliad has a market value of €10.4bn, with 20m subscribers in France, more than 6m in Italy and will soon have 15m in Poland once it closes a takeover there.

Today, while maintaining his rebellious streak, Mr Niel has clearly joined the elite. One sign of shifting perceptions came in 2016 when former president Nicolas Sarkozy, who once derided Mr Niel as the “peep-show man” for having invested in sex shops in the 1990s, flew on the entrepreneur’s private jet to watch a Champions League football match in London. 

In an interview after winning the Unibail vote, the billionaire told the Financial Times that he welcomed the outcome but pushed back against being lumped in with aggressive US hedge funds. “We are not activists, but rather rebellious shareholders,” he sniffed. 

Colleagues and friends describe Mr Niel as brilliant, awkward and loyal to a small circle of allies. The long-haired, jeans-wearing executive has long been intensely private, apt to suing journalists or rivals who reveal details about his personal life or business. But in other ways he is an atypical billionaire: many people use the informal “tu” to address him and he sometimes travels to meetings on an e-scooter.

Mr Niel has also played an important role in nourishing France’s tech scene, first as a prolific business angel and then as the founder of Station F, the world’s biggest start-up incubator. Closest to his heart as “un self-made man” was the opening of 42, a free programming school with no teachers and no books, but open to all who pass a brutal month-long entry exam regardless of academic record or social class.

“When he talks about 42, he often has tears in his eyes,” recounted Jean de La Rochebrochard, who invests in about 100 start-ups a year for Mr Niel’s Kima Ventures. “He is really proud of it and he’s right to be” since it helps address France’s entrenched inequality.

Both were also big real estate projects: it cost €250m to turn an old rail depot in south-east Paris into the gleaming Station F campus and Ecole 42 cost €70m to build. They have become obligatory visits for French politicians and foreign diplomats eager to endorse what President Emmanuel Macron called the “start-up nation”.

The seeds of Mr Niel’s admission to the French establishment were sown earlier. In 2010, he teamed up with the late fashion businessman Pierre Bergé and investment banker Matthieu Pigasse to rescue the Le Monde newspaper from near-bankruptcy. The “BNP trio” were not initially popular among the left-leaning paper’s journalists, but their investment modernised its digital operation and eventually helped reverse years of revenue declines.

The Le Monde investment “was an important entry point for him to the French establishment, and he’s since built up relationships across the political spectrum and business”, said Olivier Rosenfeld, who was Iliad’s chief financial officer from 2001 to 2007 and now works for Mr Niel’s private vehicle that invests in telecoms.

“Xavier plays a long game: he became part of the French elite on his own terms,” he added.

Soon afterwards, Mr Niel began a relationship with Delphine Arnault, the daughter of the billionaire founder of LVMH. The pair have two children together, and he also has two older children from a previous marriage.

The pairing has meant Mr Niel is no longer always the centre of attention. Outside a Louis Vuitton fashion show last month, he waited patiently as Ms Arnault had her photo taken by paparazzi. Then they took their places in the front row.

EDF denies the idea of ​​serving as a "white knight" at Suez. The scheme would create a service giant valued at 45 billion euros. And counterbalance Total's ambitions

A great burst of laughter as a denial. The EDF spokesperson dismisses a circulating scheme that the state-owned company could be the white knight coming to Suez's rescue in its fight against Veolia. "The merger between EDF and Suez would create a global heavyweight in the provision of services in France and internationally without areas of conflict of interest, which would also allow Total to be counterbalanced", explains a generally very well-informed source.

The fact that Jean-Bernard Lévy, CEO of EDF, is also a director of Société Générale, Suez’s bank adviser, helps make the information plausible. Just like the hatred he cultivates towards the CEO of Total: it would not be the first time that a personal affair has spurred a proposed deal in France. Thus, we remember Henri Proglio, boss of EDF, who dreamed of getting closer to Veolia, where Antoine Frérot had succeeded him. In any case, if marriage to 45 billion euros there is one day, it is indeed the State, shareholder with 84% of EDF which will decide.

