Challenges : l’américain Teledyne repart à l’assaut de la pépite française Phot

Incroyable, l’américain Teledyne repart à l’assaut de la pépite française Photonis
Par Vincent Lamigeon le 27.10.2020 à 07h30ABONNÉS
Après avoir rompu les négociations fin septembre devant les exigences du gouvernement français, le groupe américain tente une nouvelle offre pour racheter le champion français de la vision nocturne, à 450 millions de dollars. Baroud d’honneur ou coup gagnant?

C’est l’histoire sans fin. A peine un mois après avoir jeté l’éponge, l’américain Teledyne repart à l’assaut de la pépite française de la vision nocturne Photonis. Dans une conférence avec des analystes financiers organisée le 21 octobre, et étrangement passée inaperçue, l’industriel californien indique avoir relancé des négociations avec le fonds français Ardian, l’actuel propriétaire de la pépite. "Ces derniers jours, les demandes financières du vendeur se sont considérablement réduites, et nous avons relancé nos efforts d'acquisition, indiquait ainsi le président exécutif de Teledyne, Robert Mehrabian. Nous espérons conclure les négociations et annoncer l'acquisition avant la fin de l'année." Le prix d’acquisition évoqué est de 450 à 460 millions de dollars, bien en dessous des 550 millions de dollars proposés début 2020.

Le groupe américain avait retiré sa première offre fin septembre. Teledyne expliquait ce renoncement par les conditions imposées par le gouvernement français: une participation minoritaire dans Photonis de Bpifrance (à hauteur de 10%), et "des droits de veto concernant les opérations et la gestion des entreprises européennes de Photonis en France et aux Pays-Bas". Ces exigences, indiquait le groupe, rendaient l’opération "non réalisable à la valorisation communiquée". Paris prenait ainsi les Etats-Unis à leur propre jeu. Washington est un spécialiste de ces vetos qui ne disent pas leur nom: le Comittee on Foreign Investments (CFIUS), qui évalue tous les investissements pour déterminer leur dangerosité pour les intérêts stratégiques des Etats-Unis, impose régulièrement des restrictions assez drastiques pour dissuader les acquéreurs potentiels de pépites américaines.

Baisse de prix de 15%
Mais depuis, les conditions financières du deal ont changé, souligne Teledyne. "Il y a eu un changement important du prix que nous avons reçu, [une baisse d’] environ 15% en dollars américains, indiquait Robert Mehrabian le 21 octobre aux analystes. Et franchement, vous pouvez comprendre que posséder 100% d'une entité est très différent de posséder 90% d'une entité, c'est pourquoi il y a eu réduction de prix." A cette nouvelle valorisation, Teledyne serait prêt à accepter les restrictions imposées par Paris.

L’industriel américain assure ne pas avoir d’objection philosophique à la présence de Bpifrance au capital. "Nous avons eu des discussions avec la banque d'investissement française et nous les trouvons beaucoup plus orientés vers le business que vers le gouvernement, assurait Robert Mehrabian le 21 octobre. Bien sûr, ils auront leur mot à dire pour s'assurer que la technologie ne quitte pas la France. Mais je pense que nous pouvons vivre avec cette entreprise en tant qu'actionnaire minoritaire pendant un certain nombre d'années." En clair, Bpifrance apparaît plus, du point de vue américain, comme un partenaire business classique que comme un fonds souverain chargé de préserver les intérêts industriels et technologiques français.

Reste la grande question: cette offre a-t-elle une chance de réussir? Teledyne se veut optimiste. "Je pense que nous avons un accord de principe, nous devons désormais finaliser nos documents détaillés avec le gouvernement", indiquait Robert Mehrabian aux analystes le 21 octobre. Mais le coût politique d’une telle opération devrait faire réfléchir à deux fois l’exécutif français. "Je vois mal Emmanuel Macron laisser passer un tel rachat à moins de de deux ans de la présidentielle, alors que la souveraineté est devenue un thème majeur", assurait mi-octobre à Challenges un ponte de l’intelligence économique. Comme révélé par Challenges en avril dernier, les forces spéciales françaises, qui utilisent les matériels de Photonis au quotidien, étaient d'ailleurs montées au créneau pour alerter sur le potentiel rachat de Photonis par Teledyne, de même que la Direction du renseignement et de la sécurité de la défense (DRSD), le service de contre-ingérence du ministère des armées.

