This week’s news includes; BT loses £7bn in share price due to accounting scandal, Tesco acquires food company Booker for £3.7bn, Nigerian villagers loses UK court case against Shell and Jay-Z sells his Tidal stake for $200m sales figures boosted by sterling slump.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Click on the links for full stories.
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Opinion articles of the week:
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City A.M explores whether blockchain is a “new operating system for the planet”.
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CNBC looks at an analysts’ claims that “Snapchat is ‘total junk’, not worth $500 million and investors should avoid its IPO.
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City A.M examines Bank of England governor Mark Carney warning that fintech’s democratic revolution poses risk to financial system.
1. UK GOVERNMENT LOSES ARTICLE 50 CASE
Theresa May needs the approval of Parliament to trigger the Brexit process, Britain’s most senior judges have ruled.
The Supreme Court has decided that MPs must be given a vote on triggering Article 50, the formal mechanism for leaving the European Union. Despite the setback, Downing Street insisted Mrs May’s plan to begin negotiations on leaving the EU by the end of March remains on track.
Revealing the decision, Supreme Court President Lord Neuberger said: “The referendum is of great political significance, but the Act of Parliament which established it did not say what should happen as a result.
“So any change in the law to give effect to the referendum must be made in the only way permitted by the UK constitution, namely by an Act of Parliament.
“To proceed otherwise would be a breach of settled constitutional principles stretching back many centuries.” (Sky News)
The Brexit bill
The government has published its bill to trigger article 50, prompting Labour to table a series of proposed amendments, including one seeking to guarantee that parliament gets a final say on any final deal for Brexit.
The bill, containing just two clauses and only 137 words long, will be granted five days of time in the Commons, the government announced, prompting concern from some Labour MPs that it could not receive proper scrutiny in such a period.
Devised after the government this week lost its supreme court case on whether it could trigger article 50 without the approval of parliament, the European Union (notification of withdrawal) bill states as its aim to “confer power on the prime minister to notify, under article 50(2) of the treaty on European Union, the United Kingdom’s intention to withdraw from the EU”.
Granting this power to the prime minister would have effect “despite any provision made by or under the European Communities Act 1972 or any other enactment”, the bill says. In a statement with the bill, David Davis, the Brexit secretary, said he trusted that parliament “will respect the decision taken by the British people and pass the legislation quickly”.
The Labour leader, Jeremy Corbyn, confirmed he would seek to oblige his MPs to back the bill, a decision that seems set to cause considerable opposition within the party. (The Guardian)
2. JOHNSON & JOHNSON $30 BILLION ACQUISITION
U.S. health care giant Johnson & Johnson will acquire Swiss biotech company Actelion in a $30 billion all-cash deal that includes spinning off Actelion’s research and development pipeline, the companies said on Thursday.
The acquisition gives J&J access to the Swiss group’s line-up of high-price, high-margin medicines for rare diseases, helping it diversify its drug portfolio as its biggest product, Remicade for arthritis, faces cheaper competition.
The offer to pay $280 per share, following weeks of exclusive talks, was unanimously approved by the boards of directors of both companies.
The deal represents a 23 percent premium to Actelion’s closing price on Wednesday of 227.4 Swiss francs and is more than 80 percent above the Nov. 23 closing price before initial reports emerged that Europe’s biggest biotech company had attracted takeover interest.
Actelion has been the subject of takeover speculation for weeks after J&J launched and then halted discussions with the Swiss company. French drugmaker Sanofi had also been interested, sources said, but was sidelined after J&J returned and began exclusive negotiations in December.
Sanofi’s failure to come away with a big deal for a second time has added to pressure on its management. (CNBC)
3. BT ACCOUNTING SCANDAL
BT has issued a shock profit warning after revealing that the impact of an accounting scandal in its Italian business is nearly four times worse than originally thought. The company had said it believed the impact of the “inappropriate behaviour” to be around £145m, but now says the write-down is expected to be as high as £530m.
Shares in the company plunged more than 19pc in early trade, to around 309p, wiping roughly £7.2bn off its value. BT issued a profit warning for this year and next, saying earnings before interest, tax, depreciation and amortisation (ebitda) would be £175m lower for both years.
Adjusted revenue for this financial year will be £200m lower, it added, with a similar fall expected in 2017/18. Cashflow will take a £500m hit.
