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The Oracle billionaire spent almost $10 million on houses for his children’s tutors and others about 30 minutes from his Florida compound

For the past few years, residents of the tiny Palm Meadows Estates gated community in Boynton Beach, Fla., have gossiped about a string of home purchases that quietly took place in their neighborhood in 2023. Eight homes with different sellers, most unlisted, closed within weeks of each other for a total of almost $10 million. All were purchased by the same limited liability company with a California address.

Word quickly spread that the mystery buyer was a tech billionaire. Some speculated it was Meta Chief Executive Mark Zuckerberg. Others heard it was Elon Musk.

The buyer, as it turns out, was Oracle co-founder and billionaire Larry Ellison, according to an analysis of property records and people familiar with the transaction. Ellison had paid $173 million the year before for an oceanfront compound in the upscale town of Manalapan, roughly 30 minutes away.

But the Boynton Beach properties weren’t for Ellison himself. They were for his family’s staff, including tutors for some of the five children he shares with his sixth wife, Jolin Ellison, according to people familiar with the situation. An Oracle spokesperson declined to comment on Larry’s behalf.

The purchases offer a rare glimpse into a phenomenon largely shielded from public view: As the ultrarich expand their personal real-estate footprints, they are also buying homes for the people who keep their households running. Some of the world’s wealthiest people have built self-contained ecosystems in which employees live close enough to be helpful, yet far enough away to maintain the family’s privacy. Meta’s Zuckerberg, for instance, has bought a number of houses in Palo Alto to build out a compound for his family.

The trend is also playing out across the luxury condo market, where developers are incorporating smaller studio and one-bedroom apartments on the lower floors of their towers in order to accommodate residents’ staff.

“Worth it”

As the ultra wealthy—hedge-fund managers and tech titans—have poured into South Florida over the past few years, they have reshaped the education options in the area to meet the needs of their own children. Some have spent hundreds of millions to build or expand dozens of private and charter schools. Musk, WeWork Co-founder Adam Neumann, Zuckerberg and real-estate developer Jeff Greene have even founded their own schools.

The Ellisons have kept details about their five children, who are younger than 18, private. They are involved parents, according to people familiar with the interactions. The Manalapan home has several buildings that include areas where the older children are home-schooled. There are an array of tutors, and the children are learning several languages, the people said.

Palm Meadows Estates, located between West Palm Beach and Boca Raton, has a gated entryway with 24-hour security and is surrounded by a lake.

“Every single home has a view of the water,” local agent Ashley McCoy of Serhant said of Palm Meadows Estates.

Kimmie Cruz, a local real-estate agent with LuxeIQ, lives in the community. One morning around March 2023, she said, she got a call from an agent at another firm asking to see all her Palm Meadows Estates listings on very short notice for a buyer who was looking to purchase about 10 homes.

While proof of funds wasn’t immediately available, the agent told Cruz that it would be “worth it” to arrange the last-minute showings, she recalled.

That day, Cruz showed several properties to a small group, including an engineer. The team was specifically interested in single-story, ranch-style homes, she said. They later wanted to see homes that weren’t on the market, so Cruz met individually with homeowners to convince them to sell.

“I said, ‘Look, this is the chance to sell it without having to have it on the market,’” Cruz said. “‘This is a chance to have somebody very viable. The money is there.’”

Days later, Cruz, who was still none the wiser about the buyer’s identity, was told he wanted to visit in-person. The person who arrived to tour the homes, flanked by bodyguards, was Ellison. That night, Cruz received the first of the signed contracts for the houses.

Well-maintained homes

An LLC tied to Ellison, who has a roughly $200 billion fortune, closed all eight deals between May and June 2023, according to property records. The properties are moderately sized with well-kept lawns; some have swimming pools.

Each of the sellers made a substantial profit on the sales; local agents said that is typical in the area, which saw a large influx of buyers from the Northeast during the pandemic. One couple, Paul and Yvonne Carozza, sold their three-bedroom, roughly 2,100-square-foot home to Ellison for $1.2 million; they paid $567,000 for it in 2019, records show. The Carozzas didn’t respond to a request for comment.

