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Unilever Bid Follows Familiar Playbook for Warren Buffett and 3G

Warren Buffett’s Berkshire Hathaway has teamed up with 3G in efforts to consolidate food and consumer-goods industries and expand products’ reach

Brazilian private-equity firm 3G Capital Partners L.P. and billionaire investor Warren Buffett are creating a global food and consumer-goods empire by following a simple formula: buy a company that is concentrated in one market, combine it with another somewhere else and then spread the products across the world.

On Friday they took their biggest swing yet when Kraft Heinz Co., which is partly owned by 3G and Mr. Buffett’s Berkshire Hathaway Inc., said it made a $143 billion approach to take over U.K. consumer products giant Unilever PLC. Kraft Heinz later said Unilever has declined the offer, but that “we look forward to working to reach agreement on the terms of a transaction.”

If the deal happens, it would cement 3G and Mr. Buffett as the largest global players in food and consumer packaged goods by bringing together household brands such as Kraft Heinz’s Oscar Mayer hot dogs and Maxwell House coffee and Unilever’s Dove soaps and Surf laundry detergent.

The strategy behind the deal follows a familiar playbook for 3G and Berkshire.

The firms first teamed up in 2013 when they bought ketchup giant H.J. Heinz Co. in a $23 billion deal. At the time, the Pittsburgh-based company generated two-thirds of its sales outside the U.S., with more than 20% in emerging markets. Two years later, in a deal orchestrated by 3G and Mr. Buffett again, Heinz bought U.S.-centric food maker Kraft Foods Group Inc. to create one of the world’s largest food and beverage companies.

It isn’t clear what role Mr. Buffett might play if Kraft Heinz and Unilever reach a deal. Berkshire could split the cost of the acquisition with 3G and it could also help 3G fund its part of the deal.

As 3G’s global ambitions have grown, the Brazilian firm has given Mr. Buffett access to new markets and deals he normally wouldn’t do on his own. Unlike Berkshire, which is molded in the image of its folksy chief executive and has a reputation for hands-off ownership, 3G is known for aggressively cutting costs and jobs.

“On the surface, it’s inconsistent,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business and a Berkshire shareholder. “But I think from Buffett’s point of view…it’s not Berkshire making these operating decisions.”

The motivation for Berkshire is that as the firm has grown, Mr. Buffett has struggled to find deals big enough to move the needle on the firm’s earnings. Berkshire’s subsidiaries, which include insurers, a railroad, utilities and retailers, rapidly pile up cash for their parent company to spend. Mr. Buffett has compared his search for ever-larger deals to elephant hunting.

Mr. Buffett declined to comment Friday through an assistant. A spokesman for 3G didn’t return a call seeking comment.

In his 2015 annual letter, Mr. Buffett wrote that Berkshire and 3G both “crave efficiency and detest bureaucracy,” but Berkshire seeks those qualities before buying companies and 3G buys companies with the goal of cutting costs. 3G’s executives “could not be better partners,” he wrote.

Meanwhile, 3G and Mr. Buffett are also becoming a global force in the restaurant industry. When 3G bought Burger King in 2010, the majority of the restaurants were located in the U.S. Since then, 3G has pushed Burger King into Latin America, Europe and the Middle East, making it one of the fastest-growing fast-food chains in the world with a total of more than 15,000 restaurants.

3G teamed up with Mr. Buffett in 2014 when Burger King took over Canadian coffee-and-doughnut chain Tim Hortons Inc. for $11 billion. The company has since brought more Tim Hortons to the U.S. and to new overseas markets such as the Philippines.

At the time of that merger, people familiar with the matter said Burger King wanted to fashion itself after Yum Brands Inc., the owner of Pizza Hut, Taco Bell and KFC, by becoming a holding company with unrelated, separately managed restaurant brands. The tie-up between Burger King and Tim Hortons resulted in a new company called Restaurant Brands International Inc.

Group says government incentives encourage the retention of polluting coal plants

The chairman of Iberdrola has denounced Europe’s energy regulations as “Kafkaesque”, and warned the current regime encourages utilities to keep polluting coal plants running rather than invest in green power generation for the long term.