And this is far from obvious. First, Veolia already owns nearly 30% of Suez. Then, the management of the energy company and the public shareholder engaged in a process of reprofiling the group called "Hercule" with a split between an "EDF Bleu" grouping together nuclear, dams and RTE and an "EDF Green" bringing together renewable energies and Enedis, part of whose capital would be listed. There are variations, such as perhaps the creation of an "EDF Azur" with hydraulics, but it is certain that a merger with Suez would completely reshuffle the cards.

Then, and this is the reason why the government wants to reorganize EDF while continuing to focus on nuclear power, the public company is drowning in colossal debt. At the end of 2019, the group's indebtedness stood at 41 billion euros and a confidential report from the Treasury Department mentions a figure of 60 billion euros in the short term. EDF could be a white knight, but certainly not a beautiful bride for Suez.

While waiting for this scenario to continue to grow in the brains of Bercy strategists and among the many investment bankers who revolve around Suez, Engie and Veolia, other names of white knights are circulating. The Ardian fund is thus making a comeback after doing a little bit of everything on the file a few weeks ago. The name of the first French infrastructure fund, with 15 billion euros in assets, Antin Infrastructure Partners is also circulating.

EDF dément l'idée de servir de "chevalier blanc" à Suez. Le schéma permettrait de créer un géant des services valorisé 45 milliards d'euros. Et de contrebalancer les ambitions de Total

Un grand éclat de rire en guise de démenti. Le porte-parole d’EDF écarte un schéma qui circule selon lequel l’entreprise publique pourrait être le chevalier blanc venant à la rescousse de Suez dans sa lutte contre Veolia. "Le rapprochement entre EDF et Suez créerait un poids lourd global de prestations de services en France et à l’international sans zones de conflits d’intérêts, ce qui permettrait aussi de contrebalancer Total", nous explique une source généralement très bien informée.

Le fait que Jean-Bernard Lévy, le PDG d’EDF, soit également administrateur de la Société générale, banque conseil de Suez, contribue à rendre l’information plausible. Tout comme la détestation qu’il cultive envers le PDG de Total : ce ne serait pas la première fois qu’une affaire de personnes aiguillonne un projet de deal en France. Ainsi, on se rappelle d’Henri Proglio, patron d’EDF, qui rêvait de se rapprocher de Veolia, où Antoine Frérot lui avait succédé. En tout état de cause, si mariage à 45 milliards d’euros il y a un jour, c’est bien l’Etat actionnaire à 84% d’EDF qui en décidera.

Et cela est loin d’être évident. D’abord Veolia détient déjà près de 30% de Suez. Ensuite, la direction de l’énergéticien et l’actionnaire public se sont engagés dans un process de reprofilage du groupe baptisé "Hercule" avec une scission entre un "EDF Bleu" regroupant le nucléaire, les barrages et RTE et un "EDF Vert" regroupant les énergies renouvelables et Enedis, dont une partie du capital serait cotée. Il y a des variantes, comme peut-être la création d’un "EDF Azur" avec l’hydraulique, mais il est certain qu’une fusion avec Suez rebattrait complétement les cartes.

Ensuite, et c’est la raison pour laquelle le gouvernement souhaite réorganiser EDF en continuant de porter le nucléaire, l’entreprise publique croule sous une dette colossale. A fin 2019, l’endettement du groupe s’élevait à 41 milliards d’euros et un rapport confidentiel de la direction du Trésor évoque un chiffre de 60 milliards à brève échéance. EDF pourrait être un chevalier blanc, mais certainement pas une belle mariée pour Suez.

En attendant que ce scénario continue de cheminer dans les cerveaux des stratèges de Bercy et chez les très nombreux banquiers d’affaires qui gravitent autour de Suez, Engie et Veolia, d’autres noms de chevaliers blancs circulent. Le fonds Ardian fait ainsi un retour après avoir fait un petit tout sur le dossier il y a quelques semaines. Le nom du premier fonds d'infrastructure français, avec 15 milliards d'euros d'actifs, Antin Infrastructure Partners circule également.

A post-election report from Minsk-on-the-Potomac.