An increasing number of wealthy people are purchasing or renting homes for their household staff, according to Peter Mahler of Mahler Private Staffing. Including housing as part of a staff compensation package makes it easier to recruit high-quality employees, he said, particularly if a client lives in a pricey market with few affordable-housing options. Many clients prefer their staff to live off-site, so they can maintain a quiet family life and have more privacy, he said.

“If you want them to get to work quickly and have a reasonable commute, investing in lodging can be a very smart decision,” Mahler said.

At Palm Meadows Estates, the Ellison purchases ruffled some feathers. Some objected to the idea of an individual or corporation owning so many homes within the community, according to two residents. The homeowners association later introduced rules to prevent it from happening again, Cruz said.

A neighbor who lives next door to an Ellison staff property said it is especially well-maintained. Landscaping and lawn care are provided by the community, but the neighbor said there are other vendors who have powerwashed or provided additional landscaping at the Ellison house.

The residents of at least some of the Ellison staff homes drive Teslas, residents said. Ellison served as a Tesla board member between 2018 and 2022. Records show permits were filed to install Tesla Powerwalls in each of the eight houses after Ellison purchased them, according to Palm Beach County records.

Ellison, 82, also has two adult children—Paramount chief executive David Ellison and film producer Megan Ellison—from a previous marriage. In recent months, Ellison has been serving as a major financial backer for Paramount in its massive $81 billion acquisition of Warner Bros. Discovery.

The more data you hand over, the more this talented personal assistant can do for you

My first task for Muse: “Change your name to Mark Zuckerberg.” Meta’s META -4.79%decrease; down pointing triangle AI agent refused.

Zuck, Mark and even Marc—no dice. So I pivoted to the Terminator, which was gleefully accepted.

I asked Muse to Terminator-ify its fuzzy blob mascot, and it adopted metal accents and a glowing red cyborg eye. Pretty stinkin’ cute.

Muse is designed to do stuff for you, like an executive assistant. The more you hand over, the more helpful it gets. When I connected my inbox and calendar, my little Terminator found unpaid bills and suggested a recipe based on an incoming produce delivery.

But are cute and helpful enough to overcome my trust issues with Meta, the ad-powered company that also operates Facebook, Instagram and WhatsApp? The company has a history of privacy scandals and data-use controversies.

The app has already been downloaded more than 3.4 million times and topped app-store charts, according to Sensor Tower data. After a week with the Terminator, I began to see how Muse became a hit. And how much data it needs to do its job.

The benefits

As an AI agent, Muse can answer your queries like a chatbot, and also click around websites, use apps and work with files on your computer.

Agents have taken off mostly in tech work, and other apps, such as Instinct, have gained traction among Silicon Valley power users. ChatGPT and Claude have similar capabilities but more complicated features and premium subscription requirements.

Muse is the first app I’ve experienced for normal people. Meta successfully hid the complexity of agentic AI behind a simple, friendly interface. And for now it’s free. Once you hit a usage limit, you can pay for more tokens, starting at $20 a month. (I’m reassured by this, in some ways, because it means Meta can make money without using my data or dumping ads into the experience.)

Each Muse user gets a secure “virtual machine,” an unseen cloud computer with its own file system and a web browser that pops up on the user’s screen from time to time.

For my test, I started thinking up real-life admin tasks. First: a rain poncho for my kid’s bike seat. I found a European one, and asked the Terminator to hunt for a U.S. retailer. It came up empty—but found a great alternative in California and loaded the checkout page.

Then the Terminator asked for my credit card.

Actually, it prompted me to connect Link by Stripe, which stores payment methods. Link gives vendors a one-time virtual card number instead of real card details and includes protections, such as a return guarantee.

I opted against Link, instead clicking “Take control of the browser” and typing in the card number myself. The poncho is currently en route.

Next, I asked if my gym offered a membership-referral benefit.

The agent responded with an exciting promo: 50% for both me and my friend. But the deal was for a totally different gym on a totally different coast. Even cuddly AIs can make mistakes.

