TheChek News Flow

Qualcomm’s new fingerprint sensors work through displays, water, and even metal

This is obviously bad news for Samsung fans who plan to buy the company’s upcoming new flagship phone, but the good news is that there’s light at the end of the tunnel. Qualcomm on Wednesday unveiled next-generation fingerprint sensor technology that will enable fingerprint scanners to be embedded not just beneath a smartphone’s display, but just about anywhere at all on a device.

Dubbed simply Qualcomm Fingerprint Sensors, the new components take Qualcomm’s Snapdragon Sense ID fingerprint tech to the next level. The suite includes next-generation ultrasonic fingerprint sensors that can be embedded beneath an OLED display up to 1,200 μm thick, other glass up to 800 μm thick, or even under metal up to 525 μm thick.

In other words one of Qualcomm’s new fingerprint scanners can be embedded beneath the aluminum housing on the back of a smartphone and still work with no problems.

Beyond the ability to be embedded practically anywhere on a phone, there’s another huge benefit to utilizing ultrasonic technology: these new scanners will work through water. Have you ever tried to unlock your phone while it’s wet, or while your hands have sweat on them? Qualcomm’s next-gen sensors use sound waves that reflect off of the user’s skin to scan a print, so it works through moisture with no problem. In other words, you’ll be able to unlock your phone with no issue when you’re at the gym, in the rain, or even in a swimming pool or the ocean.

“We are excited to announce Qualcomm Fingerprint Sensors because they can be designed to support sleeker, cutting-edge form factors, unique mobile authentication experiences, and enhanced security authentication,” Qualcomm VP Seshu Madhavapeddy said. “This provides OEMs and operators with the ability to offer truly distinct, differentiated devices with added value on truly groundbreaking new devices.”

Qualcomm Fingerprint Sensors for Glass and Metal will be available to OEMs for development later this month, though commercial products that integrate them aren’t expected to go on sale until the first half of 2018. OEMs won’t be able to begin testing the Qualcomm Fingerprint Sensor for Display until Q4 2017.

Analysts say break-up of Eon and RWE last year point to a wave of deals

A year after the break-up of Eon and RWE in a sweeping restructuring of Germany’s power industry, investors are bracing for the next wave of upheaval in European utilities.

Bankers and industry executives say further deals look certain as electricity companies scramble to adapt to the accelerating shift towards renewable energy.

The £318m sale last week of two UK gas-fired power stations by Centrica to EPH of the Czech Republic was the latest example of a utility reshaping its portfolio. Now, expectations are growing of bigger transactions to come.

Much of the anticipation is focused on the new companies created by the separation of Eon and RWE. Both German utilities split themselves in two, with one unit focused on traditional thermal generating businesses — dominated by coal and gas-fired power — and the other comprising “cleaner” businesses, such as renewables, electricity distribution and consumer services.

Uniper, the conventional power business spun out of Eon, has been touted by analysts and bankers as a potential target for Fortum, the Finnish utility. Meanwhile, Innogy, the clean energy business split from RWE, has been linked with Engie of France.

Isabelle Kocher, Engie’s chief executive, has denied interest in such a deal and her counterpart at Innogy, Peter Terium, last week said there had been no contact between the companies. Uniper and Fortum declined to comment. However, anticipation of mergers and acquisitions has been one of the factors behind a 10 per cent increase in the valuation of European utilities this year, outperforming the broader market by a third.

Johannes Teyssen, chief executive of Eon, says the case for consolidation is most obvious among traditional thermal generators as they seek strength through scale in the face of rising competition from wind and solar.

“In the conventional energy world, scale matters a lot so I’m sure that we will see more consolidation steps,” he told a recent FT energy conference. “As more and more [fossil fuel] assets are retired, the smaller players will become smaller and less competitive and less able to deliver value.”

Europe’s 12 biggest utilities have written off more than €100bn of assets since 2010, according to Jefferies, as scores of coal and gas-fired plants have been closed or mothballed. Those that remain have fallen in value.

Julian Critchlow, partner at Bain & Company, the consultancy, says growth in renewables has created excess capacity of about 25-30 per cent in the European power sector, depressing profit margins for generators. He predicts mergers of equals through which companies will share synergies from closing uneconomic plants.

Some companies still see value in buying traditional power stations. EPH’s deal with Centrica last week was the latest in a series of similar acquisitions by the Czech group from larger European utilities, including German assets of Sweden’s Vattenfall and Eon in Italy.

Although renewables are gaining share, conventional thermal generation remained the biggest source of EU electricity last year at 49 per cent of output. Good profits can still be made from coal and gas plants, especially during periods when wind and solar output is low.

