Today's business and finance round up 10th March 2022
👋Stagecoach ditches National Express for rival takeover offer
10th March 2022
Bite-sized business news from the UK and beyond
Good morning It’s been a bad week for McDonald’s. First it was heavily criticised for continuing to operate in Russia despite other big brands pulling out. And now it’s facing a $900m lawsuit for allegedly misleading customers over the availability of ice cream.
- Changing routes – Stagecoach ditches National Express for rival takeover offer
- Bills, bills, bills – Russia struggling to pay its debt
Stagecoach ditches National Express for rival takeover offer
What’s going on?
National Express’ £445m takeover offer for fellow bus and rail operator Stagecoach has been gazumped. Stagecoach has now agreed to a £595m approach from DWS a German investment fund.
Why is this important?
Last December National Express and Stagecoach announced that they had agreed to merge, creating a group worth £1.9bn, with a fleet of 40,000 vehicles and a workforce of 70,000.
It was easy to see why they wanted to join forces. Public transport passenger numbers have been decimated by lockdown and the pandemic-related growth in home working. By combining, Stagecoach and National Express would be able to cut costs and improve their chances of survival.
But a merger was never going to be easy. The combination of the two largest bus operators attracted the attention of the competition regulator who earlier this year launched an investigation into whether the deal would dampen competition and lead to worse outcomes for consumers.
These sorts of investigations are notoriously lengthy and painful. An offer from a company outside the sector would therefore be more appealing to Stagecoach.
DWS has a track record of investing in transport businesses across Europe and has stakes in a number of UK companies including Corelink Rail Infrastructure and Kelda, the owner of Yorkshire Water.
A takeover by DWS offers Stagecoach a lot more certainty – lower execution risk, no competition regulator investigation and greater continuity with management. Not to mention it means 30% extra payment to shareholders.
Russia struggling to pay its debt
One of the many consequences of starting a war and receiving retaliation sanctions is that it makes repaying your debts much harder. That’s the situation facing the Russian government which is on the brink of defaulting on loans from international investors.
Three of the world’s biggest credit rating agencies have all downgraded their view of the country’s debt to “junk”, the lowest rating and an indicator that a default could be on the horizon. That also means that investors will charge higher interest to lend to that country.
The Russian economy has been weakened by the sanctions from the UK, US and EU. The exclusion of several Russian banks from using SWIFT, an international payments system, have restricted Russians’ ability to do business outside of their home country. More recently the West announced plans to ban Russian oil and gas imports, a major source of Kremlin income.
The Russian rouble has lost almost half its value and reached a record low since the war in Ukraine began. This makes repaying debts, usually denominated in US dollars or euros, a lot more expensive.
If Russia were to default it would send its economy into a further downward spiral and have ripple effects beyond its borders.
European banks are major owners of Russian debt. Italy's second biggest lender Unicredit says it would have to write-off €7.4bn while France's BNP Paribas would be €3bn out of pocket.
But the most damaging impact can be on the country's people. If your government finds it more difficult and more expensive to borrow, then that pain gets passed on to consumers leaving them with less disposable income.
Stat of the day
107 years after it sank, explorer Ernest Shackleton's ship Endurance has been found in near pristine condition in Antarctica
Other stories to keep you in the loop
- UK consumer spending strengthens in February as Covid rules relaxed
- Petrol soars above £2 a litre
- London gadget maker backed by iPod inventor raises $70m
- Marks & Spencer buys stake in online sportswear retailer The Sports Edit
- Amazon, PlayStation and Heineken exit Russia over Ukraine war
- Oil prices plunge as UAE supports supply boost
- EU regulators set to give Amazon’s £6.4bn MGM snap up the green light
- Branch banking to be dead and gone in Europe by 2025, survey says
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