“There is not enough capacity to satisfy expected demand,” Ignacio Galán told the Financial Times. “What is happening now is that we are artificially preserving power plants that are obsolete and that would be closed if it were not for [government] incentives [to maintain capacity]. At the same time, we are not building new gas-fired power plants.”

Iberdrola is one of Europe’s biggest utilities, with a large presence spread across the US, Brazil, Mexico, Spain and the UK, where it owns Scottish Power. The Madrid-based group, which claims to be to the largest generator of wind power in the world, is due to publish full-year results on February 22.

Mr Galán’s comments highlight frustration in the industry as power groups struggle to balance competing demands from politicians to combat climate change and keep the lights on without raising consumers’ energy bills.

“The European system is pretty Kafkaesque,” said Mr Galán. “On the one hand the system tells you that prices must not rise, and on the other side regulators place more and more burdens on you that you have to include in the tariffs.”

He also pointed to growing concerns about power shortfalls at moments of peak demand, or at times when there is little sun or wind. To cover that risk, governments have provided subsidies to keep old power stations running, including heavily-polluting coal and diesel plants.

Mr Galán singled out the UK as a country where the need for more generation capacity was especially acute.

“The country in Europe that has the most problems with reserve capacity is the UK,” he said. “They have not built new power stations for many years. They haven’t got the incentives. If you don’t offer long-term incentives to build new plants you won’t get new plants. You are putting at risk the system. That is the reality.”

Scottish Power on Friday became the latest UK energy company to increase electricity prices, raising its standard tariff by almost 11 per cent.

According to Mr Galán, British consumers “should not be surprised” by rising energy bills, pointing to the effects of higher oil and gas prices, the slide in sterling’s value after the UK’s vote to leave the EU, and the steady increase in regulatory costs.

“If we want to lower energy costs we have to remove all the non-energy related costs from the bills, as is the case in the US,” he said. “The energy bills we pay in Europe — almost half the total comes from items that have nothing to do with energy or energy transportation, such as taxes, regulations and subsidies.”

Coal-fired power stations operated by Vattenfall at Jaenschwalde in Germany © EPA

Iberdrola’s share price suffered a hit in the immediate aftermath of the Brexit vote, but the group has since managed to calm investor concerns. Mr Galán said Iberdrola was fully hedged against any impact from the fall of sterling both in 2016 and 2017. In spite of the political turbulence, “our theme is business as usual”, he added.

Iberdrola’s investment plans for the UK — which amount to £2bn a year from 2016 to 2020 — are unchanged. “We don’t see that Brexit will have a negative effect on our business,” Mr Galán said.

He sought to project the same equanimity with regard to political changes in the US, where Iberdrola has expanded rapidly in recent years and now ranks as the second-largest producer of wind energy. President Donald Trump and some of his closest advisers have repeatedly questioned whether climate change is happening, while promising to revive the US coal industry.

“President Trump has been in his job only for a few weeks,” Mr Galán said. “Let’s see how things turn out. We have to give him time. I see no concrete sign that suggests the US will not lower its emissions.”

Manchester City are now “richer than God”, in the memorable title of Guardian journalist David Conn’s account of its takeover by Abu Dhabi’s ruling family.

But it was not always thus. In 2002, having plumbed the depths of English football’s third tier, they suffered one of their perennial cash crises as they battled to remain in the Premier League. 

Chairman David Bernstein, later to head the Football Association, had business experience with French Connection and came up with a corporate finance deal more familiar on Lombard Street than Maine Road. He enlisted Bear Stearns, the investment bank, to raise £30m by pledging future gate income so he could pay the wage bill. 

Such securitisation is more common now. And it is soon to come to the masses (or at least sophisticated retail investors). Ray Ranson, who himself played for City and ended his career at Newcastle United in 1995, is the man behind the plan. 

Mr Ranson sensibly turned down a coaching offer at St James’s Park to develop his sports finance and insurance broking company. It would arrange for sponsors to be protected if a Formula 1 driver was injured, and help clubs raise money against future revenues. 

He merged it with the Benfield Group, founded by Matthew Harding, the then Chelsea director who later died in a helicopter crash. At Benfield, Mr Ranson facilitated more than €250m of transactions for professional clubs across Europe. Benfield, best known for reinsurance products, floated for £645m in 2003. 