Alternative française?
Les politiques se sont ressaisis du dossier illico. "Une solution française est préférable au baroud d’honneur de Teledyne, indique le sénateur UDI Olivier Cadic, vice-président de la commission des affaires étrangères, de la défense et des forces armées, sur son blog. Le prix offert est maintenant du même ordre de grandeur que celui proposé par les fonds français intéressés lors de la mise en vente de Photonis, et donc de nature à écarter définitivement la menace de reprise par Teledyne."

Interrogé par Challenges, Olivier Cadic assure qu’une solution française, impliquant à la fois BPI et des fonds d'investissement privés, est envisageable avant la fin de l’année. "A 450 millions de dollars, on est revenu à une valorisation plus raisonnable, estime-t-il. Ce dossier peut marquer une inflexion historique: on peut rompre avec les solutions purement défensives, comme le fait de vouloir tordre le bras à Safran ou Thales, et bâtir une solution française pérenne qui permettra de développer Photonis." Un scénario séduisant, mais qui semble encore aujourd’hui assez hypothétique.

Challenges : Lagardère : Arnault et Bolloré face à face

Lagardère : Arnault et Bolloré face à face
Par Vincent Beaufils le 27.10.2020 à 07h30ABONNÉS
SERIE - # 4 Où le patron de LVMH et le premier actionnaire de Vivendi se retrouvent sur le dossier Lagardère. Que de similitudes entre ces défenseurs du capitalisme familial, qui ne se sont jamais croisés !

Leur entourage le promet : « Cela se passera bien » , Bernard Arnault et Vincent Bolloré se parlent, et tout le monde gardera bonne figure. « Il y a ici un immense respect pour Bernard Arnault, le meilleur capitaine d'industrie européen » , entend-on au dernier étage du siège de Vivendi, avenue de Friedland, à côté de l'Arc de Triomphe. A cinq minutes de là, avenue Montaigne, « on ne dit que du bien de Vincent Bolloré » . Et d'ailleurs ce dernier ne s'est-il pas réjoui après l'annonce officielle de l'entrée de Groupe Arnault chez Lagardère, dans une déclaration à l'AFP, le 25 mai : « L'arrivée amicale [de Bernard Arnault] est accueillie très positivement » par Vivendi et démontre qu' « il croit en l'avenir des activités du groupe Lagardère » . C'était un lundi, et Bolloré avait eu le week-end pour trouver les mots qui ne fâchent pas : Bernard Arnault l'avait en effet appelé le vendredi pour lui annoncer son investissement. Trois jours, le prix de l'estime…

Mais, derrière les mots, il ne faut pas se cacher : Vivendi est ulcéré. « Tu fais chevalier blanc, et on te prévient au dernier moment qu'un autre vient à ta place », fulmine un administrateur. « Le cours de Lagardère a pris 25 %, et Bolloré a gagné une centaine de millions d'euros sans rien faire » , relativise un observateur, l'œil rivé sur les cours de Bourse. Pourtant, à partir de cette date, les relations entre Vivendi et Lagardère ont changé. Les équipes qui échangeaient en vue de rapprocher Canal+ (Vivendi) d'Europe 1 (Lagardère) ne se sont plus rencontrées (lire notre épisode 2 "Quand Bernard Arnault vient au secours..."). « Nous avons pris conscience que le chevalier blanc était rentré dans la maison pour choper la plus belle fille de la famille » , se justifie-t-on de manière imagée chez Lagardère.

Voilà pourquoi le « cela se passera bien » n'est pas forcément crédible. Vivendi est arrivé sur le dossier avec un intérêt appuyé pour certains actifs de Lagardère : Hachette évidemment, très complémentaire hors de France de son activité d'édition ; et les médias Europe 1 et Paris Match, « le seul hebdomadaire français connu dans le monde entier » , selon un membre du directoire de Vivendi. Bernard Arnault met au contraire constamment en avant sa volonté de soutenir le groupe Lagardère « dans son intégrité » . Manière de rappeler qu'il n'est pas là pour dépecer, et encore moins pour voir Europe 1 partir dans le camp Bolloré. L'homme le plus riche de France agirait-il en service commandé, à la demande d'Emmanuel Macron ? « L'Elysée ne laissera pas Vivendi s'emparer d'Europe 1, assure-t-on ainsi au Château. La dérive droitière de CNews nous suffit… »

