3rd August 2021
Good morning Goldman Sachs has become the latest bank to increase junior banker pay as the industry comes under pressure to reduce hours and improve work-life balance of employees. A first year 21-year-old graduate at Goldman Sachs will now earn $110k rising to $125k in year two – not including any bonuses.
- £6bn defence takeover sparks gov scrutiny
- Twitter founder buys ‘buy now pay later’ firm
Yesterday's market moves
FTSE 100 +0.7% 7,082
FTSE 250 +1.1% 23,209
Markets started the month in positive form as investors focussed on positive company earnings.
In the UK all eyes will be on the Bank of England who will deliver its latest policy decision on Thursday. Expectations are that interest rates won’t budge.
In the US, this is the last major week of half year earnings reports with results from 142 companies.
£6bn defence takeover sparks gov scrutiny
What’s going on?
The UK government could intervene in the proposed £6.3bn takeover of Meggitt by US rival Parker Hannifin.
Why is this important?
Coventry-based Meggitt is a FTSE250 engineering business that makes parts for the aerospace and defence sector.
Parker specialises in motion and control technology and says Meggitt would double the size of its aerospace division. Meggitt’s board has accepted the offer of £8 per share – a 71% premium to the closing share price last Friday before the deal was announced. News of the takeover made Meggitt’s shares jump 57% yesterday to 735p.
Both companies supply to the British and American military which could give the UK government grounds to intervene if it threatens national security.
Parker already has operations in the UK employing around 2,000 people. Meggitt has a global workforce of 9,000 people, including 2,300 in the UK. As with all takeovers there are concerns that jobs will be lost, and operations moved to other countries.
Parker has tried to ease these fears by promising to keep Meggitt’s Coventry headquarters and increase research and development spending in the UK by 20% over the next five years.
Meggitt is the latest British company at the centre of a foreign takeover bid this year. For some, this is more evidence that UK stocks are cheap compared to US and European counterparts.
Twitter founder buys ‘buy now pay later’ firm
Square, the credit card processing fintech run by Twitter founder Jack Dorsey, has bought Australian buy-now-pay-later (BNPL) company Afterpay for $29bn making it the biggest ever Australian takeover.
Launched in 2014, Afterpay (known as Clearpay in the UK) offers shoppers the chance to acquire goods then pay for them instalments with no charges so long as payments are made on time.
Afterpay competes with the likes of Sweden’s Klarna and US Affirm in a fast growing sector that offers consumers an alternative to shopping using a credit card.
BNPL is especially popular with under-30 consumers as it facilitates interest free loans to buy goods and doesn’t always require a credit check.
From the company or merchant’s perspective it gets charged a higher fee by the BNPL firm than it would if it was a credit card transaction – however BNPL options at checkouts lead to higher basket values and a greater likelihood that the shopper will complete the transaction.
Afterpay has more than 16m customers and is used by 100,000 businesses around the world. The deal with Square means that it will be able to expand more quickly in the US.
Tech giant Apple and Wall Street bank Goldman Sachs are also rumoured to be planning an entry into BNPL, a sector that has boomed during the pandemic as lockdown led to more online shopping.
Stat of the day
A recent survey revealed two out of three remote workers said they have worked from bed during the pandemic
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