EU denies creating ‘extra hurdles’ for Lufthansa bailout
Vestager says states rescues could be seen to strengthen a company and distort market
Margrethe Vestager, the EU competition chief, has rejected accusations that Brussels is creating “extra hurdles” for the €9bn bailout of Lufthansa, after the German group’s supervisory board balked at requests to relinquish lucrative slots at its hub airports in Frankfurt and Munich.
Speaking to journalists on Friday, Ms Vestager said rescue packages in which states injected large amounts of capital would be seen by investors as “a strengthening of the company”, and thus make it easier for saved businesses to raise money.
“There is a high risk that if you hold market power, that you are a big impressive company and you get a lot of aid, that competition will be disturbed,” she added.
On Monday, Germany agreed to support its national carrier with a capital injection of €5.7bn, as well as €3bn in government-backed loans, and €300m-worth of new Lufthansa shares, which would give Berlin a 20 per cent stake in the airline.
In the case of a hostile takeover attempt, Angela Merkel’s administration retains the right to increase its position to 25 per cent plus one share, which is a blocking minority in German law.
However, despite Lufthansa being weeks away from running out of cash, the company’s supervisory board refused to approve the bailout package on Wednesday, delaying the extraordinary general meeting needed to ratify the deal.
The board of Europe’s second-largest airline said it needed time to assess the impact of demands from the European Commission that it give up some slots in Munich and Frankfurt, where it holds two-thirds of the available capacity.
The group includes Austrian, Brussels, Swiss and Eurowings airlines.
Leading figures from Germany’s governing CDU and CSU parties have also strongly opposed the EU’s suggested remedies. Markus Söder, the prime minister of Bavaria, said he feared the slots would be given to low-cost operators, who would offer less secure jobs.
Michael O’Leary, the boss of Ryanair, threatened to lodge a complaint with the EU against the bailout, which he claims will “further strengthen Lufthansa’s monopoly like grip on the German air travel market”.
While not explicitly mentioning Ryanair, Ms Vestager said slots would be at the “centre of the debate” as they are a “limited” and “valuable” resource.
Ms Vestager’s comments came as 10 unions from across Germany, Austria, Switzerland and Belgium wrote to the commission, warning the body not to impose “massive restrictions” on Lufthansa.
“Neither employees of the Lufthansa group nor the citizens of Europe will understand if tens of thousands of jobs are lost not because of Covid-19, but because of conditions imposed by the EU Commission,” the letter read.
The unions also cautioned against giving up slots to low-cost competitors, who “have disregarded the rights of employees for years and have passed on their business risk to the workforce”.
On Friday, rating agency Moody’s warned that a “failure to swiftly finalise the negotiations on the support package . . . at a time when Lufthansa's liquidity position is eroding rapidly” could lead to a downgrade.
Tobias Moers: Engine king of Mercedes takes wheel at Aston Martin
AMG chief is ‘diametric opposite’ of ‘nice’ predecessor Andy Palmer
Since Tobias Moers was named as the chief executive of Aston Martin, a common thought has circulated the industry — staff at the luxury carmaker are in for a shock.
“He is the exact diametric opposite of [predecessor] Andy Palmer,” said one senior figure who knows both men.
While Mr Palmer, who led Aston for six years, is no soft touch, he is almost universally regarded as being “nice”.
Of the half-dozen former colleagues or acquaintances of Mr Moers contacted by the FT, none volunteered that word to describe the man leaving Mercedes-AMG to head Aston this summer.
“People are frightened of him,” said one industry insider who, on presenting bad news to Mr Moers in a meeting, was struck by the silence that followed, as subordinates switched between staring at the floor and the ceiling.
“You could feel the oxygen being sucked out of the room.”
Mr Moers’ response — we need to fix this rather than sit around debating it — diffused the tension. Underlings sprung into life.
Expect the scene to be replicated many times over at Aston’s headquarters in Warwickshire, once Mr Moers arrives in August.
He was handpicked from Mercedes’ high-performance AMG business by Aston’s new chairman and part owner Lawrence Stroll to turn around the ailing carmaker.
It is a daunting task.