Mezzo, leur seul bien commun
C'est aussi une des nouveautés à souligner dans la rivalité entre les deux tycoons. S'ils ont témoigné chacun à leur manière de leur fidélité à Nicolas Sarkozy après son élection - Bernard Arnault au Fouquet's et Vincent Bolloré en lui prêtant son yacht Paloma -, autant l'actuel hôte de l'Elysée entretient une grande proximité avec la première fortune de France, autant il ne marque que méfiance pour la 17e , depuis son arrivée dans les médias. Bolloré, bravache, s'en fiche et, avec un sens de la provocation qui n'appartient qu'à lui, fait même tout pour la mériter. Plus il se rapproche de la date annoncée de sa retraite - il aura 70 ans en février 2022 -, plus il se sent libre. A l'inverse, Bernard Arnault n'a jamais été aussi en cour : en France donc, mais aussi outre-Atlantique, où l'inauguration de l'atelier Louis Vuitton au Texas a placé le PDG de LVMH, arrivant en compagnie de Donald Trump dans l'avion présidentiel Air Force 1, sur une autre orbite.

C'est vrai aussi de leur fortune : 100 milliards d'euros pour Bernard Arnault, selon le dernier classement de Challenges, vingt fois moins pour Vincent Bolloré. Et d'ailleurs ce dernier le reconnaît avec humour, quand il dit à son entourage : « Il est vraiment plus fort que moi. Si j'avais investi en titres LVMH l'argent que j'ai gagné, je serais beaucoup plus riche… » Les deux milliardaires ont pourtant commencé leur parcours presque au même moment, au début des années 1980, empruntant des voies très parallèles, sans quasiment jamais se croiser : on ne leur connaît qu'un seul investissement commun, la chaîne musicale Mezzo rachetée à 50/50 par Les Echos et Canal+, en juillet 2019. Mais pour le reste, quelles similitudes !

Voici deux entrepreneurs qui sont en même temps héritiers. « J'allai avec mon grand-père et mon père tous les jeudis, quand je n'avais pas école, visiter les chantiers » , racontait Bernard Arnault à Challenges dans un de nos numéros sur les fortunes. Le promoteur Férinel avait alors un ancrage régional, dans le Nord. Vincent Bolloré, lui, vivait déjà dans le XVIe arrondissement de Paris, mais c'est en Bretagne qu'il a écrit le premier chapitre de sa saga : l'entreprise familiale papetière était en pleine déconfiture quand il l'a remontée avec son frère Michel-Yves.

La promotion immobilière ou les papiers à cigarettes n'avaient pourtant pas suffisamment de surface pour satisfaire leurs ambitions. Tous deux ont alors repéré, chacun de leur côté, une belle endormie - Dior au sein de l'empire Boussac pour Arnault, et la Banque Rivaud pour Bolloré - et ont suivi les conseils du même parrain dans l'establishment parisien pour financer leur montée en puissance : Antoine Bernheim (1924-2012), le banquier de Lazard, qui a inventé la mécanique des « poulies bretonnes » , assurant à chacun le contrôle des affaires sans avoir à investir trop d'argent.

« Ligne jaune » et « petit sujet »
Le parallèle ne s'arrête pas là. La construction de leur empire repose sur un cocktail, très inhabituel en cette fin de siècle, d'agressivité entrepreneuriale et de capacité à se nourrir des nouveaux instruments des marchés financiers. Quand Bernard Arnault s'empare de Louis Vuitton à la barbe de la famille Racamier en remodelant à son avantage la fusion LVMH, Vincent Bolloré consolide son empire en Afrique en encerclant la famille Vieljeux. Cela ne marche pas toujours, et parfois les entreprises visées leur échappent : Martin Bouygues s'extirpera des griffes de Bolloré grâce à François Pinault, lequel enlèvera également Gucci aux appétits d'Arnault.

