Maitland/AMO Morning Monitor – Monday 21 June 2021
In the news
- Armin Laschet, frontrunner to become Germany’s next Chancellor, has warned of the dangers of a new cold war against China, agreeing with Angela Merkel that Beijing was as much a partner as a systemic rival.
- Santander has set its sights on becoming a big force in European investment banking, challenging the Wall Street powerhouses that have come to dominate the industry.
- Ackman’s Spac buys 10% of Universal Music for $4bn.
- EU member states have provisionally agreed sanctions on Belarus’s financial, oil and potash sectors to punish President Alexander Lukashenko’s regime.
- Public Health England experts have warned that England may have to endure more lockdowns this year, especially during the winter months to tackle COVID-19.
- Prime Minister, Boris Johnson, begins the week under intense scrutiny amid a series of increasingly public splits in his Cabinet and the wider Conservative Party over his tax and spending plans, multiple highly contested government policies, and the decision-making style of his No. 10 operation.
- The House of Commons sits from 2:30pm with education questions, followed by any post-weekend UQs or statements.
- The Commons main business will be two opposition day debates: Labour has ones lined up on planning reform and protecting the steel industry.
- The House of Lords sits from 1pm with oral questions on the Female Offender Strategy. The main business will see peers begin committee consideration of the Environment Bill.
Stock market moves
- In Asia, Japan’s Topix index shed 2.4% while Hong Kong’s Hang Seng Index declined 1.6% and Hong Kong’s Hang Seng Index declined 1.6%.
- In the US, the S&P 500 futures slipped 0.4% and Nasdaq 100 futures were 0.2% lower- the index fell 0.8%.
- In Europe, the FTSE 100 is trading down 1.9% while the STOXX 600 is also trading down 1.6% in the early hours of the morning.
- Gold rose 0.5% to $1,772.90 an ounce.
Corporate announcements* Maitland Client
Pershing Square Holdings LTD Pershing Square Holdings, Ltd. Provides Update to Investors
- The Group notes that Pershing Square Tontine Holdings, Ltd. issued the following press release announcing it has entered into a definitive agreement with Vivendi S.E. pursuant to which PSTH will acquire 10% of the outstanding Ordinary Shares of Universal Music Group for approximately $4bn.
- The Pershing Square Funds will exercise approximately $1.6bn (91% of which is allocated to PSH) of the Forward Purchase Agreements as part of the transaction.
- On 23 June 2021, Universal Music Group will present a 22-minute, live-streamed video presentation prepared for PSTH shareholders about the company.
- Following the UMG video presentation on the same day, the Pershing Square investment team will make a detailed presentation about UMG and the transactions, and answer questions.
- The Group has seen an improving trend in its trading performance in the first half of the year, in line with its expectations.
- Capita remains on track to deliver revenue growth in 2021, for the first time in six years, despite the ongoing impact of COVID lockdowns, in particular in its Specialist Services division.
- The Group currently expects Half Year adjusted revenue to be flat on prior-year adjusted revenue.
- Jon Lewis, CEO, said: “We remain on track to meet our priorities for 2021: to deliver revenue growth for the first time in six years, improve operating cash flow, strengthen the balance sheet, and implement our new organisational structure. Looking forward, we are confident of delivering positive sustainable free cash flow in 2022.”
- Net Asset Value with debt at fair value total return of 47.9% versus 54.1% from the Benchmark return.
- Share price total return of 54.0%.
- Total dividend of 1.75 pence, 51st consecutive annual increase, up by 3.0%.
- Anja Balfour, Chairman, said: “While the battle against COVID-19 is far from won, as can be seen around the world with still tragic consequences, the markets have largely discounted that we are indeed heading back to normal. Corporate earnings are rebounding strongly and the remainder of 2021 looks promising on this front.”
- The Board notes the recent announcement by Clayton, Dubilier & Rice, LLC as manager of Clayton, Dubilier & Rice Funds XI and confirms that on 14 June 2021 it received an unsolicited highly conditional non-binding proposal from CD&R in relation to a proposed cash offer of 230 pence per Morrisons share for the entire issued, and to be issued.
- The Conditional Proposal was subject to the satisfaction or waiver by CD&R of a number of pre-conditions including the completion of detailed due diligence and the arrangement of debt financing.
- The Board of Morrisons evaluated the Conditional Proposal and unanimously concluded that the Conditional Proposal significantly undervalued Morrisons and its future prospects.
- The Board rejected the Conditional Proposal on 17 June 2021.
- The Group notes the press speculation regarding a potential transaction involving Morrisons and confirms that it is considering a possible cash offer for the issued and to be issued share capital of Morrisons.
- Rule 2.6(a) of the Code requires that CD&R, by no later than 5.00 p.m. on 17 July 2021, either announces a firm intention to make an offer for Morrisons in accordance with Rule 2.7 of the Code or announces that it does not intend to make an offer.
- This announcement is not a firm intention to make an offer and accordingly, there can be no certainty that an offer will be made.
- The Group announces that Capita and Cabinet Office have agreed to sell AXELOS Limited to PeopleCert International Limited in a deal that values the joint venture at £380.0m on a cash-free, debt-free basis, representing an 11.5x multiple on 2020 EBITDA of £33.1m.
- The sale of Capita’s 51% interest in AXELOS will result in Capita receiving net cash proceeds of £172.5m upon completion.
- This will provide additional liquidity to strengthen Capita’s balance sheet, meet upcoming debt maturities and support the ongoing implementation of its transformation plan.
- Jon Lewis, CEO, said: “Capita and Cabinet Office have partnered together to grow the business over the last eight years, creating significant value for us and the taxpayer. AXELOS is an excellent example of a successful collaboration between the private sector and the UK Government.”