The luxury brand is bleeding cash, awash with red ink, chronically indebted, and hobbled by unsold sports cars stacked up at dealerships.
It has missed so many earnings targets that its reputation among financial investors is so battered that, were it a car, it would be immediately broken down and sold for parts.
The company’s problems were apparent long before the coronavirus pandemic.
Since floating in 2018, Aston’s share price has fallen from £19 to just 50p — a drop in part exacerbated by a rights issue as part of Mr Stroll’s £540m rescue deal earlier this year.
While a 2014 turnround by former chief Mr Palmer enjoyed the cloak of private ownership, Mr Moers’ overhaul will have to take place in the piercing glare of the stock market.
Deliveries of the company’s first sport utility vehicle — the DBX, considered key to the group’s future success and already being made at its St Athan plant in south Wales — will have started by the time Mr Moers arrives.
Any kink in the rollout will be punished by investors. Other plans, including supercars to rival Ferrari, will also have to be delivered flawlessly.
Under his tenure as chief executive, AMG rose from a niche engine tuner to a widely-known sub-brand of Mercedes, with units topping 130,000 last year. It is thought to contribute a fat portion to the annual profits of Daimler, the owner of Mercedes.
His drive and the AMG record placed him “head and shoulders” above the other two candidates considered for the role, according to two people familiar with the selection process.
He is also someone for whom the term “petrol head” was invented.
Growing up, he spent bitter winters in the Black Forest honing his driving skills to make his first car — a rear-wheel-drive Opel Kadett — travel sideways around frozen bends.
Even in an industry dominated by company lifers, Mr Moers’ quarter-century service within one division is unusual.
After studying mechanical engineering at the University of Applied Sciences in Offenburg, he worked on an electric car in a project funded by chocolate company Ritter Sport, before joining AMG in 1994.
He rose through the ranks, becoming chief executive and chief technical officer in 2013, which widened his expertise beyond engineering to marketing, branding and design.
“If you underestimate him, you will pay the price,” said one person who has worked with him in the past.
While at AMG, Mr Moers was also “intimately involved” with Aston, which buys engines and some technology from the German group.
His move is expected to bring the companies closer, easing Aston’s development costs as it delves more deeply into Daimler’s copious parts bin.
“We know that his expertise will be of great value to Aston Martin, a company with which we have a longstanding and successful partnership,” said Daimler chief executive Ola Kallenius, who himself led AMG before Mr Moers.
Big questions remain, including how Mr Moers will win back the market’s confidence, and how well he will gel with his new billionaire boss.
Both men are used to getting their own way, so relations will be harmonious as long as the two are steering in the same direction.
When the paths differ, the results have the potential to be volcanic.
“If there is a clash, it won’t last for very long,” said a longtime associate of Mr Stroll. “Tobias will find himself heading back to the Black Forest.”
But as with the high-powered sports car engines he has spent two decades building, performance is often twinned with aggression.
“He won’t mind being the guy who thumps the table and comes across as the angry German,” said a compatriot colleague who knows him well.
Born in Freiburg, Germany, in 1966, his muscular build means he is more likely to be mistaken for “a farmer” than a chief executive of a London-listed company.
JAB: Peet’s feat
Holding company uses virtual roadshow to sell shares in coffee shops when most of them are closed
You have to hand it to JAB. Pulling off Europe’s biggest IPO since 2018 on the back of a three-day virtual roadshow is quite something. Even more impressive is the feat of selling shares in coffee shops when most of them are closed. Are the buyers of shares in JDE Peet’s similarly astute?
JAB, which manages the wealth of the Reimann family, spent several years buying and rolling up coffee acquisitions, from pods (Keurig Dr Pepper) to filter (Douwe Egberts) to cafés (Peet’s). The spin-off entity comprises the last two, with a split of roughly 80/20 between at-home drinking and cafés.
Shares were priced on Friday at the upper end of the proposed range. At €31.50 the newly fledged company is valued at €16.8bn ($18.6bn). JAB will remain the company’s largest shareholder. Providing an extra shot of caffeine, investors propelled shares a further 12 per cent higher in morning trading. The offer price represents about 11 times last year’s ebitda of about €1.5bn-€1.6bn and, depending on growth projections, a multiple of 10-13 times for this year.