Mr Ranson founded sports data provider Prozone in 2004 before selling out in 2011 to concentrate on his finance business. The London Sport Exchange was established as a wholesale platform last year and has raised several hundred million pounds by matching investors and sports clubs, Mr Ranson said. This week he is opening the site to sophisticated retail investors. 

“The business of sport globally is worth $150bn annually. I want to democratise it,” he says. “Sports clubs are asset rich but cash poor. They have lots of guaranteed income streams such as media rights and ticket sales.” 

Sports bring in about $50bn from media rights, $50bn from ticketing, $30bn from sponsorship and $20bn from merchandise, according to PwC, the consultancy. 

Some clubs are even relegation proof, he argues. “Leeds United are going to sell 10,000 season tickets a year even on a cold day in hell.” 

Mr Ranson points out that the assets are uncorrelated to the global economy. “You could have Trump declare war on Iran, oil going through the roof and a run on stocks but it is not going to affect the value of Paul Pogba [the world’s most expensive player at £89m].” 

Mr Ranson says he will stick to the three Rs — royalties, receivables and rent. One growth area is players’ image rights. Clubs pay up to a fifth of wages this way as it attracts lower tax. They could borrow it from investors who then collect from sponsors. “Your creditors are Nike and Samsung. They are going to pay up,” says Mr Ranson. There are 600,000 self-certified sophisticated investors who invest via their personal pension (Sipp) or Isa to trade on the platform. 

The minimum investment is £1,000 and returns are likely to be 5 per cent annually. But there is a reason that sports finance is a niche product. Teams are tempted to chase glory by spending money they do not have. 

James Dow, a football finance expert who also runs investment funds, said the history of the sport was littered with financial failures. “It worked for Chelsea and Manchester City but they were bailed out when rich owners arrived. It comes down to good stewardship.” 

Mr Dow, a partner at Dow Schofield Watts, says he would not be recommending it to any of his clients. “There are plenty of other yield opportunities. You can invest in a bridging loan company at 8 per cent return and that is secured on property — as safe as houses. 

“I would be surprised if investors thought the quality of the assets was high enough to justify the risk.” 

Rangers went bust in 2012 after overborrowing against future ticket sales and failing to pay taxes. Leeds United entered administration in the early 2000s despite a fire sale of assets including its stadium and most of its squad. 

But outside football the market is growing. Wasps, the rugby union club, issued a £35m bond last year. It pays 6.5 per cent and matures in 2022. It is secured on its Coventry stadium and is tradeable on the London Stock Exchange. 

Lancashire county cricket club in 2014 raised £3m to build a hotel through a mini-bond paying 7 per cent. 

And Mr Ranson is talking of expanding into pop groups and films. The fate of his business may depend as much on them as the beautiful, often financially ugly, game.

The $143bn approach is a big test for the prime minister’s industrial policy

Theresa May has ordered her top officials to examine Kraft Heinz’s proposed takeover of Unilever to see if it raises concerns for the wider British economy and merits government intervention.

The $143bn takeover approach, revealed on Friday, is a big test for Mrs May’s industrial policy. Immediately before she became prime minister, she called for more powers to block predatory takeovers of key companies — citing Kraft Foods’ 2010 takeover of Cadbury. The US company, which later split off its snacks business, reneged on a promise to retain factories and jobs in Britain.

When UK companies were bought or forced to close, she said, “workers have a stake, local communities have a stake, and often the whole country has a stake”.

Mrs May has been criticised for presiding over a “fire sale” of British companies following the sharp post-Brexit vote depreciation of sterling. But her legal powers to intervene in foreign takeovers are limited and Philip Hammond, chancellor, has led opposition to the introduction of a wider public interest test. Downing Street on Sunday declined to comment on any plans to consider intervening in the Unilever bid.

British ministers are only allowed by law to prevent foreign takeovers on grounds of national security, financial stability and media plurality. They can, however, use other policy levers such as state industrial assistance, research grants and infrastructure to try to win concessions from a foreign bidder in a takeover.