Avec l'entrée dans un nouveau millénaire, l'hostilité fait toujours partie du vocabulaire, comme en témoigneront les raids sur Havas (Bolloré) ou Hermès (Arnault). Mais ce qui impressionne plutôt, c'est la maîtrise des opérations financières des deux capitaines d'industrie pour asseoir leur contrôle familial : Bernard Arnault fera passer sa part du capital de LVMH de 35 à 46 % en écrasant le holding intermédiaire Christian Dior ; et Vincent Bolloré atteindra 27 % dans Vivendi, grâce notamment aux milliards hérités de l'opportune fusion du groupe de communication avec Havas. « Ces montages d'une habileté extrême, où l'on flirte avec la ligne jaune sans jamais la franchir, leur ont permis d'augmenter leurs participations sans sortir un sou » , admire en connaisseur un autre milliardaire entrepreneur.

Enfin, dernière caractéristique commune : une volonté farouche d'inscrire ce choix résolument familial dans le temps. « Ma double exigence est que le groupe LVMH reste en France et qu'il demeure la propriété de ma famille le plus longtemps possible » , nous disait en 2018 Bernard Arnault. Un an plus tard, Vincent Bolloré ouvrait l'assemblée de Bolloré en se félicitant « de voir la septième génération prendre à son tour les commandes du groupe » . C'est d'ailleurs la défense du capitalisme familial qui est à l'origine de leur présence en soutien successif de Lagardère. Comment deux entrepreneurs à la mentalité aussi proche, même si leur ombre portée sur le business mondial n'a rien à voir, vont-ils se sortir de ce face-à-face imprévu ? Différentes hypothèses sont avancées. D'un côté, la première fortune d'Europe, pour laquelle l'investissement réalisé (180 millions d'euros) est un « petit sujet » , surtout en regard des actions en justice autour de Tiffany (une OPA à 16 milliards de dollars). De l'autre, Vincent Bolloré (5,7 milliards d'euros de patrimoine, selon Challenges ), qui a déjà fait une belle plus-value. « En entrepreneur agile, il sait que les circonstances créent des actions » , lance mystérieusement un de ses proches. Comment interpréter cette formule sibylline ? « Que nous allons gagner, et que Vincent Bolloré va être très riche » , rigole-t-on dans le camp d'en face, laissant échapper la pointe d'arrogance suffisante pour que « tout [ne] se passe pas [si] bien » .

FT : US experts urge caution on giving Covid vaccine to children

US experts urge caution on giving Covid vaccine to children
More research needed to understand younger people’s milder reaction to coronavirus

Children should not be given a Covid-19 vaccine until there is more data to ensure it is safe, experts have warned the US regulator, as the first group of American teenagers were dosed with a potential treatment for the disease.

Top vaccine scientists on an advisory committee to the Food and Drug Administration said the disease develops so differently in children that any approval should not rely on data from adults. 

Most children get no or only mild symptoms, so the risk-benefit calculations of giving them a vaccine are different from those for adults. Yet a small proportion develop a serious condition called multi-inflammatory syndrome, which can be fatal. 

Cody Meissner, chief of paediatric infectious diseases at Tuft’s Children’s Hospital in Boston, said he would want to be “very convinced” about the safety of a vaccine before it was approved for children. 

“The pattern of disease is quite different in children and lumping them in with adults in this particular illness would cause me some discomfort,” he said at the committee hearing on Thursday. 

Other scientists on the committee also warned against combining results from a large adult trial that could prove efficacy and safety with data from a smaller trial involving children, which could only show some safety data and whether their immune systems reacted. 

Luigi Notarangelo, head of the National Institutes of Health lab of immunology and microbiology, said he was “very concerned” that there was not enough evidence to support the use of a vaccine in children. 

“We would need to have safety studies that are long enough in duration to include the potential appearance of [multi-inflammatory syndrome] and actually be large enough to take those into consideration,” he said. 

The US has left the door open for vaccine makers to suggest dosing for a paediatric vaccine as part of an emergency approval application. 

The FDA’s guidance says vaccine makers should consult regulators when designing trials on children to make sure they take into account how vaccines might work differently among younger people. But it has not set hard rules on the number of children who should be tested or how long they should be monitored before authorisation is granted.

Matt Hepburn, head of vaccine development at the White House operation to accelerate coronavirus vaccines and treatments, said: “As these trials roll out, our intention is to do additional trials to understand [their effect on children].” He did not say how many children he thought would need to be vaccinated at trial to confirm a vaccine’s safety and effectiveness.