Muse was, unsurprisingly, adept at perusing Facebook Marketplace. I asked the Terminator to find a white-noise machine. It found a cheap one nearby and drafted a pickup message.

But how would Muse handle our labyrinthine childcare-booking platform? I gave it four dates and times, and my preferred sitters. Once I manually logged in, it made the reservations while I made lunch. It even offered to add the events to my Google Calendar, so I connected that.

I heard the screams of cybersecurity professionals ringing in my ears. But I wanted to see what Muse could do.

I also connected my personal Gmail account with “read only” access: It could see emails but couldn’t delete them or shoot off embarrassing notes to my entire address book.

Muse surfaced a forgotten dentist bill. Watching the agent complete a lengthy form with details from my inbox, such as my appointment date and date of birth, was magical, but also a little creepy.

The agent was also able to gather everything I needed for Global Entry applications from my calendar and inbox, including five years of international travel history.

Not all tasks are successful, however.

My colleague Meghan asked Muse to find cheaper auto insurance. It submitted her information for quotes but said her current rate was as low as it could get. One provider called her, and ended up offering a better deal than Muse previously reported. If she hadn’t spoken to a human, she would have missed $420 a year in savings.

I know, you’re thinking, is it really that hard to fill out a form? I understand, but I also appreciate tools that can help tick things off my endless to-do list.

So why would I not continue using Muse?

The risks

Any information you share with Muse can technically be shared with Meta. The company says that won’t be used to serve ads, but it can be used to train AI models. You can opt out in Settings > Data controls. Meta says employees won’t access accounts except under specific circumstances, such as a law-enforcement request or a user-reported problem.

Meta says later this year it will offer a confidential virtual machine that encrypts data so the company can’t access the chats.

“The question for any user is what happens if their device is compromised or the service itself is breached,” says Trevor Hilligoss, chief intelligence officer at security firm SpyCloud.

Ordinarily, your email, your social-media apps and your shopping and banking accounts are all under secure, separate logins. By giving one service access to any or all of them, you’re creating a super resource for an attacker, Hilligoss says.

f your Facebook account gets hacked, that hacker has access to everything you’ve shared with Muse. Meta doesn’t generally require two-factor authentication on its accounts, so it’s up to you to turn that on—and come up with a strong unique password.

Also, AI agents can behave unexpectedly. Users should take control of the browser for any tasks involving money, passwords, account settings or messages sent in their name, says Katie Moussouris, chief executive of Luta Security.

Muse does have a “secure credentials store” for your logins, which Meta says allows the agent to use passwords without seeing them. An agent-friendly password manager integration would be better, and 1Password says its Muse partnership will be available in a few weeks.

AI agents can also be tricked, says Moussouris. A website or email can contain hidden prompts telling the bots to ignore instructions and send personal data to hacker accounts instead.

Meta outlined safety measures that direct the agent to disregard prompt injections and limit its access to secrets. The company says Muse will “sometimes make mistakes.”

I’m going to be cautious and reset Muse for now. Though I might reconsider once the confidential option is available.

Oil price and US Treasury yields in tightest relationship since 1990

Bond investors watch Iran conflict and crude price for signs as to where government borrowing costs will go

Oil prices and US Treasuries are locked in their tightest relationship since the first Gulf war in 1990, as the Middle East conflict increasingly drives the bond market that helps set borrowing costs across the global economy.

The correlation between the price of West Texas Intermediate crude and the 10-year Treasury yield hit 65 per cent this month, according to derivatives firm Cboe, putting it within touching distance of the level set following Iraq’s invasion of Kuwait nearly four decades ago.

The closeness of the relationship highlights how dependent the outlook for the global economy and major asset classes has become on traffic through the Strait of Hormuz, through which about 20 per cent of the world’s oil exports usually pass.

The energy price shock has forced investors to rethink their approach to the market as they price in higher inflation and interest rates.

Bond investors usually “dig into countries’ economic data releases and their central bank announcements in microscopic detail”, said Mike Riddell, a fund manager at Fidelity International. “For the last three to six months, we’ve basically just been oil traders.”

The correlation between oil and Treasury yields hit a record of 66 per cent in 1990, in Cboe data going back to 1985. Bond yields move inversely to prices.