Ever since Saturday morning, when Joe Biden was declared the winner of the 2020 Presidential election, Donald Trump has been hunkered down in the White House, refusing to concede defeat, raising money for an “election-defense task force,” and pushing vague conspiracy theories about voter fraud to his millions of followers. That part we expected. What was not entirely clear in advance was how Republicans, when faced with decisive results pointing to Biden’s victory in every single one of the remaining battleground states, would choose to respond. It turns out they have reacted as they have to virtually all of Trump’s norm-shattering behavior for the last four years: by enabling it.

The exceptions, as of this writing, have remained so few as to be notable and, at the national level, countable on two hands: four sitting senators who have dared to call Biden the President-elect (Susan Collins, Lisa Murkowski, Mitt Romney, Ben Sasse), a handful of House members, a few governors, and a host of formers, including former President George W. Bush. Another half-dozen or so Republican senators, trying to split the difference, have stopped short of congratulating Biden or calling him the next President, but say that Trump should at least let the official transition process begin or allow Biden to start receiving intelligence briefings. On Thursday morning, when Governor Mike DeWine, Republican of Ohio, said on CNN, “Joe Biden is the President-elect,” it was treated as breaking news. Merely acknowledging basic math, it seems, is now considered an act of political courage. More foreign leaders have so far acknowledged the outcome of the American election than Republican Party officials. Needless to say, this is not a good look for the world’s longest-running constitutional democracy.

At times, during this unnerving week in America’s capital, it has felt as though we were watching events unfold in Minsk or some other dictator stronghold where elections are not stolen the day votes are cast but in the weeks afterward, as the defeated President holes up in his palace, defying reality and increasingly urgent crowds in the streets. Here in Minsk-on-the-Potomac, Trump has been perpetrating the Big Lie, claiming the election was stolen from him and apparently persuading millions of Americans to go along with this evidence-free fantasy. Biden, so far, has urged calm. It’s an “embarrassment,” he told reporters Tuesday in Wilmington, Delaware, where he continued to plan his transition, took congratulatory phone calls from world leaders, and appointed a White House chief of staff. The official line from Biden has been clear and simple: concession or no concession, Trump will have to leave office at noon on January 20th, and that is that.

But is it? That we are reduced to even asking this question is a defeat for the United States and a win not only for Trump but for all the Trumpists to come, who will forever have the example of a President of the United States flouting the most basic principle of American democracy: accepting the election results and the consequences that come with them.

On Monday, after a weekend of jubilation in America’s heavily Democratic big cities—where the unofficial anthem was a rap song by YG, “F--uck Donald Trump”— the President left off sulking on the golf course long enough to fire the Secretary of Defense, Mark Esper. He was “terminated,” Trump tweeted at around noon.

I found out about the Pentagon chief’s ouster from Anthony Scaramucci, the former White House communications director, who has since become a fierce critic of Trump, as we were about to start an interview. It seemed somehow appropriate to hear the news of this latest firing from someone whose own short-lived tenure in the Administration—a mere eleven days—has since become a unit of measurement signifying the attenuated life cycle of a Trump-era official. Scaramucci has fully embraced the linguistic legacy of his brief government service. Trump, he told me, “will have been President for 132.78 Scaramuccis, and unfortunately right now for the country we have six and a half more Scaramuccis to go. I think the last six are going to be really tough on the country, because the guy’s basically a sore loser and a big-time baby.”

Trump himself has declined to offer an explanation for just what exactly he is doing. Throughout the week, he remained publicly silent, aside from various tweets denouncing the “Rigged Election,” complaining that Fox News has abandoned him, and insisting, “WE WILL WIN!” At the same time, unnamed senior Administration officials and outside advisers to the President told reporters that Trump was not, in fact, serious about defying the election results to remain in office. With Biden on track to receive far more than the two hundred and seventy votes needed to win the Electoral College, Trump was reported to be “very aware there is not a path to victory,” as the NBC correspondent Peter Alexander put it. Others suggested that the President’s intransigence was merely a “circus,” a “performance,” or a temper tantrum that would amount to nothing. Republicans, it was said, were just humoring Trump, or giving him time to accept his fate, or helping to boost turnout in the upcoming Georgia runoff elections that will decide control of the Senate. Scaramucci theorized that maybe Trump would simply retreat to Mar-a-Lago, his winter home in Palm Beach, and never come back to the White House.

