21st June 2021
Starting the week with good news for Big Mac and sushi fans. Yesterday McDonald's announced plans to open 50 restaurants in the UK and Ireland over the next year. Itsu also said it would create 100 new outlets creating 2,000 UK jobs.
Morrisons says no thanks to takeover offer
Channel 4 could be up for sale
Friday's market moves
FTSE 100 -1.9% 7,017 FTSE 250 -0.9% 22,324
UK markets lost gains from earlier in the week with British retail sales falling unexpectedly by 1.4% between April and May as the lifting of lockdown restrictions encouraged spending in restaurants rather than shops. Elsewhere, the number of British employees on company payrolls surged by a record amount in May as pandemic related restrictions eased; however, it remains more than half a million below the pre-Covid peak.
RETAILMorrisons says no thanks to takeover offer
What’s going on?Over the weekend Morrisons, the UK’s fourth largest supermarket, has rejected a £5.5bn takeover offer from US private equity firm Clayton, Dubilier & Rice (CD&R). Morrisons says the offer significantly undervalues the business and its future prospects.
Why is this important?It’s not the first time Morrisons has been at the centre of takeover talk. In the past it’s been rumoured that Amazon could make a bid given it sells Morrisons products on its site. Also Amazon has a clear strategy of moving into groceries with its 2017 acquisition of Whole Foods and launch of its till-less supermarket earlier this year.Morrisons employs over 100,000 people making it one of the UK’s largest private sector employers. Its 500 store property portfolio and 10% share of the grocery market make it an appealing takeover target.CD&R has already bought two British businesses this year - healthcare company UDG and plumbing group Wolseley.The supermarket sector has seen a lot of takeover activity in the past couple of years. In 2019, the UK competition watchdog stopped Sainsbury’s and Asda's attempt to merge. Then in February this year Asda was bought by private equity firm TDR Capital from Walmart in a deal valuing it at £6.8bn.
Takeaway2021 has been a busy year for private equity firms taking over UK companies. This has been driven by the relatively lower price of British companies in the stock market and record low interest rates making it even easier to fund acquisitions.Under UK takeover rules CD&R has until 17 July to propose a firm offer or walk away.
MEDIAChannel 4 could be up for sale
According to reports from the Financial Times, Channel 4 could be up for sale.The free-to-air broadcaster has been government aka publicly owned since launching in 1982. Unlike the BBC it does not receive public funding instead it generates revenue through advertising. Any profits made go back into the business. In 2019 it had sales of £985m and a loss of £26m. Speculation over plans to sell it to private investors have been around for years and it has always strongly opposed such a move. However it looks like talk could soon turn to action as:
The growing popularity of streaming services like Amazon Prime, Disney+ and Netflix has meant increased competition for viewers for Channel 4.
Channel 4's free-to-air business model is under pressure and 2020 exposed this weakness. In a year when many companies pulled back on advertising to cut costs during the pandemic Channel 4 saw a significant drop in revenue.
The pandemic has seriously dented public finances with unprecedented levels of government debt. The sale of Channel 4 could net the government up to £1bn.
Although the reasons for a sale may be more valid than ever, the big question will be who would buy it.Compared to a rival like ITV, Channel 4 doesn’t have a huge back catalogue of original content that could make it attractive to a streaming platform. Whatever happens it’s likely that Channel 4 continue to resist any attempt to sell it.
Stat of the day
During the pandemic the number of romance scams rose by 20%, the average loss per victim reported was £7,850
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