WSJ : Cartier’s Owner Spreads Its Bets Online

Cartier’s Owner Spreads Its Bets Online
Swiss luxury group Richemont is investing in U.S.-listed fashion platform Farfetch alongside Alibaba


An investment by the owner of the Cartier jewelry brand in luxury fashion website Farfetch is a smart move. It might also be an indirect admission of weaknesses at the rival online business it owns, Yoox Net-a-Porter.

On Thursday, Swiss luxury goods giant Compagnie Financière Richemont CFRUY 10.18% said it would invest $550 million in New York-listed Farfetch, made up of $250 million in a new joint venture in China and the balance in notes that can be converted into Farfetch stock. Tech giant Alibaba will contribute the same amount. Richemont and Alibaba have the option to up their stakes in the Chinese JV from 25% now to 49% after three years.

Richemont’s shares rose 7% in morning trading Friday. First-half results that showed booming sales in mainland China and a recovery in lucrative jewelry sales certainly helped. But there is also speculation that some kind of future tie-up with Farfetch, which operates a fast-growing online marketplace, could allow it to unload digital retailer Yoox Net-a-Porter.

“The market’s hope is that this will be an opportunity for Richemont to find a way out of the online distribution business,” says Luca Solca, luxury -goods analyst at Bernstein.

This wouldn’t be out of character. The Swiss company has switched in and out of full control of its fashion website over the years. Richemont merged its Net-a-Porter business with Italian competitor Yoox five years ago before taking over the combined group in 2018. Farfetch—which appears to have approached Richemont rather than the other way around—may have good reason to bulk up now that Amazon has launched a rival platform called Luxury Stores. And YNAP’s close relationships with the best brands, built up over two decades, has to be appealing to its competitor.

Selling YNAP to Farfetch, if the possibility arises, could address an eyesore at Richemont. Sales at the company’s online distributors, including luxury watch reseller Watchfinder, fell 21% in the half. The weak performance does reflect warehouse closures during the height of the pandemic. And the Swiss company gave priority to its bottom line by not slashing prices on YNAP’s sites, which nonetheless made a loss.

YNAP’s problem is that luxury brands are cooling on independent retailers, even online ones. Increasingly, they prefer platforms like Alibaba’s Luxury Pavillion or Farfetch, which give them full control over pricing and how their goods are presented. Quality digital department stores like YNAP are still in demand, but momentum is moving toward the marketplace model.

The business of selling luxury goods online remains at a relatively early stage of development, and brands are still trying to work out the right approach. Richemont’s latest digital bet makes sense for investors—but it also highlights the costs of being an early mover.

>>> US Close Dow -0.24% S&P -0.03% Nasdaq +0.04% Russell -0.96%


Closing Stock Market Summary

The S&P 500 (-0.03%) finished flat on Friday despite a better-than-expected October employment report, although it still ended the week higher by 7.3%. The Nasdaq Composite (+0.04%) and Dow Jones Industrial Average (-0.2%) also finished little changed in a lackluster session, while the Russell 2000 fell 1.0%.  

Briefly, nonfarm payrolls increased by 638,000 (consensus 570,000) and the unemployment rate was 6.9% (consensus 7.7%), versus 7.9% in September. This was the sixth straight month of a labor market recovery, but it supported a view among some lawmakers, including Senate Majority Leader McConnell, for a smaller stimulus deal. 

The S&P 500 energy sector dropped 2.1% amid weaker oil prices ($37.14/bbl, -$1.61, -4.2%), which was attributed to profit taking and the notion that a slower economic recovery would hinder oil demand. No other sector gained or lost more than 1.0%. 

The financials sector (-0.8%) also showed relative weakness, while the defensive-oriented consumer staples (+0.4%), information technology (+0.3%), and health care (+0.2%) sectors posted modest gains. 