The UK has ruled out inoculating under 18s. Kate Bingham, head of the country’s vaccine task force, said the vaccine would be for people over 50. 

“If you vaccinate a young, healthy person, by vaccinating them you can cause them some freak harm, that’s a risk-benefit analysis that’s very hard to do,” Ms Bingham said. 

Pfizer this month received approval to expand its Covid-19 vaccine trial to children as young as 12, as the only study in the US enrolling children. The company said its focus was on collecting data on safety and immune system response. 

Abhinav, the 12-year-old son of a physician at Cincinnati children’s hospital, one of the sites for the Pfizer trial, was one of the first children to get the vaccine when they started with the younger age group last week. He decided to do so after his father had participated in the adult trial. He was more nervous about having to have his blood drawn than possible risks from taking an experimental vaccine. 

“They showed me a video how everything really works . . . There was a man who described how vaccines stimulate your immune system just enough to help fight the virus,” he said. “Knowing that it is pretty cool.”

Sharat, his father, hoped he would be getting the real vaccine, rather than a placebo, providing some protection for their family as they head into the winter. He believed he got the vaccine himself because he had a low-grade fever afterwards.

“His grandparents would also like to visit him,” he said. “By him getting the vaccine and me getting the vaccine, we could allow his grandparents to come and visit us and know that way we’re not risking passing on the virus to them because of their age.” 

Robert Frenck, a paediatric infectious disease specialist running the trial in Cincinnati, said it was not planning to enrol enough children to test efficacy and would have to rely on the combined approach. 

The American Academy of Pediatrics is lobbying for more data on children’s response for the vaccine to be collected quickly — perhaps even ahead of an emergency use authorisation. 

In a letter to the FDA commissioner, the academy said it was “less than desirable” to have a vaccine available under an emergency use authorisation without any data on how it affected children, arguing it was unjust for them to carry burdens of the pandemic, including disrupting their schooling, but not be able to benefit from a vaccine. 

Vaccine trials in children are required to show a clearer potential benefit for participants than in adults. Dr Frenck believes the Covid-19 vaccine trials easily meet that bar, because more children have died from Covid-19 than die from flu each year, yet flu vaccinations are recommended for kids in the US. 

While Covid-19 did not appear to be as bad in children as it was in adults, “there’s still a significant morbidity and mortality”, he said. “So that’s why we think it’s important to immunise kids.”

Dr Frenck added that vaccinating children may also stop them bringing it home to their older family members, or infecting schoolteachers, especially since it can be hard to get teenagers to stick to social distancing rules. 

“The thing about adolescents is that they’re immortal, right?” he said. “It’s hard for them to understand that something really can hurt them. And that’s why the vaccines are so important.”

>>> US After Hours Summary: AIG +6.7% jumps as it plans separation

After Hours Summary: AIG +6.7% jumps as it plans separation and names new CEO; VRNS +9.5%, TNET +9.3%, FFIV +4.9% up on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: LRN +9.9% (also reports strong enrollment data), VRNS +9.5%, TNET +9.3%, SSD +7.8%, TBI +6.3%, FFIV +4.9%, NXPI +3.1%, MC +2.7%, ACC +2.1%, OMF +1.7%, AGNC +1.1%, BRO +0.9%, BYD +0.7%, AMKR +0.4%, CR +0.2%, FIX +0.1% (also increases dividend slightly), NOV +0.1%, AJRD +0.1%

Companies trading higher in after hours in reaction to news: AIG +6.7% (to pursue separation of Life & Retirement business; names new CEO), BGS +6.1% (BGS to acquire SJM's Crisco business for $550 mln in cash), LVS +3.8% (exploring the sale of its flagship casinos in Las Vegas, according to Bloomberg), VNDA +2.6% (FDA approves IND application to evaluate VSJ-110 for allergic conjunctivitis), RARE +2% (announces Phase 1/2 GTX-102 study protocol will be amended), SJM +2% (BGS to acquire SJM's Crisco business for $550 mln in cash), IBP +0.9% (acquires Norkote), NK +0.8% (new CEO), X +0.5% (announces successful start-up of EAF facility), PUMP +0.2% (new CFO), JCAP +0.1% (shareholders approve acquisition by NexPoint)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: PCH -6.9%, DXCM -6% (guides Q3 revs above consensus; also Chief Commercial Officer to retire), CHGG -4.8%, TCF -4.8% (also CEO to retire), HLIT -4.4%, PFG -3.5%, TWLO -1.7%, PKG -1.5%, MEDP -1.1%, QTS -0.2%