The prime minister’s team has held talks with both Unilever and Kraft Heinz — a company known for its aggressive cost-cutting — to see what the implications of its plans are for jobs, research and development, as well as for Unilever’s headquarters operations and listing in the UK. Unilever has 7,500 staff in the UK, based at its London headquarters and three research facilities at Port Sunlight, Colworth and Leeds.

Unilever’s other headquarters and listing is in the Netherlands, where politicians have been noticeably quiet about the proposed takeover. Mark Rutte, the Dutch prime minister, was formerly a human resources manager at the company. Kraft Heinz has until March 17 to table a firm bid or walk away — two days after the Dutch elections.

The government’s recently launched industrial strategy includes a promised new regime to cover foreign investments in “critical national infrastructure”, although that is expected to focus on sensitive sectors, specifically nuclear power.

Alongside the battle for Unilever, Mrs May faces another challenge to UK manufacturing with plans by French carmaker PSA to acquire General Motors’ European operation Opel, which includes Vauxhall of the UK. The prime minister is due to meet Carlos Tavares, PSA’s chief executive — and another renowned cost-cutter — next week as talks between the two businesses move towards a conclusion.

Greg Clark, the UK business secretary, travelled to Paris this week to offer PSA, owner of Peugeot and Citroen, comparable assurances to the ones given to the Japanese carmaker Nissan, in an effort to save the Vauxhall plants at Ellesmere Port and Luton from closure.

Mr Hammond has argued strongly that if Britain is serious about forging a future outside the EU as a global trading champion, it cannot intervene to prevent flows of foreign investment into the UK. “We can’t go down the Danone route,” Mr Hammond said at a cabinet meeting last October, referring to action taken by the French government a decade ago that appeared to be intended to prevent a takeover of the yoghurt maker Danone.

While Mrs May wants to put the brakes on the perceived excesses of global capitalism, a defence of Unilever — the world’s fourth-largest consumer goods company by sales, with revenues last year of €52.7bn — would seem an unlikely cause.

Further detailed work will be led by Alex Chisholm, permanent secretary at the Department of Business, Energy and Industrial Strategy, and a former chief executive of the Competition and Markets Authority.

He will seek assurances from Kraft Heinz on its headquarters, listing and employment strategy in the UK, although government officials say the takeover approach is at an early stage and it is far from clear that the deal will go ahead.

Nonetheless, the weakness of the pound since the EU referendum, as well as the prospect of new tariffs once Brexit has been completed, make the future of UK manufacturing politically sensitive, given the unpredictable effect on British jobs.

Last week Tim Farron, the Liberal Democrat party leader, said of the Unilever approach: “This deal would not be happening without Brexit. The government’s industrial strategy has been completely undermined by its determination to leave the single market.”

Former business secretary Vince Cable called the Heinz Kraft bid “really alarming”, adding that it presented the government with a dilemma. “Either they sit back and say Britain is open for business, which is a bit pathetic,” he said. “Or they try to fight it, which is what I would have done.”

Mr Cable said there were mechanisms that the government could use to prevent any deal against the national interest — noting that a potential purchase of Unilever was “even bigger than Pfizer-AstraZeneca in terms of scope, and we managed to see that one off”.

After Pfizer’s £69.4bn approach for AstraZeneca in 2014 the government sought assurances on future R&D work in the UK and the bid was eventually dropped. Mr Cable said at the time that new powers were needed to make sure promises were honoured.

A current draft of President Donald Trump’s replacement executive order on immigration and refugees shows that the administration would try to keep temporary travel restrictions on citizens of seven Muslim-majority countries, according to an internal State Department memo discussing the document.

The new order would, however, reverse the previous directive’s inclusion of green-card holders from those countries, according to the State Department memo which was reviewed by The Wall Street Journal. Green-card holders were initially included in the original ban but then later excluded. The administration has said the travel ban was necessary to thwart terrorist attacks.

The replacement order is expected to be issued as soon as Tuesday, according to a U.S. government official.

Asked about the memo, a senior administration official said the new order isn't yet complete. “It’s still being worked on,” the official said.

The State Department refused to comment on the draft.

The Justice Department told an appeals court Thursday that the president would rescind the current executive order and replace it. The first order prompted more than 20 lawsuits, with challengers arguing that the order violated individual rights and wasn’t justified by a new national-security threat. A court ruling this month from the Ninth Circuit Court of Appeals in San Francisco stayed several key provisions of the original order.