While EPH scavenges for unwanted assets, Fortum is seen as a potential driver of larger scale consolidation. The Finnish group has plenty of cash after the €9bn sale of its Nordic electricity distribution assets two years ago and Pekka Lundmark, chief executive, has made no secret of his appetite for deals.

Uniper is seen as a prime target because, although hard coal and lignite are its biggest fuel source, the group also has scale in cleaner gas, nuclear and hydro generation. Analysts at Macquarie wrote last week that they saw “a very high likelihood” of Fortum buying the 47 per cent stake in Uniper held by Eon, and this “could be the first step to a full takeover”.

Others have highlighted potential synergies between Uniper and its domestic rival RWE. “The big problem with RWE is they are overweight in coal and lignite in particular,” says Mark Lewis, head of European utilities research at Barclays. “That means Uniper’s asset base, which is more tilted towards gas, becomes a very attractive way of hedging your lignite exposure.”

In a scenario floated by several analysts and bankers, Fortum might end up with Uniper’s hydro and nuclear assets in Scandinavia while its German, Benelux and UK coal and gas assets could go to buyers such as RWE or EPH. “Fortum could decide to buy Uniper as a whole and then reach agreement to sell on some of these assets at decent exit multiples to other players,” says Macquarie.

An outcome of this kind would represent a further carve-up of German utilities after the “big bang” restructuring of 2016 that left several loose ends. Eon has made clear it wants to sell its Uniper stake but cannot do so before 2018 without triggering a big tax bill. RWE is also thought likely to sell down its 77 per cent stake in Innogy to strengthen its battered balance sheet — and potentially fund acquisitions.

Into these permutations have been added reports of a tentative French-led proposal for RWE to swap a majority stake in Innogy for a minority stake in Engie. That deal could have political appeal for Emmanuel Macron, France’s new president, as a way of deepening Franco-German energy ties and increasing his country’s exposure to renewables. Engie is 29 per cent owned by the French government.

Analysts and bankers say the industrial logic of such a deal is unclear. “Most of the value of Innogy is in their grid business so it would seem to be a very indirect way of acquiring exposure to renewables and getting a lot of other stuff you don’t need,” says Mr Lewis at Barclays.

Whatever constellation of deals emerges, it looks increasingly likely that the ripples from restructuring of RWE and Eon will not stop at Germany’s borders. As Mr Critchlow says: “Once one player consolidates, like at a dance, everybody will look for a preferred dance partner.”

Corbion (AMS:CRBN) Still All About €40 A Share

Apple’s highly anticipated 2017 iPhone cycle is a matter of months away, and the supply chain reports are rolling in as production ramps up. The iPhone 8 is expected to be a major upgrade with a new bezel-less design, stainless steel and glass chassis, and an 5.8-inch OLED display.

There are always stories about iPhone delays, although this year it feels like we have had more than ever. A new report from Digitimes blames OLED panel supply as the latest bottleneck in the production process …

The UK’s housing market regained some momentum in June, according to Nationwide’s latest house price survey, though growth in the south-east and London continued to slow compared to the rest of the country.

On average, house prices rose 1.1 per cent over the month, the first rise in four months. The increase brought the year-on-year growth rate up to 3.1 per cent, well above a consensus forecast of 1.9 per cent.

However, the monthly uptick was not enough to stop quarterly price growth slowing markedly. Average prices in the three months to June were 2.8 per cent higher than the same period last year, compared to 4.1 per cent growth in the first quarter. On a quarter-on-quarter basis, prices dipped 0.1 per cent.

London and the south-east – which have seen much faster price rises than the rest of the country since the financial crisis – appeared to be suffering more than most of the country from the recent slowdown. Nationwide said year-on-year growth in the south overall has converged with the rest of the country, while London in particular was the second worst-performing region in the second quarter, with year-on-year price growth of just 1.2 per cent.

Robert Gardner, Nationwide’s chief economist, said:

The emerging squeeze on household incomes appears to be exerting a drag on housing market activity in recent months. The number of mortgages approved for house purchase has slowed a little in recent months and surveyors report that new buyer enquiries have softened.

In our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation squeezes household budgets. This, together with ongoing housing affordability pressures in key parts of the country, is likely to exert a drag on housing market activity and house price growth in the quarters ahead.