Companies trading lower in after hours in reaction to news: CATB -63.2% (Phase 3 PolarisDMD trial primary endpoint was not met), MRTX -3.6% (stock offering), ALTG -0.5% (stock offering), AZZ -0.1% (announces divestiture of AZZ SMS business), AFG -0.1% (enters into block reinsurance agreement with Global Atlantic), SCS -0.1% (detected a cyberattack on its IT systems)

>>> Notable earnings/guidance movers: LRN +9.7%, VRNS +7.3%, TN

Notable earnings/guidance movers: LRN +9.7%, VRNS +7.3%, TNET +7.2%, FFIV +4.4%; PFG -7.7%, DXCM -6.9%, CHGG -5.4%

  • Earnings/guidance gainers: LRN +9.7%, VRNS +7.3%, TNET +7.2%, TBI +6.3%, FFIV +4.4%, SSD +3.9%, MC +2.7%, BRO +2%, AMKR +1.2%, AGNC +1.1%
  • Earnings/guidance losers: PFG -7.7%, DXCM -6.9%, CHGG -5.4%, TCF -4.8%, HLIT -3.1%, PCH -2.4%, FIX -2.1%, NXPI -1.6%, TWLO -1.1%

>>> US Close Dow -2.29% S&P -1.86% Nasdaq -1.64% Russell -2.15%

Closing Stock Market Summary

The S&P 500 fell 1.9% on Monday on familiar concerns surrounding the economy, although it was down as much as 2.9% intraday. The Nasdaq Composite declined 1.6%, the Dow Jones Industrial Average declined 2.3%, and the Russell 2000 declined 2.2%. 

Notably, stimulus talks remained deadlocked, the U.S. set a new record for daily coronavirus cases last Friday, Germany's SAP (SAP 115.02, -34.66, -23.2%) lowered its revenue outlook due to lockdowns and a muted demand recovery, and new U.S. home sales unexpectedly decreased 3.5% m/m to 959,000 in September (Briefing.com consensus 1.022 mln).

Accordingly, the cyclical energy (-3.5%), industrials (-2.5%), materials (-2.5%), and financials (-2.2%) sectors were among the day's laggards but so was the information technology sector (-2.2%), which typically benefits from growth concerns. The utilities sector (-0.1%) finished just below its flat line. 

Conversely, longer-dated Treasuries moved higher in a safe-haven bid, which pushed yields lower. The 10-yr yield declined four basis points to 0.80%, while the 2-yr yield was unchanged at 0.16%. The U.S. Dollar Index advanced 0.3% to 93.07. WTI crude futures fell 3.3%, or $1.30, to $38.58/bbl, which weighed on energy stocks. 

The stimulus impasse was nothing new for investors, but the continued deadlock was disappointing given the macroenvironment appeared to take an unfortunate turn, which could undercut confidence for consumers and businesses without fiscal support. Note, House Speaker Pelosi said she was still optimistic in reaching an agreement before the election. 

Today's steep decline sent the S&P 500 below its 50-day moving average (3408) on a closing basis. The negative price action had some market participants bracing for further downside, evident by the 18% spike in the CBOE Volatility Index (32.46, +4.91, +17.8%). 

Dunkin (DNKN 103.10, +14.31, +16.1%) was a notable exception to the negative trend today after confirming it's in talks to be taken private by Inspire Brands for possibly $106.50/share. DNKN shares surged 16%. 

Reviewing Monday's economic data:

  • New home sales decreased to 959,000 in September (consensus 1.022 mln) from a downwardly revised 994,000 (from 1,011,000) in August. This represents a m/m decline of 3.5%, but a yr/yr increase of 32.1%.
    • The key takeaway from the report is that strong demand for new homes is resulting in higher prices, which in turn impacts affordability.

Looking ahead, investors will receive Durable Goods Orders for September, the Conference Board's Consumer Confidence Index for October, the FHFA Housing Price Index for October, and the S&P Case-Shiller Home Price Index for August on Tuesday. 