A State Department official said the new order would likely jettison the indefinite ban on Syrian refugees entering the U.S. But two White House officials said that ban wouldn't be dropped.

Homeland Security Secretary John Kelly said Saturday that the administration is planning a new version of the executive order that would be phased in to allow people already in transit to enter the U.S.

“The president is contemplating issuing a tighter, more streamlined version of the first E.O.,” Mr. Kelly said during a visit to Munich. “I will have, this time, the opportunity…to work the rollout plan in particular to make sure that there’s no one in a sense caught in the system moving from overseas to our airports, which happened in the first release.”

Mr. Kelly said “it is a good assumption” that green-card holders would be allowed into the U.S. He said there would be a “short phase-in period.”

The State Department memo makes clear the White House is seeking a careful and deliberate rollout of the new executive order, with government lawyers requesting its implementation seven to 14 days after Mr. Trump signs the document. The lag period is designed for government lawyers to deal with any legal challenges to the new order before it is implemented, the memo explains.

The immediate implementation of Mr. Trump’s Jan. 27 executive order on immigration and refugees created chaos across global airports, sparking protests across the U.S. Refugees en route to the U.S. when Mr. Trump signed the order were turned back once they landed at American airports.

According to the memo, the draft retains the provision from the previous order that temporarily bans travel to the U.S. by citizens from Iraq, Iran, Syria, Libya, Yemen, Somalia and Sudan.

The original order suspended the entire U.S. refugee program for four months and indefinitely banned Syrian refugees. The administration argued at the time that the original provisions were needed to keep possible terrorists from entering the U.S. posing as refugees.

A State Department official said the ban on Syrian refugees could be scrapped in the new order, but it would keep in place a lowered admission ceiling of 50,000 refugees for 2017 enshrined in the previous order.

Some 35,000 refugees have been admitted for the government’s 2017 fiscal year, which ends in October, leaving only 15,000 admission slots left globally for the next 7½ months.

The memo says a slowdown is needed for refugee admissions for the rest of 2017 to accommodate the lower ceiling, admitting 400 refugees a week from 1,900 a week under the previous administration. Mr. Trump more than halved the 110,000 refugee admission ceiling set by the administration of President Barack Obama for fiscal year 2017.

The current draft gives the secretary of state broad authority to waive individual cases and allow, in certain instances, citizens from the seven banned countries to enter the U.S., but the secretary must agree with the Department of Homeland Security before specific cases are waived.

The memo said the Department of Homeland Security is unwilling to put into writing categories of visa seekers that could be exempt from the new order, such as students seeking entry via U.S. government-funded exchange programs.

The approach described in the memo would likely bolster the White House’s position, both legally and politically.

Legally, one of the primary critiques of the order is that it amounts to religious discrimination. The new version appears to address that by eliminating the preferences for religious minorities that was included in the original order.

Further, in its ruling, the Ninth Circuit Court of Appeals was critical of the administration’s mixed messages as to whether legal permanent residents, also called green-card holders, were affected. The new version appears to address that by making clear that they aren’t included.

The appellate court also criticized the order for lacking due process for those affected. Giving notice before it take effect could address that, at least in part.

The new approach described in the memo also appears to try to address the administration’s political problems around the order. Many Republicans who otherwise support the idea were highly critical of the chaotic way the order was rolled out. Democrats and others were critical of the process and the substance.

Big Apartment Landlord Sues Airbnb

Apartment Investment & Management Co. alleges Airbnb is helping tenants breach their leases

One of the largest U.S. apartment landlords has filed civil lawsuits in California and Florida against short-term rental website Airbnb Inc., alleging its tenants are renting out units on the site in violation of their leases and are creating unsafe conditions for other tenants.

Apartment Investment & Management Co., or AIMCO, which owns or manages roughly 50,000 apartments across the U.S., is seeking an undetermined amount of damages, a spokeswoman said.

AIMCO Chief Executive Terry Considine said in a written statement that Airbnb is helping tenants breach their leases, which prohibit short-term rentals.