Howard Archer, chief economic advisor to the EY Item club, said that, despite the decent monthly performance, “house prices still look unlikely to rise by more than 2 per cent over 2017″. He added:

The fundamentals for house buyers are likely to deteriorate further over the coming months with consumers’ purchasing power squeezed even more by a damaging combination of higher inflation and muted earnings growth. It is also very possible that the labour market will increasingly falter despite its current resilience.

Financial Conduct Authority demands fund managers present investors with all-in fee

The UK regulator has called for a radical shake-up of Britain’s £7tn investment market in a bid to stamp out conflicts of interest and restore savers’ trust in the asset management industry.

The Financial Conduct Authority told fund managers on Wednesday to overhaul their charging structures and improve governance standards following a near two-year investigation into competition issues in asset management.

Investment companies lobbied hard against many of the regulator’s proposed remedies outlined in an interim report last November that was deeply critical of widespread practices in the fund market and its treatment of retail investors.

But the watchdog has pressed ahead with its most controversial reform ideas, including forcing fund managers to present investors with an all-encompassing fee that includes trading costs.

This measure is expected to have a direct impact on asset managers’ profits and goes further than legislation in other large investment markets.

Daniel Godfrey, chief executive of The People’s Trust and former head of the UK’s Investment Association, said this measure was a “huge shock” for the industry. “It would be a massive change to their way of life,” he said.

The FCA has also requested that the government allows the watchdog to regulate the powerful investment consulting industry, which determines how the vast majority of UK pension schemes invest their money.

Andrew Bailey, chief executive of the regulator, said: “The asset management sector is important to the economy, managing the savings of millions of people and in the current low interest environment it’s vital we help people earn a return on their savings. We need a competitive sector, attracting investment into the United Kingdom which also works well for the people who rely on it for their financial wellbeing.”

The watchdog has intensified its focus on the asset management industry as fund managers increasingly take responsibility for overseeing the retirement savings of millions of UK workers.

More than three quarters of UK households rely on the investment industry, including more than 9m individuals saving for their retirement through workplace pension schemes, according to the FCA.

The UK watchdog’s report comes at a pivotal moment.

Britain quitting the EU has introduced fresh challenges for asset managers, including higher compliance costs, changes to how funds can be sold to non-UK investors and the future rights of foreign workers remaining in the country.

At the same, European countries are trying to gain an advantage over Britain’s withdrawal from the EU by stepping up efforts to lure UK-based fund companies to relocate staff to the continent.

The UK sector, which manages the second largest pool of assets globally after the US, also faces structural shifts as traditional active managers that charge higher fees for stock and market selection struggle to compete with better performing passive managers that track indices.

The FCA was highly critical of the sector when it released its interim report in November. It found investors were being short-changed by a sector bloated by fat profits earned by actively managed funds delivering sub-par returns. It also said investors were not getting value for money and the sector was rife with potential conflicts of interest.

The proposed remedies in Wednesday’s final report are subject to consultation.

The asset management sector covers fund managers, investment platforms, fund rating providers and investment consultants.

Apollo Breaks Record as Investors Flock to Buyout Funds

Apollo Global Management, private-equity firm founded by Leon Black, collects $23.5 billion for largest ever buyout fund

Apollo Global Management LLC, the private-equity firm co-founded by billionaire investor Leon Black, has raised $23.5 billion for the world’s largest-ever buyout fund.

The record-breaking fundraising is the latest demonstration of a surge in investor appetite for leveraged buyout funds, extending a run of records in recent months.

People familiar with the matter said Apollo had hit its $23.5 billion target, outlined last month in a filing with the Securities and Exchange Commission, and is set to close the fund “imminently.” One person said a formal closing could happen as soon as this week and that the final amount could come in higher than $23.5 billion.

On closing, it will be the largest pool of capital ever gathered by a buyout firm, exceeding the $21.7 billion that Blackstone Capital Partners V LP collected in 2007. The fund is also significantly larger than the $18.4 billion flagship fund Apollo raised in 2013.

Mr. Black said on a February earnings call that the Apollo flagship fund would be the biggest “single driver” of assets under management at the firm. The company, which has $197 billion in assets under management, is also raising $3.5 billion for a distressed-debt fund.

The fund adds to the mound of uninvested capital that private-equity firms are sitting on.

Faced with increasing competition for assets from sovereign-wealth and pension funds, buyout houses have slowed the rate at which they have deployed capital. The value of deals struck by buyout firms fell 14% in 2016, while deal count dropped 18%, according to Bain & Co.’s Global Private Equity Report 2017.

This, coupled with a strong fundraising environment, resulted in firms accumulating a record $1.5 trillion of dry powder, according to the same report.

The rate at which Apollo has been able to deploy the money it raises is likely to have played a role in encouraging investors to back the fund.