  • Nasdaq Composite +26.6% YTD
  • S&P 500 +5.3% YTD
  • Dow Jones Industrial Average -3.0% YTD
  • Russell 2000 -3.8% YTD

FT : UK accused of letting private equity ‘cash in’ on loans

UK accused of letting private equity ‘cash in’ on loans
Senior MP concerned companies may use borrowings to cover costs of the debt used to buy them

The government has been accused of letting private equity groups “cash in” on state-backed coronavirus loans, by allowing the companies that they own to use the funding to cover the costs of the large debts used to buy them.

In September, ministers loosened the rules around government-guaranteed loans, making it easier for companies laden with debts as part of their takeover by private equity groups to secure funding to survive the Covid-19 pandemic.

Under the leveraged buyout model used by the private equity industry, the companies they buy take on the debts used for the acquisitions, and become responsible for repaying the borrowings and the interest due on them.

Darren Jones, Labour chair of the House of Commons business, energy and industrial strategy committee, said the government’s decision last month to give private equity-owned groups easier access to loans backstopped by the taxpayer could amount to “allowing private equity owners to cash in while, in some cases, they sit on mountains of cash”.

Mr Jones, whose committee scrutinises decisions made by the business department, said he was concerned that state-backed loans might be used by private equity-owned companies to repay their takeover debts.

“If private equity firms are receiving this public money then there should be some conditionality around their commitment to protecting jobs and helping UK businesses get through this pandemic,” he said. 

Mr Jones was speaking after he published a letter from business secretary Alok Sharma about the issue.

Mr Sharma said in the letter that, after opening certain government-backed Covid-19 loan schemes to some private equity-owned companies that were previously blocked, the government “does not propose to introduce further conditionalities”. 

All businesses applying for support are subject to restrictions on dividends, and other shareholder and management payments, added Mr Sharma.

The state-backed loans “are designed to support [small and medium-sized enterprises] during the coronavirus outbreak”, said a spokesman for the British Business Bank, the state-owned organisation that administers the government-guaranteed loan schemes.

“Whilst management buyouts are not excluded, the facility must be for business purposes and must provide an economic benefit to the business.”

Buyout groups have been lobbying for months to secure easier access to the government’s coronavirus loan schemes, saying EU state-aid rules effectively stopped the companies they owned from obtaining support that was available to rival businesses.

Private equity groups “are very conscious of the eligibility criteria” for the state-backed loans, said a spokesman for the British Private Equity and Venture Capital Association, a lobby group.

“All recipients appreciate the nature of the support being provided and the necessary conditions which the government has applied.” 

The private equity industry has invested in some of the sectors hardest-hit by the pandemic, including the events and hospitality industries.

The Treasury said its loan schemes had provided a lifeline to thousands of businesses across the UK.

“We announced in May that firms taking out large loans must restrict dividends and senior pay, so that funding provided is prioritised for protecting jobs and keeping firms operational,” it added.

Meanwhile, Mr Jones questioned why the government had not yet published the names of companies that have borrowed more than €100,000 in state-backed loans, including through the future fund, which offers convertible debt to start-ups.

MPs and transparency campaigners have been calling on the Treasury to shed more light on who has obtained loans.

However, officials are still not clear about what exactly they are required to publish, said two people briefed on the matter.

Small business minister Paul Scully last week said the “earliest possible deadline for publishing details . . . would be 23 March 2021”.

WSJ : Police Struggle to Protect Voters and Avoid Intimidation at Polls

States and cities across the U.S. are wrestling with a delicate task as they gear up for the possibility of violence on Election Day: how to keep voters safe without deploying a police presence that could intimidate some voters.

So far, authorities have taken different approaches. Michigan has moved to ban firearms at the polls after armed protests took place at the state capitol. Police in New York City plan to boost their presence in and around polling sites.

While a number of states ban police at the polls unless they are asked to help with a particular situation by election officials, some are encouraging officers to be nearby, but not at, election sites.

The concern among law-enforcement officials is that efforts to protect voters put them in the position of policing the polls, a practice that historically has been discouraged or even forbidden by law.

“The last thing we want are the police in the polling stations,” said Robert Stevenson, executive director of the Michigan Association of Chiefs of Police.