In the absence of pure-play coffee peers, Swiss food giant Nestlé — trading on 17 times this year’s consensus ebitda — offers the nearest comparison. Even allowing for JDE Peet’s less geographically and product-diverse portfolio, that implies a more than decent discount. Some of that is still justified. The pandemic has brought new risks to the world. Even after lockdowns ease, unemployment and smaller wage packets will curb thirst for takeaway cappuccinos.
Coffee habits may ultimately revert to pre-pandemic norms, but the IPO process will surely change for the long term. JDE Peet’s brought in cornerstone investment worth €100m, unusual for a European deal. If an offering of this size and global reach can be carried out over Zoom video conferences there is little reason to revert to the usual manic, and expensive, dash around a dozen cities in half as many days.
Gapping down
In reaction to disappointing earnings/guidance:
- CGC -20.8%, DXC -5.9%, CRM -3.3% (also announces multi-year strategic agreement with AT&T), CIR -2.8%, COST -1.8%, TCOM -1.5%, JWN -1.5%, VEEV -1%, OKTA -1%
Other news:
- ARVN -24.2% (announces update on ARV-110)
- AVEO -14.2% (Phase 1b/2 DEDUCTIVE clinical trial update)
- MRNS -13.9% (prices offering of 16 mln shares of common stock at $2.50 per share)
- MMX -9.7% (announces secondary offering and intention to exercise warrants by Pan American Silver)
- NFG -8.1% (prices offering of 3.8 mln shares of common stock at $39.50 per share)
- APPN -4.9% (launches 2.5 mln share offering)
- APY -4.8% (shareholders approve combo with ChampionX)
- ADVM -2.2% (initiates INFINITY Phase 2 trial)
- LAMR -2.2% (cuts dividend in half)
- CGNX -1.5% (announces workforce reduction)
- BOMN -1% (prices offering of 3.2 mln shares of common stock at $16.00 per share)
Analyst comments:
- DEXA -6.3% (downgraded to Neutral from Overweight at JP Morgan)
- HAL -1.8% (downgraded to Market Perform from Outperform at Cowen)
- VFC -1.1% (downgraded to Hold from Buy at Argus)
Gapping up
In reaction to strong earnings/guidance:
- ZS +19.9% (also acquires Edgewise Networks), BIG +13.6%, GLUU +9.4%, VMW +8.2%, WSM +8%, DELL +7.2%, MRVL +6%, PAGS +4.7%, PSTG +3.9%, OLLI +2.8%
Other news:
- PRTY +88.2% (executes Transaction Support Agreement with bondholders holding over $440 mln of its bonds)
- TLSA +5.1% (presents data demonstrating StemPrintER outperforms Oncotype DX)
- ADAP +3.9% (presented updated data from its ADP-A2M4 Phase 1 trial at ASCO)
- AZN +3.7% (announces positive Phase III ADAURA trial results)
- KPTI +3.7% (reports results from the pivotal, Phase 3 BOSTON study )
- PCG +3.6% (receives approval for Chapter 11 Plan of Reorganization from CPUC)
- MRSN +2.7% (prices offering of 8 mln shares of common stock at $19.00 per share)
- CSCO +1.7% (to acquire privately held ThousandEyes)
- ALCO +1.7% (Florida has option to purchase 10,684 acres)
- GSX +1.6% (refutes allegations in Muddy Waters Research report)
- LGND +1.4% (earns $3 mln milestone payment from Palvella Therapeutics)
- NVS +1.2% (receives positive CHMP opinion to treat HR+/HER2- advanced breast cancer with a PIK3CA mutation)
- LLY +1.1% (receives FDA approval of TAUVID)
Analyst comments:
- CULP +13.4% (upgraded to Buy from Hold at Stifel)
- KL +2.6% (upgraded to Outperform from Market Perform at BMO Capital Markets)
- BLMN +1.8% (upgraded to Buy from Hold at Jefferies)
- RIO +1.7% (upgraded to Buy at BofA/Merrill), PPL +1.5% (upgraded to Buy from Neutral at Mizuho)