5th July 2021
Good morning John Lewis could be your next landlord. The department store is trying to find ways to boost profits amidst the demise of the high street and has announced plans to build 10,000 rental homes over the next few years.
- Morrisons agrees takeover
- 130 countries back tax deal
Friday's market moves
FTSE 100 0.0% 7,123
FTSE 250 +0.6% 22,747
Friday’s main focus was the unemployment report from across the pond as investors look for any strong indicators of a change in the pace of recovery in either direction. Numbers suggested that the American economy continues to recover well from the pandemic without heaping further pressure on the US central bank to reduce crisis-era stimulus measures quickly.
In the UK the FTSE 100 trod water and the FTSE 250 rose a further 0.6%.
Morrisons agrees takeover
What’s going on?
Morrisons, Britain’s fourth largest supermarket, has agreed to be bought by US private equity firm Fortress Investments Group in a deal worth £6.3bn.
Why is this important?
It was exactly two weeks ago that we reported that Morrisons had rejected a £5.5bn takeover offer from US private equity firm CD&R.
As predicted more firms jumped in looking to do a deal and over weekend the supermarket’s board agreed to be acquired which would take the FTSE 250 business from public to private ownership.
The offer represents a 42% premium to Morrisons share price as of June 18, the last day before the first offer from CD&R was made.
Fortress is no stranger to the grocery sector and has invested in retailers in North America and Europe. It owns the British wine chain Majestic Wine.
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.
But private equity deals tend to attract a lot of scrutiny especially when the target is high profile and a large employer like Morrisons. Critics of private equity firms - investment funds that acquire businesses and seek to improve returns through debt financing – say that they can ruin companies by aggressively cutting costs and taking on too much debt.
The Labour Party has already called for the deal to be looked at closely and for promises to be made to protect jobs and employee rights.
The deal is still subject to shareholder approval although Morrisons’ board have already given its blessing. However it might not be a slam dunk – analysts say Morrisons is worth more than the 42% premium Fortress have offered - so could another bidder swoop in with an 11th hour offer? Watch this space.
130 countries back tax deal
Last month the G7 – group of seven largest economies – agreed to a landmark deal that would see a global minimum corporate tax rate of at least 15%.
Now 130 countries – representing 90% of the world economy - have also signed up to the agreement.
The deal was negotiated with the help of the Organisation for Economic Co-operation and Development (OECD), a group that includes 139 countries and jurisdictions.
Although a few countries refused to sign up including EU members like Ireland, Hungary and Estonia, the world’s biggest economies – Brazil, China, India, Russia - are taking part.
The new rules are expected to raise $100bn in extra tax revenue, much needed by governments to finance the expensive pandemic related support schemes.
Tech giants like Amazon, Facebook and Google are likely to be most impacted as they’ll have to pay tax where they operate and earn profits so won’t be able to hide earnings in tax havens or low tax countries.
The agreement which has been years in the making is expected to come into effect from 2023.
Stat of the day
20.9 million people watched England beat Ukraine in the Euros on Saturday, the most watched live TV event of 2021
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