Despite a wider slowdown, Apollo spent $9.6 billion on private-equity deals in 2016, a record for the firm. The flagship strategy can switch between buyout deals and distressed investments, boosting its capacity to spend.

Adding to the dry powder, London-based CVC Capital Partners gathered €16 billion ($18.14 billion) earlier in June, the biggest fund ever raised by a European manager, while U.S. buyout giant KKR & Co. closed record Asia and North American funds at $9 billion and $13.9 billion, respectively.

Private-equity firms have generated consistently strong returns over the past decade, a performance that has fueled investor demand.

Over the past five years buyout shops have delivered an average net internal rate of return of 15.84%, according to data provider Preqin Ltd. Buyout firms have failed to deliver double-digit returns in just two years since 2000, including 2008 and 2011.

Hedge funds, which compete with buyout firms for money allocated to alternative assets, delivered net returns of 7.56% over the same period, according to Preqin.

Packed foods giant to focus spending on beverages other high-growth segments, explore deals in consumer health care

Nestlé NSRGY 1.20% on Tuesday announced plans to launch a $20.8 billion share buyback, focus its capital spending on categories like coffee and pet care and look for consumer health-care acquisitions, a move that comes after it found itself the target of activist investor Third Point LLC.

Nestlé wasn’t expected to deliver an update to shareholders until September, but its plans were fast-tracked amid investor pressure that culminated with Third Point founder Daniel Loeb on Sunday night publishing a letter on how Nestlé should change its business. His recommendations include a formal margin target, more share buybacks and a sale of Nestlé’s stake in French cosmetics giant L’Oréal SA.

Mr. Loeb began amassing shares in Nestlé early this year, according to a person familiar with the matter, and now owns 1.25% of the company making him Nestlé’s fourth-biggest shareholder. Nestlé shares jumped following Mr. Loeb’s letter, which promised the company’s growth and earnings would “dramatically improve” if his recommendations were followed.

“All seems to have happened very quickly, but probably not a huge surprise given the strength of the balance sheet and pressure from Third Point and others,” said Jon Cox, head of Swiss equities at Kepler Cheuvreux.

Nestlé applied for Swiss regulatory approval of its share buyback last week, and received the go-ahead on Tuesday.

Under new Chief Executive Mark Schneider, Nestlé has already dropped a sales-growth target that investors had labeled as outdated after the company fell short for four straight years. Mr. Schneider also recently said Nestlé would look to sell its U.S. confectionery business, which lags behind rivals Hershey Co. , Mars Inc. and Chocoladefabriken Lindt & Spruengli AG .

Nestlé on Tuesday indicated it could make more divestitures, saying it “will continue to adjust its portfolio in line with its strategy and growth objectives.” There have been calls for Nestlé to consider selling its frozen-food arm, which includes brands like Lean Cuisine and Stouffer’s, another business that has struggled as consumers increasingly look to fresh options. Mr. Loeb suggested that Nestlé sell its 23% stake in L’Oréal.

Nestlé will kick off a share buyback of up to 20 billion Swiss francs ($22.4 billion) next week that will run through June 2020. In addition to investing in beverages, infant nutrition and other high-growth categories, the company said it would also look to make acquisitions in consumer health care that “build on” the faster-growing parts of its core food and drinks business. It didn’t specifically refer to its frozen and prepared-foods business, although Nestlé is the world’s largest packaged-food company.

“The company is likely to exit more commoditized packaged food in favor of nutrition,” Mr. Cox said.

The Vevey, Switzerland-based company said it would examine ways to boost margins through cost cuts but cautioned that it would not do so at the expense of its growth categories.

Mr. Schneider has criticized as unsustainable the aggressive cost-cutting that Brazilian investment firm 3G has backed for companies it owns, like Kraft Heinz Co. and Anheuser-Busch InBev NV. Nestlé’s announcement on Tuesday echoes that of rival Unilever PLC, which in April unveiled a €5 billion ($5.7 billion) share buyback and plans to sell its spreads division after fending off a takeover approach by Kraft.

Nestlé, Unilever and other consumer-goods stalwarts have struggled to deliver the consistent growth that investors had come to expect. The industry headwinds include weaker global growth, volatile currencies and interest rates, higher commodity costs, rapidly changing consumer tastes and difficulty raising prices in a low-inflation environment.

Nestlé said the buyback could be curtailed should it make a big acquisition before 2020 and that most of the monthly share repurchases will be made in 2019 and 2020 to allow it to pursue deals. The buyback is Nestlé’s biggest since 2007. It has bought back 47 billion francs in shares since 2005.