As for the firing of Esper, what appeared to be an act of pure vengeance by Trump began to seem even more sinister after the subsequent ouster of several of the Defense Secretary’s senior advisers. Was this a sweeping purge that might presage more worrisome acts to come? Some analysts called the post-election firings a “decapitation strike.” Many theorized that the White House power play might have something to do with pulling troops out of Afghanistan and the Middle East—something that Pentagon officials have been publicly feuding about with Trump’s national-security adviser, Robert O’Brien. Or maybe it was about politicizing intelligence. Or defending Trump in the case of a truly contested succession. What seemed clear was that the regime loyalists installed in key posts at the Defense Department and the National Security Agency weren’t there just to add a line to their résumés.

Even after a full four years of watching Trump, this might have been the most unsettling, and uncertain, few days in his Presidency. On Monday, as Republicans made clear that they would not publicly challenge Trump’s election denialism, there were moments when I worried this really was the power grab we’ve spent the past few years dreading. By late in the week, it seemed more like much of the tumult of the era: terrible for democracy, but ultimately a bad case of Trumpian bluster rather than an ominous portent of tanks in the streets. In private, the President reportedly was already telling advisers he would like to run again in 2024, which at least sounded a lot less like a man who plans to barricade himself in the White House rather than leave in January.

On Thursday, five days into this insane impasse, I asked a dozen of the smartest Washington hands I know what to make of it all: Was this a coup in the making, or just another Trump con? Taken together, their responses were modestly reassuring. “A little coup, a lot of con, and a total and reckless disregard for the health of our democracy or country,” William Kristol, the conservative leader of the Never Trump movement, told me. “He couldn’t organize a one-car funeral; he sure as hell can’t organize a coup,” a leading Republican pollster, who worked with a number of the Party’s candidates this election and asked not to be named, said. “Besides, a coup would not stand. It would end the best way possible for the G.O.P.—with him dead or in jail. He doesn’t want either of those, so it’s a con.”

Brendan Buck, a Republican strategist who served as a top adviser to former House Speaker Paul Ryan, called Trump’s actions this week “a national embarrassment,” but also “a fantasy with no endgame” that will “not change anything other than eroding confidence in elections among Republicans.” The dénouement of whatever this is, Tom Davis, a former Republican member of Congress, told me, will come when states begin certifying the election results over the next few weeks. “Republicans know that Biden’s won. They’re just giving him room,” he said, of Trump. “When these are certified, this all crashes and burns.”

Several of them said the Pentagon firings—and the threat of additional firings, of officials like the F.B.I. director, Christopher Wray, and the C.I.A. director, Gina Haspel—were even more worrisome than the spectre of Trump refusing to leave office in January. “The Pentagon purges are most troubling because there are two months remaining,” William Antholis, the director of the Miller Center, at the University of Virginia, who has studied Presidential transitions and their national-security risks, said. Michael Abramowitz, the president of Freedom House, an N.G.O. that supports democracy around the world, told me that Trump’s moves resembled “authoritarian tactics” used elsewhere. “Will it be successful in helping President Trump keep power? I don’t think so,” Abramowitz said. “But is it a chilling move and a bad precedent? Very much so.” Perhaps the best-case version of what is going on came from Kori Schake, a Republican who served on the National Security Council under President George W. Bush and is now at the conservative American Enterprise Institute. She told me the Pentagon firings were a “spiteful indulgence rather than an ominous policy move.”

Miles Taylor, the former Department of Homeland Security chief of staff who later outed himself as the Anonymous author of a scathing anti-Trump Op-Ed in the Times and book, may have summed up the whole sorry episode best. Trump’s outrageous behavior since the election that rendered him the first one-term President in three decades is the latest, the worst, and the most worrisome example yet, he told me, of “Trumpism gone wild”—which strikes me as both quite accurate and not at all reassuring.