“It is not acceptable to us that Airbnb actively promotes and profits from deliberate breaches of our leases, and does so in utter disregard of the disrespectful and unsafe situations created for our full-time residents and their families,” Mr. Considine said.

Airbnb plans to fight the lawsuit, said Nick Papas, a spokesman for the company. “This attack on the middle class by powerful interests is wholly without merit,” he said.

This is the first instance of a major landlord suing Airbnb, according to Conor Wagner, an analyst at real-estate research firm Green Street Advisors. He said other landlords might decide to pursue the same tactic if they can’t win cooperation from Airbnb.

“This is all somewhat unprecedented for them,” Mr. Wagner said. “If you don’t want this going on in your building, and Airbnb won’t desist, then this might be their only recourse.”

AIMCO said its buildings have suffered property damage, nuisance and disturbance, and loss of revenue. It is seeking compensation for losses and is asking the courts to forbid Airbnb from listing units in its buildings in the future.

Airbnb has faced an uphill battle in building relationships with apartment landlords. Last fall it unveiled a program that would give landlords a cut of the revenue if they permitted Airbnb guests to stay in tenants’ apartments.

The program initially received a cool reception from landlords, who were concerned that transient residents would change the character of their buildings.

In many cities, regulations limit how many days per year a dwelling can be rented unless the tenant is present.

Airbnb, valued by investors at $30 billion, has been working to shore up regulatory hurdles city by city ahead of an eventual initial public offering.

It suffered a setback in New York City last year, when Gov. Andrew Cuomo signed a law allowing fines of up to $7,500 on tenants who break rules that prohibit listings of less than 30 days in multiunit buildings. The city this month began targeting some offenders with fines.

Analysts predict an end to dramatic share price falls for the Scottish fund house

Hedge funds have stopped betting against Aberdeen Asset Management for the first time in four years, with analysts predicting an end to dramatic share price falls for the Scottish fund house.

Aberdeen’s share price nearly halved since it hit a high of 507p in April 2015. It was targeted by hedge fund managers when investors began to worry about emerging market valuations four years ago.

The FTSE 250 fund house, which specialises in emerging market and Asian equities, reported its 15th consecutive quarter of net outflows earlier this month, bringing total withdrawals for the company to more than £100bn since 2013.

AQR and Odey Asset Management, two of the world’s largest hedge fund companies, are among the big asset managers to have removed their longstanding short positions against Aberdeen in recent months.

Analysts said the company’s share price is unlikely to fall much further, reducing the incentive to bet against Aberdeen.

They added that Martin Gilbert, chief executive of the fund house, indicated last year that Aberdeen had received interest from potential buyers, and any M&A bid would be expected to boost its share price.

Paul McGinnis, an analyst at Shore Capital, the brokerage, said: “The shares [may] have now fallen to a level where hedge funds don’t see sufficient downside to maintain the short.

“The fact that Martin Gilbert has also talked about Aberdeen being an attractive asset that people want to buy perhaps makes hedge funds nervous about being caught on the wrong side of a bid.”

But he added that if Aberdeen is forced to cut its dividend — a prospect that was raised by the company last year — then its share price could fall below 240p.

RBC upgraded Aberdeen earlier this month after deciding the risks facing the UK’s second-largest listed asset manager were “well known by the market and more than reflected in the share price”.

In a research note, the Canadian bank said Aberdeen was more likely to receive a takeover offer due to its lower share price and the weak pound, which makes the company more affordable for foreign buyers.

“[Aberdeen has an] oversold share price, a reasonable valuation, a high dividend yield, stabilising revenue margin, well controlled cost base, and the real possibility of M&A,” the bank said.

Aberdeen, AQR and Odey Asset Management declined to comment.

The French fund house is set to become the eighth-largest asset manager globally

It is hard to imagine Yves Perrier, the chief executive of Amundi, Europe’s largest asset manager, getting excited.

I meet the 62-year-old the same morning Amundi posts net inflows of €62bn for 2016, not quite a record but €22bn more than what was promised when the French fund house listed in 2015.

The influx of cash is all the more impressive when compared with the problems facing Amundi’s competitors. Just days before, Henderson reported its first yearly outflows since 2012 after the UK’s third-largest listed fund company suffered £4bn of net withdrawals in 2016.

