United Kingdom

Liam Proud

Breakingviews - KKR throws autos shareholders into a spin

22 Oct 2018

LONDON (Reuters Breakingviews) - KKR’s $7.1 billion splurge on a Fiat Chrysler-owned supplier is sending auto industry valuations into a spin. The buyout group is paying 16 times next year's earnings for Magneti Marelli, which will be merged with KKR portfolio company Calsonic Kansei. That's double what publicly traded car-parts peers are worth, according to Refinitiv data. Meanwhile, shares of marquee manufacturers trade at an even bigger discount. 

Breakingviews - Buyout pass-the-parcel hands BC Partners a present

28 Sep 2018

LONDON (Reuters Breakingviews) - Buyout groups often pick up each other’s scraps. Cynics argue that such pass-the-parcel deals mean the sector is out of ideas. BC Partners’ latest transaction shows that they can also be a lucrative way to exploit one of private equity’s perennial weaknesses: managers’ finite investment horizons.

Breakingviews - Daimler’s new CEO to drive without steering wheel

26 Sep 2018

LONDON (Reuters Breakingviews) - Daimler is doing its best to reverse out of a tight corner as it switches chief executives. The risk is that its well-intentioned manoeuvre will leave the new boss driving without a steering wheel.

Breakingviews - Google’s car deal is hazard light for auto groups

18 Sep 2018

LONDON (Reuters Breakingviews) - Auto groups are dancing with the tech-giant devil. That should make drivers happier. But Google’s push into software for cars looks eerily similar to its highly successful grab for smartphones.

Breakingviews - EU arms media with a pea-shooter for Google fight

12 Sep 2018

LONDON (Reuters Breakingviews) - Europe wants to give news publishers a helping hand. The dominance of technology companies like Google and Facebook mean its efforts will make little difference.

Breakingviews - Europe’s $50 bln payment upstarts can justify hype

10 Sep 2018

LONDON (Reuters Breakingviews) - Europeans often bemoan the lack of home-grown technology groups. Germany’s Wirecard and Netherlands-based Adyen, whose combined value has soared to 43 billion euros, are notable exceptions. They can justify the hype. Wirecard passed a symbolic milestone on Wednesday when the company replaced Commerzbank in Germany’s blue-chip DAX index. The 23 billion euro group is worth more than Deutsche Bank, and trades at 40 times forward EBITDA – roughly double the valuation of Visa, Mastercard and others who process electronic payments. Adyen, whose shares are up 174 percent since its June listing, is valued at an even headier 118 times 2018 EBITDA. Strip out the jargon, and these are relatively simple businesses. Adyen hooks companies like Netflix and Spotify up to networks run by Visa and Mastercard. It charges a small fee for taking on the risk that transactions fail. Wirecard does the same, although for smaller businesses, and sells services like payment cards. Customers like the pair’s low transaction costs and slick technology, which drops relatively few payments and allows merchants to see useful shopper data. Last year, global electronic payments hit $23 trillion according to the Nilson Report. The data provider reckons the market will grow 10 percent a year, implying volumes of $40 trillion by 2023. Based on Adyen and Wirecard’s average charge of 0.5 percent last year, using Berenberg estimates, that implies about $200 billion of revenue may be up for grabs for intermediaries in this part of the payments chain. Assume Adyen’s net revenue increases by 30 percent a year, near the middle of its targeted range, while Wirecard’s top line expands by 20 percent annually. Together the two would have net sales of $4.4 billion by 2023. That would be equivalent to a 2 percent share of the market. They’re currently at 1 percent, using last year’s results and the same fee structure. Increased scale should boost already-high margins. Risks are plentiful. Competition may force down fees, while tech giants could cut out middlemen altogether: in China, Alibaba and Tencent connect buyers and sellers directly without the need for payment processors. Still, Adyen and Wirecard’s technology took years to develop. Western tech giants are just getting started on their payment networks. That gives the European pair a greater chance of fulfilling their growth expectations – and rewarding giddy investors’ prepayment.

Breakingviews - Tesla is risky vehicle for Saudi reform drive

14 Aug 2018

LONDON (Reuters Breakingviews) - Saudi Arabia’s Crown Prince Mohammed bin Salman risks picking the wrong driver. The kingdom’s sovereign wealth fund already holds nearly 5 percent of Tesla and expressed interest in taking the electric-vehicle innovator private, according to boss Elon Musk. That’d be a dicey way to diversify away from oil.

Breakingviews - Tariff truce leaves EU carmakers stuck in low gear

26 Jul 2018

LONDON (Reuters Breakingviews) - European carmakers need to know whether Donald Trump is a pragmatic dealmaker or a hardcore protectionist ideologue. Even though the U.S. president has seemingly relented on potential auto tariffs following a meeting with European Commission President Jean-Claude Juncker, they are still none the wiser.

Breakingviews - Disney can still play hardball with Comcast on Sky

26 Jul 2018

LONDON (Reuters Breakingviews) - Sky shareholders may be unduly worried about a truce. Shares in the pay-TV group are down 2 percent since suitor Comcast last week said it wouldn’t challenge Walt Disney’s bid for most of Twenty-First Century Fox. Yet the Mickey Mouse owner could still prove a nuisance to Comcast in the battle for Sky, to investors’ gain.

Breakingviews - New Fox bid would take Sky into crazy territory

10 Jul 2018

LONDON (Reuters Breakingviews) - Rupert Murdoch’s Twenty-First Century Fox may be about to push the bidding war for Sky into crazy territory. A mooted new 25 billion pound bid is too high for a buyer to make a decent return. That’s mostly a problem for Fox suitor Walt Disney. 

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