W.R. Grace (GRA)

40 North Management revealed a 14.9% interest in the specialty-chemicals and materials manufacturer, equal to 9,865,008 shares. Last month, 40 North disclosed that its board representative, Kathleen Reiland, resigned as a W.R. Grace director over disagreements over how to address the company’s performance. On Nov. 9, 40 North issued a letter to the company stating that it was prepared to offer $60 in cash per W.R. Grace share to take it private. In the letter, 40 North alleged that ever since W.R. Grace spun off GCP in 2016, improved operational performance hasn’t materialized. 40 North believes that its offer gives shareholders a “direct path to realizing a compelling premium…with far greater certainty if W.R. Grace were to remain a publicly traded company in this uncertain economic environment.”

California Resources (CRC)

Golden Tree Asset Management disclosed an initial position in the independent oil-and-gas explorer of 19,914,491 shares, including 475,571 underlying warrants. California Resources exited bankruptcy to begin trading on Oct. 28 after it completed its financial restructuring. Under the restructuring, Golden Tree surrendered its claims against California Resources in exchange for the shares and warrants. Combined, the new California Resources equity holdings give Golden Tree a 23.9% interest in the company.

Silver Lake Group revealed that it owns a new position in the consumer-insurance firm of 9,259,259 Class A common shares. Silver Lake bought all of the shares through a private purchase that closed the day of Root’s Oct. 30 initial public offering. Both the initial offering and private purchase priced shares at $27 each. Silver Lake has no plans or proposals in place for its Root stake, which now stands at 15.6% of Root’s outstanding Class A common shares.

Xerox Holdings (XRX)

Icahn Capital lifted its position in the printing and imaging technology firm to 28,769,235 shares. Icahn Capital bought 243,198 Xerox shares on Nov. 6 at $18.99 each. Icahn Capital has now lifted its interest in Xerox to 14.5% and remains Xerox’s largest shareholder. Earlier this year, Xerox ended a hostile bid to buy larger rival HP Inc. (HPQ) in the face of the coronavirus pandemic and opposition from HP Inc.

Coliseum Capital Management reported a higher stake in the home and commercial interior-construction-products maker of 2,313,747 shares. Coliseum Capital bought 286,300 GMS shares from Sept. 10 through Nov. 6 at prices ranging from $22.16 to $24.90 apiece. Following the additions, Coliseum now owns 5.4% of GMS’ tradable stock.

The chip industry has been one of the biggest investment stories this year.

The iShares PHLX Semiconductor exchange-traded fund (ticker: SOXX) is up 35%, despite the pandemic and economic shutdowns. Helping drive the gains: a wave of deals, spurred in part by the elevated stock prices of the acquirers.

We checked in with C.J. Muse, 50, Evercore ISI’s widely followed chip analyst, to see what happens next. After receiving his M.B.A. at Columbia University, Muse worked as an investment banker at Lehman Brothers before becoming an equity-research analyst in 2000, first at Lehman Brothers, then at Barclays, and since 2014, at Evercore ISI. Muse does his job well: He’s the top-ranked semiconductor analyst in Institutional Investor’s annual survey. He resides in New York City, where he plays tennis and takes care of his new dog when he isn’t tracking the semiconductor industry. Keep reading for more.

Barron’s: Why has SOXX been climbing?

C.J. Muse: One of the most important factors to recognize, coming into 2020 and the pandemic, is that much of the semiconductor industry had corrected in the latter part of 2018 and all of 2019. During the global financial crisis, revenues for the industry dropped 40% from peak to trough, and then, within three to four quarters, were back to peak. In this cycle, we were 20% off the prior peak. That gave us confidence that the impact to semiconductor fundamentals would be muted. This year, semiconductor revenues are probably up 5%, which is pretty amazing in light of the high correlation with global gross domestic product.

What kind of growth are you expecting?

Our base case is semiconductor revenue growth of 5% this year and 10% or even higher next year. The consensus estimate for next year is below that. Driving accelerated growth in 2021 and beyond is, first and foremost, the secular story with the cloud. We also have the 5G cycle. Not only will that lead to greater smartphone units, but there’s also an underlying content story. If I think about secular growth for the cloud, and smartphone units tracking down 10%-plus this year, and then going into the 5G cycle, I don’t know why smartphones can’t grow 10% to 15% in 2021.