BT suspended two of its most senior executives in its Italian arm in September last year, at the launch of an internal investigation into the financial irregularities.
In an update released on Tuesday morning, it said the investigations, which included an independent review of its Italian accounting practices by KPMG, revealed that “the extent and complexity of inappropriate behaviour in the Italian business were far greater than previously identified”.
The company has culled leading members of its Italian arm, saying the members of BT Italy’s senior management team who were suspended have now left the business. It has also appointed a new chief executive for the division, who will take over at the start of next month. (The Telegraph)
4. TESCO ACQUIRES BOOKER FOR £3.7 BILLION
Supermarket Tesco has reached a deal to merge with wholesaler Booker, owner of Budgens and Londis, with both firms stating an ambition to create the UK’s leading food company.
The groups will combine in a share and cash deal worth £3.7bn, after discussing a combination for almost a year. They said today that there are no job losses planned in connection with the merger.
Tesco boss Dave Lewis said he hoped the deal would complete by the end of 2017/early 2018, but said this was not set in stone as the transaction will need to be cleared by competition authorities.
Shares in Tesco were up over 10 per cent in early trading, while Booker’s stock had risen 15 per cent.
FTSE 250-listed Booker claims it is “the UK’s largest cash and carry operator, offering branded and private-label goods which are sold to over 503,000 customers including independent convenience stores, grocers, leisure outlets, pubs and restaurants”. Among the businesses that form part of the Booker group are Booker Wholesale, Budgens, Londis and Makro. It supplies restaurants such as Wagamama and Carluccio’s.
The wholesaler recently announced a 5.1 per cent increase in like-for-like sales in the last four months of 2016, and at the time, chief executive Charles Wilson said: “Our plans to focus, drive and broaden Booker Group are on track.”
Both groups’ chief executives said they are not concerned about getting clearance from the competition watchdog. Lewis said the fact that the deal was not an acquisition of stores would work in the companies’ favour, and Wilson said: “We think this is a pro-competition deal.” (City A.M)
5. DOW JONES HITS 20000
The Dow Jones Industrial Average, Wall Street’s blue-chip stock market, has smashed through the 20,000 points barrier for the first time. The milestone was achieved at the start of Wednesday trading – just after the opening bell sounded – and the positive sentiment remained through to the close.
Such a move had been on the cards for some time, given the rally in US stocks since the election of Donald Trump as US President in November – with investors cheering his plans for a major infrastructure investment programme and other business-friendly policies.
The rally in stock values faltered in the weeks before the tycoon’s inauguration – coming within one point of 20,000 on 6 January.
Market participants credited Mr Trump’s announcements on Tuesday, to advance two major pipeline projects blocked by former president Barack Obama, for the surge in the Dow’s performance on Wednesday.
It was 0.7% higher within the first hour of trading at 20,051, with analysts saying the continued climb in value was down to investment through “FOMO” or the “fear of missing out.”
The President himself, in typical fashion, delivered his reaction on Twitter, writing: “Great #Dow20k” (Sky news)
6. RBS SETS ASIDE EXTRA £3.1 BILLION TO DEAL WITH FINES
Royal Bank of Scotland will take another financial hit when it sets aside a further $4bn (£3bn) for fines. The bank will announce it has now put nearly $10bn in the kitty to pay a monster fine from the US Department of Justice.
It relates to the bank’s role in the selling of risky mortgages – the so called subprime crisis – which was at the epicentre of the financial crisis. This will plunge RBS, 72% owned by the taxpayer, further into the red.
It will make 2016 the ninth year in a row that RBS has lost money. To be clear, this is not unexpected, nor is it a final settlement. The urgency to settle once and for all which existed around the beginning of this month (before the change of the guard in the US administration with a Trump presidency) has eased as a new administration and a new attorney general are now in place.
Guesses on the final bill from the US vary widely from $12bn-$20bn. If this $10bn did prove to be enough for the final bill, that would be considered a good result. It remains to be seen whether the new US administration takes a tougher or more lenient approach to misconduct by European banks. (BBC News)
7. BARCLAYS MOVES HEADQUARTERS TO DUBLIN
Barclays is preparing to make Dublin its EU headquarters for when Britain leaves the European Union, according to a source familiar with the matter.