The close correlation can also be seen across European bond markets, where yields for countries more exposed to the energy shock have moved higher in tandem with the crude price.

Yields are moving “basically tick-for-tick with the oil price this year”, said Richard Woolnough, a bond fund manager at M&G.

Oil price benchmarks have swung wildly during the Middle East conflict, seesawing between well over $100 and about $70 per barrel as the prospects of a negotiated peace ebb and flow.

The US 10-year yield, a benchmark for trillions of dollars in assets worldwide, has soared to its highest level since 2007 this year, as the fallout from the US-Iran conflict — combined with a strong domestic economy — adds to fears of higher inflation.

That has prompted traders to increase their bets that the Federal Reserve will have to raise interest rates.

Each extra dollar on the price of a barrel of WTI is equivalent to almost 0.02 additional percentage points on the 10-year yield, according to calculations by analysts at TS Lombard. On Monday, oil rose as much as 4.5 per cent, while the yield on the 10-year Treasury climbed as much as 0.09 percentage points.

As the conflict has rolled on since February, investor hopes have faded that central banks would overlook a temporary supply-driven surge in inflation. Instead, higher energy prices are increasingly seen as the last straw for central banks grappling with above-target inflation.

Fed chair Kevin Warsh this month said “inflation is too high and has been for too long” as the central bank increased interest rates for the first time since 2023.

“The driver of front-end yields has changed” this year, said Peter Schaffrik, global macro strategist at RBC Capital Markets. “You now have a very specific, identifiable driver of central bank policy,” he added, referring to energy prices.

As a result, investors say that changes in economic fundamentals such as growth and inflation have taken a back seat to oil as a driver of bond prices.

“That transmission mechanism is quite cloudy,” said Lauren Van Biljon, a senior portfolio manager at Allspring Global Investments. “It makes timing difficult.”

Mandy Xu, head of derivatives market intelligence at Cboe, said: “If this pattern holds, then where yields go from here will be less dependent on the Fed and more on the situation in Iran.” 

For Europe, soaring gas prices have been equally closely watched, given their greater importance to household inflation. European natural gas prices are up 160 per cent this year to the highest level since the aftermath of Russia’s full-scale invasion of Ukraine.

European Central Bank president Christine Lagarde highlighted the rising gas prices as an upside risk to inflation when the central bank raised interest rates earlier this month.

The outlook for the conflict itself remains uncertain, with Donald Trump on Saturday saying he had rejected Iran’s offer of a new seven-day ceasefire.

“For the first time since the start of the Iran conflict, we don’t have a baseline view” on where oil will go, wrote JPMorgan analysts led by Natasha Kaneva, head of global commodities strategy, in a widely circulated note last week. “We simply don’t know how to model the endgame.”

Unicredit’s Andrea Orcel moves to seize control of Commerzbank within months

Italian executive aims to replace 10 board members and oust CEO as soon as January, say people familiar with plans

Andrea Orcel’s UniCredit is preparing to seize control of Commerzbank and overhaul its supervisory board as early as January, accelerating its timetable for the biggest European bank takeover since the financial crisis.

The Italian lender is planning to call an extraordinary general meeting once it receives the remaining regulatory approvals needed to take control of Germany’s second-largest bank, according to people familiar with the matter.

UniCredit’s base-case scenario is to secure control of Commerzbank by the end of February and replace all 10 shareholder members on its 20-person supervisory board, giving the Milan-based group an effective majority, the people said. Its best-case scenario would see it take control in January.

UniCredit had previously indicated that it could take control during the second quarter of next year. Despite the plan to accelerate the process, it could still be pushed back until Commerzbank’s annual meeting in May if the German lender seeks to delay it, the people added, though its ability to hold up the changes is limited.

UniCredit chief Orcel, one of Europe’s most prominent dealmakers, is also preparing to remove Commerzbank’s chief executive Bettina Orlopp and has pushed back against the German government’s demand that it retain its two seats on the supervisory board, the people said.