The same month Aberdeen Asset Management posted its 15th consecutive quarter of net withdrawals, bringing total outflows to more than £100bn since clients first began pulling money from the Scottish investment house four years ago.

“I am satisfied,” says Mr Perrier flatly. “Things are going a bit faster than I had anticipated.”

The inflows meant Amundi eclipsed the €1tn mark for assets under management last year, and its €3.5bn acquisition of Pioneer Investments from UniCredit, the Italian bank, will move assets closer to €1.3tn when the deal closes before the summer.

But cuts will have to come first. The company announced cost savings of €180m when the merger was revealed in December. Admin, IT and back-office functions will all be streamlined.

“I have seen some in the British press say the deal will be a bloodbath for staff or some kind of slaughter. It won’t,” says Mr Perrier, who has been chief executive of Amundi since it was born out of the merger of Crédit Agricole and Société Générale’s asset management units in 2010.

Four hundred and fifty jobs will go from a total pool of 5,000 staff. Many would consider that a bloodbath of sorts.

“We can carry this out without any big ‘social’ plan, and for a very simple reason: last year the turnover of all staff was 175 people. If you multiply by two, you have more than 300. That means two-thirds [of all job cuts] will come just from staff turnover,” he says.

Mr Perrier, a once-talented footballer who was offered a contract with French team Olympique Lyonnais, has experience of cutting staff — practical knowledge he seems to relish.

“When we created Amundi in 2010 we announced €120m of cost synergies but in fact generated savings of €150m. And in 2003, I was in charge of the creation of the investment bank of Crédit Agricole from the merger of Indosuez and the investment bank of Credit Lyonnais.

“We announced a reduction in staff of 3,000 people, half in France, half abroad, and we delivered. I know how to do this,” he says.

I ask him if staff at Pioneer will bear the brunt of the cuts, given the fierce reputation of trade unions in France and his own allegiances to Amundi.

“As I have mentioned, I have implemented two mergers where we cut staff in France and abroad. From that I found it took three or six months longer to reduce staff in France than the UK, for example. But it was easier and quicker in France compared with Japan or Germany.”

He adds: “Any cuts will be based on fairness and efficiency, not on labour laws or loyalties.”

But staff at Pioneer are expecting harsher treatment as a result of the sale and a number of high-profile employees have already left the company.

In December it emerged that two senior staff at Pioneer had been suspended pending an investigation into allegations that they attempted to set up a rival investment business to which they could potentially take clients.

“Amundi is going to slaughter us,” one employee told FTfm at the end of last year. “They don’t need employees, they need assets.”

The deal will, however, bring an end to years of uncertainty for clients and staff at Pioneer, which was first put up for sale more than six years ago. Amundi emerged as a potential buyer at the time, but the eurozone crisis triggered fears that a foreign owner of Pioneer would buy fewer Italian sovereign bonds.

Mr Perrier says: “The integration will be made, not like an acquisition, but like a merger. We have set up a steering committee to oversee this, which is co-chaired by myself and Giordano Lombardo, the chief executive of Pioneer. That steering committee is made up of Amundi and Pioneer staff, which is key. As I said, we will make the choices based on efficiency and fairness.”

“But let me add this”, he continues, “I had a meeting with 100 key managers within Pioneer and Amundi last week, and I told them this: you are not synergies, you are assets.”

The deal will make Amundi the eighth-largest asset manager globally but the merged unit will still trail BlackRock, the world’s largest investment house, by some margin in terms of assets under management.

The US fund house took in net inflows of $202bn in 2016 and grew its assets under management by 11 per cent year on year to $5.1tn.

Yet while inflows of client money were up, BlackRock’s revenues and profits fell compared with 2015. Revenues for the year dropped 2 per cent, and operating income came in at $4.57bn, also down 2 per cent.

How important is it for Mr Perrier to catch up with BlackRock?

“Some journalists or investors say Amundi is the European BlackRock. No, we are not.

“BlackRock has €5tn of assets, we have €1tn. And if you bear in mind that the American market represents 50 per cent of global assets, and that we have only a small presence in the US market, then it is clear we will never be number one in the world.

“But frankly speaking, it’s not a problem. What Amundi does is my business. What BlackRock does is theirs.”