Global banks and insurers have begun signaling how they will put plans into action to cope with a “hard” exit from the European Union, after Prime Minister Theresa May said that Britain would leave the single market. Barclays already has a small unit in Dublin with around 100 people.
“We have made clear repeatedly that we will plan for a range of Brexit contingencies, including building greater capacity into our existing operations in Dublin,” a spokesman for Barclays in London told Reuters.
“Identifying available office space is a necessary and predictable part of that contingency planning process.”
Bloomberg News reported that Barclays would add around 150 staff to its operations in the Irish capital. (Reuters)
8. NIGERIAN VILLAGERS LOSE UK COURT BID TO SUE SHELL OVER POLLUTION
A British court has blocked Nigerian villagers’ attempt to sue oil giant Shell for allegedly polluting their fishing waters and farmland.
The two communities in the Niger Delta – the Ogale and Bille – claim decades of oil spills have ruined their homes. They wanted their case heard in the UK.
But the High Court in London agreed with the Anglo-Dutch company’s argument that the case, affecting more than 40,000 people, should be heard by local courts in Nigeria.
The villagers have repeatedly said they will not get a fair hearing in Nigeria. However, Igo Weli, a spokesman for the multinational’s subsidiary, the Shell Petroleum Development Company of Nigeria (SPDC), told the BBC it was a “myth” that the communities could not get justice in their home country while welcoming the High Court decision as “common sense”.
But neither of the communities – who say repeated spills since 1989 have meant they do not have clean drinking water, farmland or rivers – are ready to give up. (BBC News)
9. JAY Z SELLS STAKE IN TIDAL FOR $200m
The American rapper Jay Z is selling a stake in his Tidal music streaming business to the telecoms company, Sprint. Jay Z bought Tidal three years ago and his wife Beyonce and other artists own equity in the company. Aiming to challenge larger rivals such as Spotify, Tidal offers artists on its platform more control over their music.
Sprint, which is owned by Japan’s Softbank, will pay an estimated $200m (£162m) for a 33% stake in the company. The deal means that Jay Z, whose real name is Shawn Carter, will make a return on the initial $56m investment he made when he bought Tidal from Norway’s Aspiro in 2015.
Other artists including Madonna, Rihanna, Daft Punk, Kanye West and Jay Z’s wife Beyonce are part owners of the service, giving Tidal a star-studded board of directors. It is reported that they will remain part of the company.
The investment could help bolster Tidal in its battle to win ground from Spotify and Apple, which dominate the fast-growing music streaming industry.
Sprint’s decision to invest is a sign the mobile operator wants to provide its customers with more content in a highly competitive market. As a result of the deal, Sprint customers would have access to exclusive Tidal content.
Tidal has a 42 million song catalogue and is available in 52 countries, but is currently much less widely used than services from Spotify and Apple. (BBC News)
10. HERMES TO FACE LEGAL ACTION FROM WRONGLY “SELF-EMPLOYED” WORKERS
Hermes, the courier company that delivers parcels for John Lewis and Next, is facing a legal claim from workers who believe they are wrongly classed as self-employed, according to the Labour MP Frank Field.
Speaking on Thursday, he said the move is being orchestrated by the GMB union. It follows a Guardian investigation that found Hermes was paying some of its couriers at levels equivalent to below the “national living wage”.
The possible legal proceedings come after a similar claim was brought successfully against app-based taxi company Uber. Employment judges ruled that self-employed drivers should be classed as workers and therefore have the right to the national living wage, paid holiday and sick pay.
Last October, HM Revenue and Customs said it was investigating whether Hermes was compliant with its rules regarding self-employment and said it would act where companies were found to have misclassified individuals as self-employed.
Hermes pays couriers fees as low as 45p per parcel and expects them to meet their own car and petrol costs from those payments. The company has previously said it is “confident in the legality of our self-employed courier model”.
Field, the chairman of the House of Commons work and pensions select committee, said he has supplied GMB and its lawyers with the details of 20 Hermes couriers who came forward to complain about working terms and conditions after the Guardian’s investigation.
The case is understood to be at an early stage and a claim has yet to be formally lodged with the tribunal. Hermes said it was not aware of any legal proceedings issued against it. (The Guardian)