Once in control, Orcel is planning a radical overhaul of Commerzbank, including scrapping parts of its international network, unwinding roughly €20bn of corporate lending outside its core German and Polish markets that are not essential for its Mittelstand clients, and slashing its cost base.

The plans come after Berlin, which holds a near-13 per cent stake in Commerzbank, softened its opposition to a takeover in recent weeks, shifting from outright resistance towards setting conditions for a deal.

The takeover, which is valued at about €45bn, would be an example of a foreign lender overcoming political barriers that have long frustrated consolidation across national borders in the sector.

The pivotal moment came in July when UniCredit secured a 47.6 per cent holding in its German rival through an offer that carried only a small premium.

While UniCredit’s holding falls short of the threshold for majority control, analysts have said it could exercise de facto control with its current holding.

UniCredit first disclosed a stake in Commerzbank in September 2024, triggering political opposition in Germany and a protracted stand-off with management at the Frankfurt-based lender.

This month Orcel met German finance minister Lars Klingbeil in the first face-to-face talks between the government and UniCredit, which the Milanese lender called “constructive”.

Klingbeil outlined a number of demands, including keeping Commerzbank headquartered and listed in Frankfurt and for the interests of the group’s 40,000 employees to be safeguarded.

UniCredit has previously signalled that it would cut about 7,000 jobs at Commerzbank in the event of a takeover, with Orcel denying union claims that as many as 15,000 roles could disappear.

The Italian executive’s plan to cut costs at Commerzbank includes cutting spending on external consultants and marketing, according to people familiar with the matter.

The banker, who has significantly reduced costs at UniCredit since taking over as chief executive in 2021, also intends to remove executives’ perks such as access to luxury cars for travel and curb travel to conferences, the people said.

One added that the savings would be reinvested in Commerzbank’s core businesses in Germany and Poland.

Orcel is also planning to dismantle parts of Commerzbank’s international operations, which have expanded rapidly in recent years.

UniCredit is awaiting final approvals from the European Central Bank, the European Commission and Poland’s financial regulator before it can assert control over Commerzbank.

UniCredit and Commerzbank declined to comment.

Germany issues EU budget ultimatum

Berlin and five other capitals tell Brussels to axe ‘hundreds of billions’ in planned spending

German Chancellor Friedrich Merz and five other EU leaders have threatened to withhold agreement on the bloc’s next seven-year budget unless “hundreds of billions” of euros in spending cuts are secured.

The ultimatum underscores divisions over the EU’s new spending priorities, including defence and efforts to shore up ailing industries against Chinese and US competition, while continuing to support farmers and poorer regions that have traditionally absorbed the bulk of its budget.

The EU budget “must be fundamentally reformed. We must make choices”, according to a letter signed by the leaders of Germany, the Netherlands, Sweden, Denmark, Austria and Finland and seen by the FT.

“Unless the budget is cut by hundreds of billions, there won’t be an agreement this year,” said a diplomat from one of the signatory countries.

The six leaders want to shift resources towards defence and innovative companies to reflect growing economic and security challenges, while reducing funding for farmers and poorer regions, which traditionally absorb about two-thirds of the EU budget.

The 2028-2034 budget requires unanimous agreement among all 27 member states. The six countries’ threat to withhold their consent goes against a commitment made by EU leaders in June to reach a deal this year before elections in France, Italy, Spain and Poland risk complicating the negotiations.

The budget is largely financed by contributions from member states, with the six signatories accounting for about 40 per cent of EU budget revenues. They have called for substantial cuts to the €2tn headline figure proposed by the European Commission, reflecting efforts to rein in spending at home.

Ireland, which currently holds the rotating EU presidency, has been tasked with producing a compromise proposal by mid-October. The Irish government must reconcile demands from the biggest net contributors with a majority of countries who insist on farm subsidies and regional development funding being maintained.

A group of 17 countries, including Spain and Italy, insist that funding for these traditional spending areas should increase and that the overall budget should exceed the proposed €2tn. Some also want the EU to issue more joint debt to finance the higher spending — a taboo for Berlin and its allies.

France, a net contributor to the EU budget but also the bloc’s largest beneficiary of farm subsidies, is pushing for EU-wide taxes to help fund the increase.