Concern about law enforcement presence at the polls dates to the decades of voter suppression in the South, where police often played a role in intimidating Black voters, said Sean Morales-Doyle, deputy director of Voting Rights & Elections at the Brennan Center for Justice at New York University’s law school.

Unrest this summer over police killings of Black men has reinforced the concern, said Mr. Morales-Doyle.

The moves come as President Trump has repeatedly raised questions about the possibility of voter fraud this election and called for 50,000 people to keep watch at the polls.

Armed militia groups like the Oath Keepers have pledged to monitor polling places in presidential battleground states like Minnesota, Wisconsin and North Carolina. A private security firm that was recruiting ex-special forces operatives as shadow poll watchers is being sued by a voter-rights group in Minnesota.

Democrats are also planning to field a robust poll-watching effort, with the goal of ensuring voter participation, amid an atmosphere rife with tension across the country.

“The question is, are you going to have people who are self-appointed security people who just show up to these places with guns?” said Tom Manger, a retired police chief of Montgomery County, Md. “That is just a nightmare for police to handle.”

Two armed security guards showed up last Wednesday at an early-voting location in St. Petersburg, Fla., according to election officials, sparking concerns in the tightly contested state.

The New York Police Department said Tuesday it would beef up its presence at the polls to prevent any potential disruptions. NYPD officials said the department is mandated by state law to have an officer or officers stationed at every polling place. New York police are allowed to be inside election locations in uniform.

That stands in contrast to many other states, including Minnesota, where police in most cases are prohibited from entering a polling place unless they have been called by an election official, though they generally are allowed to be outside.

In North Carolina, a state expected to be closely contested, state elections officials advised police earlier this month that they shouldn’t be stationed at the polls because some might find their presence intimidating.

“It is not appropriate or permissible for law enforcement to be stationed at a voting place,” wrote Karen Brinson Bell, executive director of the North Carolina State Board of Elections, in a memo to local officials. “In the event a county board must utilize law enforcement for parking and traffic issues at a voting site, officers must be in plain clothes.”

Police are trying to balance those concerns with worries from residents about violence at the polls, said Bill Hollingsed, interim police chief in Hendersonville, N.C., and executive director of the North Carolina Association of Chiefs of Police.

“I’ve had more inquiries from the public about fear of this than I’ve ever had before,” said Mr. Hollingsed. “People are asking ‘Are you going to have officers at all the polling places?’ and I tell them, ‘We can’t have uniformed police officers at polling places.’”

Police departments have been planning with election officials in the state on how to respond quickly if problems arise on Election Day, he said. “If we’re responding to a situation involving violence or possible violence, we would want our officers in uniform,” he said.

The majority of states allow voters to bring guns with them to the polls. Six states outlaw it entirely, while four don’t permit concealed weapons. But there are many state as well as federal laws against brandishing a weapon in a threatening manner at the polls.

In Michigan, a highly contested state where federal and state prosecutors recently indicted militia members or associates for allegedly plotting to kidnap and try Democratic Gov. Gretchen Whitmer, the secretary of state last week issued new guidance to voting places saying that the open carry of firearms was prohibited at polling places on Election Day.

“We’re responding to the very real environment that we’re in,” said Michigan Secretary of State Jocelyn Benson. “So we want to recognize that and assure voters that they will be safe and secure on Election Day.”

In Minnesota, the League of Women Voters and the Council on American-Islamic Relations of Minnesota filed a lawsuit this week seeking to stop Tennessee-based security firm Atlas Aegis from acting as poll watchers in Minneapolis. Atlas Aegis had sought former military personnel for help.

The ability to vote without fear of intimidation “is the most American thing I can think of,” said Michelle Witte, executive director of the league. “The Voting Rights Act is pretty clear. We need to stand up for voters.”

Atlas Aegis didn’t respond to a request for comment. A representative from the armed militia group the Oath Keepers also didn’t respond to a request for comment.

Some officials, like Cincinnati Mayor John Cranley, are more concerned about violence after the election. He referred to an incident known as the Brooks Brothers riot in which Republican operatives rushed into a Miami-Dade County election facility in Florida in 2000 and disrupted a state-mandated recount.

“I worry that this time the people that are doing it won’t be wearing Brooks Brothers suits, but will be right-wing militias with machine guns,” said Mr. Cranley.