The third leg of the stool is broad-based analog, with auto and industrial recovering after seven straight quarters of undershipping. Those three drivers are what’s going to enable and add growth in ’21. A number of drivers should enable continued relative outperformance. Covid-19 has exacerbated the digitalization going on across almost every industrial vertical.

Is a second wave of the virus of concern?

Another wave and/or a slowdown in a reopening of economies would be a negative. At the same time, businesses and individuals have accelerated their adoption of the digital world. You’ll see relative outperformance because of how critical semiconductors are.

Trade is a big issue for this sector. What does Joe Biden’s assumed presidential victory mean for China trade and semiconductors?

The election had a big impact on my group. Results from Qualcomm [QCOM] and the election definitely led to the SOXX going dramatically higher. U.S.-China relations will be less transactional and normalize a bit. There will be pressure for China to improve on intellectual-property theft and other concerns. But it does mean China offering regulatory approval of merger-and-acquisition transactions. The market was concerned that the restrictions on shipping equipment to Semiconductor Manufacturing International [SMICY] could move to all of them. That would be removed as a concern.

China wants to build their own semiconductor industry. This is a wonderful industry for the U.S., and we need our government to support it, like all the other foreign governments do. I would hope this is a mission-critical focus by the new administration.

Under a Biden administration, the big winners are equipment suppliers like Lam Research [LRCX], Applied Materials [AMAT], and KLA [KLAC]. We could see pressure on Texas Instruments [TXN], with planned higher corporate-tax rates favoring foreign-domiciled chip makers like NXP Semiconductors [NXPI].

M&A is this year’s story. Why?

One, there are only so many remaining high-quality assets. Scarcity value, despite the uncertainty around Covid-19, has played a role in the willingness to pursue M&A. Two, China is clearly looking to build its own domestic semiconductor industry and, looking out five to 15 years, will be a viable threat. Scale is critical for success. Three, stock prices moved up considerably in the past 12 months.

In July, Analog Devices [ADI] offered to buy Maxim Integrated Products [MXIM], using 100% stock. We weren’t out of the woods yet on Covid-19, and that was novel. Subsequently, we’ve seen Nvidia [NVDA] agreeing to buy ARM Holdings, Advanced Micro Devices [AMD] agreeing to buy Xilinx [XLNX], and Marvell Technology Group [MRVL] agreeing to buy Inphi [IPHI], all using their stock as currency. The probability of M&A being approved by Chinese regulators is now higher—good news for these transactions to close.

Moore’s Law spurred growth in the past. But technological advances are getting expensive.

The driver of incremental leading-edge capacity is high-performance compute [chips used for the cloud]. If you think about the business models for Google, Amazon.com [AMZN], and Microsoft’s [MSFT] Azure, which are competing heavily in the cloud, I don’t think they care about the cost of silicon because the return on invested capital is so vastly better than in the consumer market. That’s a very important distinction that will enable investments in leading-edge silicon, despite the fact that capital intensity is accelerating as much as it is. Other techniques are being adopted to get around the challenges of Moore’s Law, such as advances in packaging. Design also plays an important role. Nvidia, the leader in graphics processing units, is utilizing GPUs for artificial-intelligence machine learning. And Nvidia isn’t at the leading edge—they’re typically a node or two behind, but have the best product out there. So it’s not just transistors and transistor size that matter.

Are there any companies left to buy?

If you look at the semi landscape, we now have five big equipment companies. U.S. regulators stopped Applied Materials from buying Tokyo Electron and Lam Research from buying KLA. So, semi equipment is done. The four major compute platform names in semis are Qualcomm, Nvidia, AMD, and Intel [INTC]. The DRAM industry has consolidated to three names. In NAND, there are still six players after Intel’s NAND sale to SK Hynix [000660.Korea].