The Commission has proposed raising about €60bn a year through such levies, including higher contributions from the bloc’s cap-and-trade carbon market, tariffs on carbon-intensive imports, a tax on non-recycled electronic waste, tobacco duties and a levy on large companies.

But each has faced resistance, given that taxation is largely a national power governments do not want to surrender to Brussels. EU diplomats also warn that the measures would not raise enough to meet all the bloc’s spending needs.

A spokesperson for European Council president António Costa, who chairs the leaders’ summits, pointed out that they had all agreed to reach a deal by the end of the year. “Between now and the end of the year, at the latest, the goal will be to close the gap” and reach “a balanced overall agreement”.

Nvidia turns to insurers to spread the risk of AI build-out

World’s largest listed company looks for new ways to draw Wall Street deeper into the financing of the AI boom

Nvidia has held talks with insurance companies about shouldering the risks of lending against its chips as chief executive Jensen Huang pushes to unlock more demand for its semiconductors beyond Big Tech groups.

The chipmaker has approached insurance companies about a range of structures that could shift some of the risk of capital-intensive semiconductor financing to insurers and other investors, according to people familiar with these discussions.

One idea under discussion is insurance against losses on loans to upstart cloud computing companies, or “neoclouds”, if they default and the Nvidia chips pledged against their debt cannot be resold for enough to repay lenders.

Such protection could encourage more capital to flow to a group of Nvidia customers that lack the balance sheets of Big Tech groups.

The conversations are at an early stage and may not lead to any deals. But the discussions illustrate how the world’s most valuable listed company is experimenting with structures across Wall Street, private capital and now the insurance sector to help expand the range of customers who can buy its chips.

Huang has said chips should be treated like an “investable asset class” akin to other pieces of expensive, long-lasting technology, such as aeroplanes, which support complex financial structures to shift risks and costs between users and investors.

“Nvidia is trying to will the market to participate, to show other capital providers that these are investable assets,” said one person familiar with its efforts to bring in more outside capital.  

The talks come as insurers launch a flurry of products aimed at the AI infrastructure build-out. These include coverage for credit risk and falls in chip values, as well as contract breaches caused by power outages or cooling failures at data centres.

The scale of Huang’s ambitions became clearer last month. Nvidia offered to backstop a portion of financing deals intended to unlock $500bn of capital from Wall Street firms such as Goldman Sachs and Apollo.

It also guaranteed $105bn of leases to get a massive data centre built for OpenAI. Nvidia told investors that it expects a quarter of its revenue next year to come from AI labs that the chipmaker supports with its balance sheet.

The insurance discussions represent a new front. These structures could offer protection to the firms that lease chips or lend against them, shifting some of the risk to insurance providers.

Nvidia has shared data on chip depreciation and the expected future price of computing power with at least one insurance firm, the person said. Another person familiar with the talks said Nvidia was working with broker Howden Re on developing a structure involving insurers. Howden declined to comment.

The effort is being led by Ingemar Lanevi, Nvidia’s head of financial solutions, according to people familiar with the discussions. They said Nvidia had explored using insurance groups to syndicate risk to hedge funds and other alternative investors. This is because the potential scale of the deals could overwhelm the balance sheets of even large insurance carriers.

Nvidia has also explored being part of a consortium backing such agreements alongside insurers, hedge funds and asset managers, one of the people added.

Nvidia said its “AI infrastructure is an investable asset class because it is uniquely productive, durable and fungible. Leading capital partners help Nvidia and our ecosystem scale financing for the AI factory build-out, expanding compute access for AI-native companies.”

The company is also returning capital on a vast scale, announcing plans to launch a record $150bn share buy-back on Monday.

The structures Nvidia has examined are similar to so-called residual value insurance, which protects against the decline in the value of tech equipment. Companies including Forward Compute and American Compute have sprung up to offer these niche products.

Quentin Saleur, chief executive of Forward Compute, said insurance products could level the playing field for smaller cloud providers by removing the risk that they go bust before fulfilling a contract.