Beneath the index and sector levels was a more interesting story with lots of earnings movers. To name a few, T-Mobile US (TMUS 123.56, +6.30, +5.4%), CVS Health (CVS 64.95, +3.54, +5.8%), Uber (UBER 44.87, +2.91, +6.9%), and Square (SQ 198.08, +22.85, +13.0%) stood out with impressive gains, while Electronic Arts (EA 119.19, -9.14, -7.1%) disappointed. 

Separately, the presidential election remained undecided but former Vice President Biden continued to lead President Trump 253-214 in the delegate count, according to most news outlets. A winner could be announced this weekend. 

In the Treasury market, longer-dated maturities succumbed to renewed selling interest following the release of the employment report. The 2-yr yield increased one basis point to 0.16%, and the 10-yr yield increased four basis points to 0.82%. The U.S. Dollar Index decreased 0.3% to 92.26. 

Reviewing Friday's economic data, which featured the Employment Situation Report for October:

  • Nonfarm payrolls increased by 638,000 in October (consensus 570,000); the unemployment rate was 6.9% consensus 7.7%), versus 7.9% in September; average hourly earnings increased 0.1% (consensus 0.2%) versus a downwardly revised 0.0% (from 0.1%) in September.
    • The key takeaway from the report perhaps is that, because it was better than expected, Congress could potentially see a rationale for cutting down the size of the ~$2 trillion fiscal stimulus package that was discussed before the election.
  • Consumer credit increased by $16.2 billion in September (consensus $5.0 billion) after contracting by an upwardly revised $6.9 bln (from -$7.2 billion) in August.
    • The key takeaway from the report is that revolving credit increased for the first time since February.
  • Wholesale inventories increased 0.4% m/m in September (consensus -0.1%) following a 0.5% increase in August.

Investors will not receive any notable economic data on Monday.

  • Nasdaq Composite +32.6% YTD
  • S&P 500 +8.6% YTD
  • Dow Jones Industrial Average -0.8% YTD
  • Russell 2000 -1.5% YTD

FT : Hollywood turns to Dagenham in £300m bet on studio space

Hollywood turns to Dagenham in £300m bet on studio space
Derelict industrial site in east London to be transformed into film production hub


One of Hollywood’s biggest property developers is turning a derelict east London industrial estate into a film and television production hub, as the boom in UK studios development continues despite the pandemic.

Hackman Capital Partners, the owner of storied US studios where Citizen Kane and ET were filmed, has agreed to put £300m over three years into transforming the site in Dagenham.

Darren Rodwell, the leader of Barking and Dagenham council, said an area known for “factories and Fords” would be “famous for making films”. “It’s not for the glamour or the glory, it is about bringing in thousands of jobs,” he said.

The Eastbrook Studios site will include 12 sound stages, spread over 11 acres — giving it roughly two-thirds the capacity of Pinewood, one of the UK’s oldest and most established production sites. Eastbrook is expected to be completed by 2023, with some filming starting as early as mid-2022.

The move is part of a flurry of dealmaking and investment in studio space over the past two years, with Walt Disney, Netflix and Sky signing deals to secure prized studio facilities to cope with an expected surge in production.

Weeks before the spread of Covid-19, Blackhall Studios, an Atlanta-based company that has seen films such as Jumanji: The Next Level filmed at its site, announced it was developing a new production centre in the Berkshire town of Reading.

Netflix has established a production hub at Pinewood’s Shepperton Studios, while Disney has signed a long-term lease at Pinewood Studios. In December, Sky also announced plans to build new facilities near the Elstree Studios, north of London, where the original Star Wars and Indiana Jones films were shot.

The Eastbrook project is a coup for Mr Rodwell, who took a significant political and financial gamble in 2016 with a promise to turn the ramshackle old May & Baker chemical factory into “the next global destination for making blockbuster movies”.

Ignoring doubters, the council bet £40m to buy the land and put through planning permission for studios, making the site more attractive for investors. Hackman will hold a 250-year lease on the site, which will be operated by a subsidiary, The MBS Group.

The vision for a film studios has survived two big shocks. Pacifica Ventures, the original investors in the project, pulled out last year citing uncertainty over Brexit. The pandemic then hit just as the council and its regeneration arm Be First were scouting for new investors.

