9th August 2021
Good morning If you’re reading this dreading another week at your job then you’ll be happy to learn that now is a good time to be looking for a new role. According to KPMG starting salaries rose at the fastest rate in at least 24 years in July. Employers are bumping up pay amid increased competition for staff to fill jobs that opened up with the loosening of pandemic restrictions.
Bidding wars for UK companies
Millions to see record energy bill increase
Friday's market moves
FTSE 100 0.0% 7,123 FTSE 250 -0.2% 23,456
European and US markets stayed near record levels as investors weighed the implications of the latest US jobs report. It showed the world’s largest economy added nearly 1m jobs in July, while the unemployment rate dropped to 5.4% from 5.9%, against forecasts for 5.7%.
M&ABidding wars for UK companies
What’s going on?This summer supermarket Morrisons and medical devices maker Vectura have been at the centre of bidding wars and over the weekend things went up a notch.The two FTSE 350 companies received sweetened takeover offers from American suitors.
Why is this important?
In June Morrisons rejected a £5.5bn offer from American private equity (PE) firm CD&R, then two weeks later Fortress Investments Group (another US PE firm which owns Majestic Wines) threw its hat in the ring with a £6.3bn bid which the supermarket’s board accepted.However, the possibility of a counterbid from either CD&R or another name (Amazon was rumoured) has led Fortress to up its bid by 6% £6.7bn.Under UK takeover rules, CD&R has until 5pm today to present another offer.The latest twist in this saga comes as three of Morrisons’ biggest shareholders have raised concerns over Fortress’ original offer. Together these investors own about 20% of Morrison. A lack of support from top shareholders could make it difficult for the deal to gain the required approval from investors representing 75% of Morrisons’ shares.Since May, Vectura, which specialises in making inhalers, has been in the middle of a takeover tussle between Phillip Morris, the US maker of Marlboro cigarettes, and US PE firm Carlyle. Vectura has flip-flopped between the two bidders for three months.On Friday it dropped Phillip Morris’ deal and accepted a £958bn offer from Carlyle. Yesterday Phillip Morris came back with another counteroffer of £1.02bn.Anti-smoking campaigners, health professionals and politicians had raised serious concerns about prospect of a tobacco company taking over a firm that makes products that treat conditions caused by smoking.But Philip Morris and other cigarette companies are trying to change their image and pivot to less harmful products.
TakeawaySo far in 2021 PE funds have struck more deals in the UK than at any other time on record.British listed companies are attractive to US PE firms as the market is valued more cheaply than US and European counterparts. Who ends up owning Morrisons and Vectura is still TBD. But one thing is for sure, given the value for money the UK market represents, bids for British companies from PE firms is far from over.
ENERGYMillions to see record energy bill increase
On Friday Ofgem, the UK energy regulator, announced that it will increase the price cap on energy bills by £139 to £1,277.The energy cap is the maximum price suppliers can charge customers on a standard - or default - tariff.Around 11 million households on standard variable tariffs will be impacted.Ofgem says the record rise is driven by wholesale energy prices which have almost doubled this year with demand surging as economies reopen after lockdown.The price cap was introduced in 2019 to protect the millions of families who never switch their energy provider or who fall on to standard variable rates once their fixed deals end. Before, households could see providers put up their energy bills without any obligation to pass on cost savings. Ofgem reviews and updates the price cap twice year.The best advice is to shop around for a better energy deal. Ofgem estimates that those on default tariffs can save £75-100 every year as a result.
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