“Large compute buyers don’t want the counterparty risk of a neocloud,” Saleur said. “But when they use insurance, smaller neoclouds are able to compete with an Amazon or a Google, because all of a sudden, the counterparty risk is the same.”

Forward Compute said that it was examining using forward-looking chip valuations from research providers such as Barkr AI and Silicon Data, which have emerged as key data sources for the nascent market.

A forthcoming study from Barkr AI, which provides valuations of assets such as fine art, private jets and AI chips, found that Nvidia’s eight-GPU H100 system from 2022 is worth roughly $320,000 today, about the same as its initial value.

The study projects that if the supply of computing power catches up with demand, the system would retain about two-thirds of its value after one year. After six years, its value would fall to roughly $30,000.

“Nvidia needs valuation data for outside capital to come in,” said Thomas Galbraith, Barkr AI’s founder who is helping bridge the resale data gap. “Lenders want to know what revenue an asset will produce and what you can sell it for over time.”

FT : Rolex was for crypto, Ferrari is for AI

One of the good things about being a financial blog is that, when we read something interesting, we need very little justification for sharing it.

Here’s a section from a Berenberg note in which the bank’s auto analysts sound out Ferrari’s dealer network in the US, Europe and China:

Historically, the route to top-client status was simply purchasing more models. Clients are [now] expected by Ferrari to increase their engagement with the brand. The dealer highlighted that clients are to engage across Challenge racing, Corso Pilota and Cavalcade events, as well as the lifestyle and special sales departments. A client who had previously declined a 296 Speciale allocation but then reversed their decision was told an extra allocation was conditional on doing a Cavalcade event at a month’s notice. The client was also told that participation would bring “something special coming for the 12Cilindri”. He cancelled a family holiday to attend the Cavalcade event and duly appeared on the Manuale allocation list.

BASF should take another crack at chemicals M&A

Evonik, governed by the RAG-Stiftung foundation, may find it hard to turn up its nose at a higher number

For companies in shrinking industries, the question isn’t whether to band together through mergers — but how to share the resulting gains. German chemicals group BASF, whose €10.3bn bid for rival Evonik was rebuffed despite being pitched at a sizeable 29 per cent premium, should consider trying again.

BASF was already making a big bet: including debt, the deal would have cost around €14bn. Evonik is undergoing its own cost cutting and restructuring programme. And BASF’s shareholders clearly aren’t thrilled by the prospect of a deal. Its shares fell 4 per cent on initial news of the approach last Friday.

But the benefits from putting together the two companies are such that BASF has room to push the price a bit higher. Overlapping areas — where either both companies make the same products, or one makes the raw materials that the other buys — represent about a third of BASF’s sales, and two-thirds of Evonik’s, according to Deutsche Bank analysts, leaving lots of room to combine plants and remove duplication.

And even assuming that BASF only managed to cut costs equivalent to 7.5 per cent of Evonik’s sales, which is typical for the sector according to Bernstein analysts, that would imply €1bn in annual savings for roughly €8bn of equity value today, Lex calculates. By comparison, the €2.3bn premium BASF offered on Friday looks positively meagre.

For its part, Evonik, governed by the RAG-Stiftung foundation, may find it hard to turn up its nose at a higher number: analysts are not expecting a rapid recovery in its prospects, and are pencilling in 2030 operating profit below that forecast for this year, according to Visible Alpha.

Meanwhile, both companies’ shareholders should bear in mind that consolidation, in Europe’s chemicals sector, is a strategic imperative. Amid rising competition from China, almost a tenth of production capacity has already been scheduled to close, according to consultancy firm Roland Berger. A less fragmented chemicals sector could find its return on capital improves through higher margins, or perhaps even growing sales if lower costs are passed on to struggling industrial customers.

Having scale could also help beyond the factory gates. A large European chemicals champion would have more clout in Brussels as the industry lobbies for greater protection from cheap imports and looser environmental regulation.

And if Evonik proves too resistant, BASF need not abandon the hunt. Europe has no shortage of midsized chemicals companies, including Arkema, Syensqo and Lanxess. An ample supply of struggling rivals should provide BASF with the motivation to keep knocking on doors.