Even before the studios investment, Dagenham has aggressively targeted the industry through a film unit that sold the borough as a film location. It has hosted blockbuster productions including Marvel’s Black Widow and Doctor Strange.

Sadiq Khan, mayor of London, described the project as a “special moment” for Dagenham that would create 1,200 jobs.

Hackman owns some of America’s most well-known studios complexes, including Culver Studios in Los Angeles and Silvercup Studios in New York, where The Sopranos was shot.

Michael Hackman, chief executive, said — referring to a 2010 film starring Sally Hawkins and Bob Hoskins: “Our investment will help write the script for the next iteration of Made in Dagenham.”

(OscarGruss - Makor) SPACs 11/6/20


Today:

 

ENPC/U First Day for Separate Trading of Class A Common Stock and Warrants (under the ENPC and ENPC WS symbols on the NYSE)

EQD/U First Day for Separate Trading of Class A Common Stock and Warrants (under the EQD and EQD WS symbols on the NYSE)

FEAC/Skillz FEAC S/H Record Date (expected, per NYSE)

MNCL/AerSale MNCL S/H Vote Date (special meeting to vote on an extension of the deadline to consummate a business combination from 11/11/20 to 2/11/21)

NFIN/Triterras NFIN Shareholder Redemption Deadline

TDAC S/H Record Date (for annual meeting, which will include a vote on an extension of the deadline to consummate an initial business combination from 12/1/20 to 3/1/21)

TOTA/Clene TOTA Deadline to Complete Business Combinationhttps://www.businesswire.com/news/home/20201106005240/en/

Merger Agreement "Out" Date (extended if the deadline to complete a business combination is extended)

 

GHIV/United Wholesale Mortgage

United Wholesale Mortgage Announces Closing of $800 Million of Senior Notes and Intention to Issue a Regular Annual Dividend Upon Closing of Business Combination

 

TZAC/Reviva

Investor Presentation

 

HYAC/ARKO

S-4/A#3 Filed, no material change

 

OPES/BurgerFi

PRER14A Filed for business combination – no dates, minor changes

 

ADOCU

S-1/A#4 Filed

Add “At the time that the Class A ordinary shares, warrants and rights comprising the units begin separate trading, holders will hold the separate securities and no longer hold units (without any action needing to be taken by the holders), and the units will no longer trade.”

 

TTCF

S-1 Filed for selling holders common and warrants  (private placement and other selling shareholders)

 

RPLA/Finance of America

S-4 Filed.  No dates. expected completion 1st half 2021

From background:

From the date of Replay’s IPO through the signing of the Transaction Agreement with FoA on October 12, 2020, members of Replay’s management reviewed self-generated ideas and contacted, and were contacted by, a number of individuals and entities with respect to hundreds of business combination opportunities. As part of this process, representatives of Replay considered and evaluated over 150 potential acquisition targets in a wide variety of industry sectors, and engaged in discussions with senior executives and/or major shareholders of over 30 such potential targets. From the date of Replay’s IPO through August 29, 2020, representatives of Replay submitted non-binding letters of intent to four potential acquisition targets (including FoA) following evaluation of, and discussions with, each such potential acquisition target.

Representatives of Replay engaged in preliminary due diligence and detailed discussions directly with the senior executives and/or major shareholders of each of the four potential business combination targets that received non-binding letters of intent from Replay. Replay did not pursue a potential transaction with potential acquisition targets other than FoA for a variety of factors, including Replay’s views of the target companies’ respective industry, sector and/or business prospects, the target companies’ respective preparedness to become publicly listed, and divergent expectations on timing and/or valuation.

Replay decided to pursue a combination with FoA because it determined that FoA represented a compelling opportunity based upon FoA’s differentiated vertically-integrated structure, product diversity, strong and experienced management team, large addressable markets and significant growth opportunities.