The company said it had been examining its capital structure and ways to deliver higher shareholder returns since the start of the year, when Mr. Schneider became CEO.

Mr. Loeb has had several conversations with Nestlé’s investor-relations team, and more recently met with Mr. Schneider to convey his recommendations, according a person familiar with those talks. Third Point declined to comment on Tuesday.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Brian Blackstone at brian.blackstone@wsj.com

Corrections & Amplifications

Nestlé will buy back up to $20.8 billion of its shares. An earlier version of the summary of this article that appeared on some WSJ.com pages incorrectly said it was buying back $2.08 billion of shares. (June 27)

Activist should not receive credit for pushing group in direction it was already going

Nestlé is “stuck in its old ways”, with a “staid culture” and a “tendency towards incrementalism”. Some of its brands don’t make sense. Nor does its stake in L’Oréal. It won’t be able to sustain dividend hikes with its current strategy, and it is not nearly profitable enough. These are (some of) the accusations levelled at the Swiss food group by Dan Loeb, the activist investor whose Third Point hedge fund has taken a $3.5bn stake in Nestlé. Is he right?

The stake marks the next step in a newish sortie by Third Point into Europe, where activism — and Mr Loeb — is less prevalent than in the US or Japan. Third Point has directed its ire effectively in the past, whether towards Dow Chemical, Yahoo, Sony, or Sotheby’s. In recent months it has branched out into continental Europe, taking stakes in UniCredit, Italy’s second-largest listed bank, and German utility Eon. But Nestlé is different. Mr Loeb is taking his biggest bet yet, buying up about 40m shares for a 1.3 per cent stake, and devoting 15 per cent of his flagship fund to do so. It is not just his largest bet to date but is against the largest company to date. Both facts suggest he must think there is a good chance he will get his way.

Mr Loeb speaks admiringly of Nestlé. He likes much of its portfolio, and is said to respect its diverse board — although he wishes it had more experience in capital allocation and packaged goods. But he wants to shake up the company. It should, he believes, sell underperforming brands, adopt a formal target to raise operating profit margins from 15 to 18-20 per cent by 2020, and take on more debt to fund share buybacks. The company’s stake in L’Oréal should be swapped via a share exchange offer that would boost Nestle’s return on equity, and it should cut costs. All this would stop Nestlé’s underperformance, which he defines as total shareholder return towards the bottom of its peers over the past five and 10 years.

Much of this makes good sense. Nestlé’s organic sales are rising at their slowest rate for two decades. Operating margins are barely half those of industry leader Kraft Heinz. Nestlé’s balance sheet is under-leveraged, with net debt to earnings before interest, tax, depreciation and amortisation well below 1 times. Valuation multiples are high in the sector, so it makes more sense to sell businesses than to buy. Meanwhile, the L’Oréal stake, while profitable, makes little strategic sense and shareholders should be able to choose to invest in it directly rather than hold a second-hand stake.

However, while the size of Mr Loeb’s bet may be radical, none of his suggestions are. Third Point investors should question why they are paying him elevated hedge fund fees to deploy their money in a manner which barely qualifies as activism. Mark Schneider, Nestlé’s chief executive since January, is already on the path Mr Loeb recommends, and Third Point should not get credit for decisions which management is already contemplating. The announcement by Nestlé on Tuesday that it would buy back CHF20bn of shares appears less a response to Third Point’s demands than the next step in a strategy Mr Schneider has already laid out. Nestlé’s management is already focusing on the right things, investing in the faster-growing parts of the business — nutrition, beverage and petcare — where nearly two-thirds of trading operating profit is generated and underlying return on invested capital is healthy. Mr Schneider has put the US confectionery business up for sale, plans to shift more towards healthier foods and has already hinted he will adopt a profit target.

Investors should be wary of others of Mr Loeb’s claims. For a start, he exaggerates Nestlé’s underperformance. As Bernstein analysts say, shareholder returns and earnings per share have been depressed by currency effects. At constant exchange rates Nestlé’s TSR over the past decade is 85 per cent higher than Third Point suggests, while earnings per share growth ranges from the mid- to high single digits. Secondly, one of Nestlé’s problems is that it has too much cash, rather than too little. Leveraging up would only compound the problem. Thirdly, handing cash to shareholders in the form of a buyback will only improve returns in the short term. Meanwhile, margin targets are all very well, but to get there will require culture change within Nestlé, a far more difficult task.

Whether Mr Loeb’s intervention will help or hinder Mr Schneider in this task is debatable.