Elsewhere, we’re seeing two major analog players emerge in Texas Instruments and Analog Devices. We could see further consolidation among leading analog/mixed signal names like Marvell, NXP, Microchip Technology [MCHP], ON Semiconductor [ON], Power Integrations [POWI], and Monolithic Power Systems [MPWR]. The most interesting growth areas in semi land are cloud, networking, and automotive, where Marvell is probably the most interesting candidate. After that, the more interesting question is if major players in one silo venture into another. Who might have an interest in M&A in general? Qualcomm has been noticeably silent. But Qualcomm’s CEO is viewed as a value investor. I suspect he’ll be very focused on price.

What should investors own?

Nvidia is creating the AI platform. They’re dominant in training and AI for the leading cloud players. Less appreciated is their platform-based approach targeting all the major enterprise verticals. If they’re successful with it, there’s no doubt in my mind that they’re on track to increase earnings from around $15 next year to $25 by 2025. My price target is currently $600, but if that view is right, then this is a $1,000 stock looking out over the next three-plus years. [Nvidia recently fetched $532.]

NXP has one of the best exposures to automotive at 50% of revenue. Revenue will grow at a 12% compound annual rate. Plus, NXP is a content story, led by their positioning in radar, battery management systems for electric vehicles, and digital clusters for automotive. Next year, investors will start to expect $10 of earnings in 2022. We have a $160 price target [recent price: $146.] If $10 is real, our price target is probably conservative.

Anything else you like?

Teradyne [TER] has a number of interesting levers. And we expect another strong year from Apple [AAPL]. Teradyne has excellent leverage to Qualcomm, an auto-industrial story that will recover nicely in ’21, and an industrial-robotics business that will grow nicely next year. We think they earn $5 in 2021 and $7 by 2025, which supports the $110 price target today and $140 over time. [Teradyne recently traded for $100.]

Another is Micron Technology [MU]. While 2020 was disappointing, with Covid-19 weighing on end demand, supply/demand should move into balance. Very likely you’ll see shortages in 2021, meaning multiple quarters of upward pricing trends for DRAM that will lift the stock. Our current price target is $75, so that’s 50% upside. The assumed multiple is pretty low, so we could see upside there, too.

What about equipment stocks?

ASML Holding [ASML] is domiciled in the Netherlands, and isn’t impacted by U.S equipment embargoes. They have a monopoly with their EUV [extreme ultraviolet lithography] technology. Earnings are going to accelerate, and we believe 20 to 24 euros [$23.60 to $28.32] a share in 2025 is achievable. We have a current price target of €375, and long-term upside of €500, if our €20-plus earnings number is accurate. [ASML traded on Thursday for €352.]

Expect More ESG Activism and SPACs in 2021

This year saw muted activist activity due to the coronavirus pandemic, but activists are gearing up for 2021. They plan to return to campaigns that may have been upended, as well as new opportunities emerging from the recent uneven economic recovery.

Some themes aren’t too surprising. Activists are still expected to push companies to improve the performance of noncore businesses or divest them, Cas Sydorowitz, Global Head of Activism at Georgeson, tells Barron’s. Companies will also face pressure to offload investments in noncore businesses, as Dan Loeb’s Third Point tried to push Nestlé to sell its stake in L’Oréal three years ago.

The new year will also see a continuation of recent trends that have bubbled up this year.

ESG-focused activism and shareholder proposals will keep rising, Sydorowitz says. But things will be a bit different, as it will be third parties organizing investors, not just traditional shareholder activists pushing for change.

More special-purpose acquisition companies could be rolled out, as well. Loeb launched a SPAC two years ago, but this year saw a flood of such vehicles from frequent activists. Bill Ackman of Pershing Square, Jeff Smith of Starboard Value, and former hedge fund manager Cliff Robbins have all launched SPACs in recent months.

“It’s almost a form of permanent capital for activists,” Sydorowitz says.

Logitech International has been one of the big winners of the coronavirus crisis, raising guidance twice already this year thanks to strong sales of webcams, keyboards, and software to workers locked down at home.

While Logitech’s (ticker: LOGN.Switzerland) legal headquarters and heritage is in Lausanne, Switzerland, it also has a Nasdaq listing (LOGI), and most of its senior management work out of an office on the West Coast of the United States.