Compared to FoA, Replay and its advisors did not consider the other alternative combination targets to be as compelling when taking into consideration their business prospects, strategy, management teams, structure, likelihood of execution and valuation considerations.

 

 

From Yesterday:

 

HCCH/Fusion Fuel

F-4/A#4 Filed (redline attached)

11/4 record date, 12/4 meeting date, 12/2 redemption deadline; merger expected to be completed promptly following shareholder meeting

Updates that tax consequences of merger are subject to some uncertainty (pg. 54, 171 of redline)

 

LOAK/Danimer

LOAK Files From 10-Q

No update provided on merger

 

BMRG/Eos Energy

BMRG Announces Transfer of Listing to Nasdaq In Connection with Its Proposed Business Combination with Eos

BMRG intends to voluntarily transfer the listing of its shares of common stock and warrants to The Nasdaq Capital Market ("Nasdaq") from the New York Stock Exchange (the "NYSE") following the completion of its previously announced business combination (the "Business Combination") with Eos Energy Storage LLC ("Eos"), which is expected to close on or around November 16, 2020.

 

ORSN/Ucommune

424B3 Filed

Changed ticker for combined company from UCOMW to UKOMW, and mentions deadline extension (already disclosed)

 

NOACU

S-1/A#2 Filed

Reduces size of IPO from $250M to $200M

 

PCPC/U

S-1/A#1 Filed

No material changes

 

GHIV/United Wholesale Mortgage

From 10-Q Filed

No update provided on merger

 

DISCLAIMER This information represents neither an offer to buy or sell any security nor, because it does not take into account the differing needs of individual clients, investment advice. Those seeking investment advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales representative. Oscar Gruss & Son Incorporated believes this information to be reliable, but no representation is made as to accuracy or completeness. This information does not analyze every material fact concerning a company, industry, or security. Oscar Gruss & Son Incorporated assumes that this information will be read in conjunction with other publicly available data. Matters discussed here are subject to change without notice. There can be no assurance that reliance on the information contained here will produce profitable results. A security denominated in a foreign currency is subject to fluctuations in currency exchange rates, which may have an adverse effect on the value of the security upon the conversion into local currency of dividends, interest, or sales proceeds. The value of securities and depositary receipts of foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency exchange rates. © 2020 Oscar Gruss & Son Incorporated. All rights reserved.

FT : EY faces £1bn lawsuit over audit work for NMC Health

EY faces £1bn lawsuit over audit work for NMC Health
Collapsed healthcare group’s administrators prepare to sue Big Four firm for negligence

The administrators to NMC Health are preparing to sue EY for more than £1bn over claims the Big Four audit firm was negligent when it signed off the group’s accounts during a “long term” multibillion-dollar fraud.

NMC Health, the former FTSE 100 healthcare group, collapsed this year after discovering that more than $4bn was apparently hidden from its balance sheet in a large-scale fraud that spanned operations from Abu Dhabi to London.

EY has overseen NMC’s accounts since the healthcare company floated in London in 2012. The quality of the firm’s audits has already been questioned due to the fact that NMC’s board included former EY partners.

Administrator Alvarez & Marsal said it had hired law firm Quinn Emanuel to make a claim against EY, and had already issued a preliminary notice informing the audit firm it intended to file a lawsuit.

In a progress report to creditors, Alvarez & Marsal said it was still investigating the size and scale of the fraud, how it had been perpetrated and by whom, as it sought to assess potential claims and recoveries.

“The investigation is complex given the well organised and long term nature of the fraud, coupled with the number of jurisdictions involved,” it said. 

The Financial Reporting Council has already opened an investigation into EY’s audit of NMC’s 2018 financial statements.

The lawsuit is the latest blow for EY, which is facing large legal claims and regulatory scrutiny over its audit work in other high-profile scandals, such as Wirecard, the German payments processor that failed this year amid a €1.9bn fraud.

EY earned about £14m in audit fees from NMC Health over seven years.

EY said: “We can confirm that EY has received a preliminary notice to a letter of claim from the administrators to NMC Health. It would be inappropriate to comment further.”

One person close to the matter said: “It is thought that the fraud has been running since the point of the IPO. EY was the nominated accountant for the IPO and has also audited linked companies including Finablr.

“EY had a unique perspective on this group of companies, so the claim will be significant.”

The person added that it was likely to be “in excess of £1bn” but that calculations were still being carried out by lawyers and accountants ahead of filing the claim in the London courts. The administrator’s lawyers will have to prove that NMC’s financial performance would have been significantly different without the allegedly negligent EY audits in order to pursue the quantum of its claim.

NMC has been one of the biggest accounting scandals in the City of London in recent years. It was a respected member of the FTSE 100 until the end of last year, when short seller Muddy Waters began questioning its accounts and management.

The hedge fund also raised concerns over what it described as the “cosy” relationship between EY and NMC given the board included former partners of the audit firm, which it claimed meant there was a “lack of rigour” in its audits.

Although NMC initially denied the allegations, the company was quickly forced to conduct its own investigation that found billions in debt that had not been disclosed to the market amid allegations of management impropriety. 

People close to the company have alleged that the fraud included false accounting, forged invoices and kickbacks.

Alvarez & Marsal said an estimate of payments for unsecured creditors was not yet possible. A number of NMC’s businesses are being sold to raise money, including IVF clinic operators in the US and Europe.

The report also shows that Alvarez & Marsal has so far earned more than £22m in fees overseeing the administration.

FT : EU set to hit US products with tariffs in dispute over aircraft subsidies

EU set to hit US products with tariffs in dispute over aircraft subsidies
WTO has confirmed Brussels can tax up to $4bn of goods in retaliation for state aid to Boeing

The EU is set to hit US products from casino tables to groundnuts with additional tariffs in the two sides’ dispute over aircraft subsidies next week, after holding off on retaliation in the run-up to the US presidential election.

EU diplomats told the Financial Times that Brussels was gearing up to announce the higher tariffs after securing approval for the list of targeted products from national governments. 

The World Trade Organization last month confirmed the EU’s right to hit almost $4bn of US goods with punitive tariffs in retaliation for illegal state aid to Boeing. The WTO handed a larger award to the US last year in its parallel complaint against aid for Airbus, and as a result the US has already levied additional tariffs on European products ranging from French wine to Italian cheese. 

Diplomats told the FT that the EU would impose its tariffs next week, having opted not to rush through measures ahead of the US election out of concern it would lead to accusations of meddling in the country's domestic politics. 

The move is set to be announced after a strategic discussion among the bloc’s trade ministers on EU-US relations that will take place on Monday. 

One EU diplomat said he expected decisions on the matter would be announced “in light of” ministers’ discussions. “I do expect there will be something you will have on the 9th or the 10th [of November],” the diplomat said. 

Valdis Dombrovskis, the EU’s trade commissioner, told the FT last month that Brussels would introduce the tariffs if US authorities did not swiftly withdraw the ones they had slapped on EU products because of the subsidies dispute. Washington has given no such indication.

In response to a request for comment, the European Commission said: “The EU is currently finalising its process to use its retaliation rights in case we do not reach a mutually agreed solution with the US, including the immediate suspension of the US countermeasures currently in place.”

The EU’s retaliation list covers a wide range of US products, including aircraft, tractors and diggers, gym equipment, casino tables and groundnuts, as well as grapefruit juice and orange juice.

The dispute over aircraft subsidies dates back to 2004, when the US launched a case claiming that $22bn in illegal funding had been given to Airbus. The EU launched a counter-challenge, claiming $23bn in illegal aid had been offered to Boeing.

The retaliation rights of $3.99bn are far less than those awarded to the US last year in its parallel case against Airbus, but Brussels hopes that they will help galvanise talks on a settlement to the disagreement. 

Mr Dombrovskis and other EU senior policymakers have repeatedly emphasised their desire for talks to reach an agreement on aircraft subsidies and bring the spat to an end.