Its shares have risen about 400% in the past five years, to a recent 76.34 Swiss francs, or $81.96 on Nasdaq. Yet the stock could have further to rise, as working from home becomes an enduring trend after the coronavirus, and strong demand for e-sports and computer games drives sales.

Tom Forte, an analyst at U.S. investment bank D.A. Davidson, has marked the stock a Buy, figuring it could rise to CHF105.18 ($116), suggesting a rally of about 40% from recent levels.

In an October note, Forte wrote: “We have compared companies’ abilities to exploit opportunities created by Covid-19 as akin to a sailor capturing the wind having built a superior boat.” He likens Logitech to a boat with three sails: 1) the main (video collaboration), 2) the jib (gaming), and 3) the spinnaker (self-broadcasting).

“As a result of management’s ability to position itself to leverage three significant secular shifts at once, we see Logitech as well-positioned for the remainder of calendar 2020 and beyond,” Forte says.

Logitech is also rated a Buy by Michael Foeth, an analyst at Swiss investment-banking group Vontobel, whose CHF98 target price suggests 31% upside.

Logitech employs 7,000 workers and has a market value of CHF12.4 billion ($13.5 billion). It fetches 22.3 times this year’s expected earnings and is valued in line with its peers. In May, it posted net income of $450 million for the year to the end of March, which was an increase from $258 million recorded the year before. Net sales for 2020 were $3 billion.

CEO Bracken Darrell tells Barron’s, “We have positioned the business behind long-term trends, not Covid trends. Covid has accelerated them. We are growing markets and looking for new businesses to enter where we could be the leader.”

He sees plenty of opportunities. “While I don’t expect to grow at 75% forever, we should still be in long-term growth mode. We’re in a world where people increasingly need multiple places to work, and I see lots of potential.”

The business was founded in 1981 in Apples, Switzerland, by Swiss national Daniel Borel and Italians Pierluigi Zappacosta and Giacomo Marini. They wanted to call it Softech, but that name was taken, so they borrowed the root of the word logiciel—which means software in French—to create Logitech.

Before the pandemic, the company was already enjoying strong performance, selling hardware for computer games like Fortnite and League of Legends, and tapping into the booming e-sports market—a segment that, for some, could be filling the hole left by canceled sporting events.

The trend toward working from home is likely to remain, in some form, even after the pandemic passes. Already, it has sparked a boom in demand for webcams, and there is likely to be a second wave of demand from workers returning to the office who will need webcams to communicate with others who still work remotely.

Assuming Logitech can overcome any short-term supply issues and perhaps shift some manufacturing to more sustainable materials, the stock is wired for further growth.

Through turmoil, pandemic, and recession, the merger business has kept ticking. After pausing in March, deals resumed. According to Dealogic, 2020 has had 6,707 U.S. announced transactions totaling $1.1 trillion as of Nov. 10, compared with 8,752 worth $1.6 trillion for the same period in 2019. From Sept. 2 to Nov. 10, volume lagged behind 2019, but valuations were twice that of the earlier period.

Now that Joe Biden is president-elect, deal makers are recalibrating expectations. News about a Pfizer / BioNTech vaccine brightens hopes for an economic bounceback. Milton Berlinski, co-founder of private-equity firm Reverence Capital, predicts that merger activity will be “business as usual while rates are low.” Private equity, which is sitting on $1.6 trillion of cash, will, he adds, be acquisitive into 2021.

Biden promises a “relatively stable political and tax environment going forward,” says Matthew Epstein, founder of Newbold Partners, a boutique fintech-focused investment bank. But Epstein worries about Biden continuing Trump’s antitrust activism. “Concern over dominance of the economy by a handful of tech companies will continue,” he says.

As for tax changes, the Biden campaign promised to roll back Trump tax cuts, boosting capital gains and the top corporate rate. That may have produced the recent rush to get deals done. But with the GOP now holding at least 50 Senate seats, a tax hike looks less likely. As William Blair’s head of M&A Dan Connolly writes in an email, “With a Republican Senate, Biden will not likely be able to significantly raise taxes or implement significant fiscal change that could alter the current favorable M&A market.” Even the merger business could use some normalcy.