This week’s news includes; Asda-Sainsbury’s merger blocked, government decision on Huawei leaked, the cost of Boeings 737 Max crisis, Versace sued over J.Lo photos
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. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- Lawcareers.net – How is risk managed in M&A transactions?
- Investopedia – 4 Reasons Investors Are Overcrowding FANGs Despite Risks
- City A.M – Business can help Britain lead the green race to a better future
1. ASDA SAINSBURY’S
The £13 billion merger between Asda and Sainsbury’s has been blocked by the Competition and Markets Authority. The deal was blocked as the CMA concluded that it would increase prices for consumers at local and national level. The supermarkets had previously both pledged to bring £1 billion in price cuts and sell hundreds of stores to alleviate competition concerns. CMA research asserted however, that the deal would lead to supermarket petrol prices and longer checkout queues.
Although disappointed, both supermarkets announced that they had agreed to end the deal. Sainsbury’s share price sank by as much as 6% in response to the news. Both supermarkets have been stretched due to the supermarket price wars, fuelled by the rapid growth Lidl and Aldi. This merger would have alleviated some of the pressure but now the stores must find a plan B to keep shareholders happy.
2. HUAWEI LEAK
Huge concerns have been raised after the decision to permit Huawei to develop the UK’s 5G network was leaked from a National Security Council meeting. Theresa May reportedly made the decision at the meeting to allow Huawei to develop “non-core” elements of the 5G communication network. This decision faced some opposition from Cabinet Minister and the stance has criticised by the US. The US has banned Huawei from networks and has urged all allies to prohibit Huawei from the development of any national infrastructure. The US expressed deep concerns over the influence of the Chinese government over the company.
The main cause of commotion is not Theresa May’s decision, but the leak of information to the media. Only security officials and senior Cabinet ministers attend National Security Council meeting. All conversations are, unsurprisingly, highly confidential and any unauthorised disclosure of information can lead to prosecution. All cabinet ministers in attendance have completely denied leaking information. A formal inquiry has been launched and it could soon become a criminal investigation.
Check out our insight articleHuawei or the Highway: Is the Tech Giant Really a Threat? (published February 2019)
3. DEUTSCHE BANK AND COMMERZBANK
Merger talks between Commerzbank and Deutsche Bank have collapsed. The German Banks felt there were not “sufficient benefits” in relation to the costs of implementing the merger. The combined banks would have had a staggering €1.8 trillion in assets. The merger would however, have led to thousands of job cuts so the abandonment of the deal came as good news for unions.
The banks have both been struggling in recent years and the merger was seen as a way to bolster their balance sheets. Deutsche Bank had their offices raided in November 2018 and is currently under investigation in a money laundering probe. The bank had also been involved in Libor rigging, mortgage backed securities mis-selling and Russian money laundering scandals. Deutsche Bank’s share price fell 50% in 2018 alone. Commerzbank has also faced issues. Commerzbank has scrapped much of its 2020 financials targets as revenues stuttered. With the deal off, the banks must turn to other means. Deutsche Bank and Commerzbank shares fell 1.5% and 2.5% respectively in response to the news.
4. BOEING PROFITS
The financial cost of Boeing’s 737 Max crisis is becoming apparent. Boeing’s revenue fell by $1.1 billion in the first quarter of 2019 to $11.8 billion. Boeing attributed this decline to fewer delivers of 737 Max planes. Only 89 planes were delivered in the quarter, nearly a 100 fewer planes than in q4 2018. The aircraft manufacturer has also cut down production of the 737 Max by 10, which Boeing expects to cost an additional $1 billion in the coming years. The 737 Max planes were grounded globally last month after two deadly crashes left 346 people dead. Boeing has been working frantically to fix the defects that led to the crashes.
Our insight article looks closer at the crisis.
5. MICROSOFT VALUATION
Microsoft briefly reached a $1 trillion valuation last week. The tech giant reported better than expected fourth quarter profits of $8.8 billion. Revenue also beat estimates rising 14% up to $30.6 billion. CEO Satya Nadella has been focused on shifting Microsoft’s business from its core Windows software to cloud-based services. It’s core software now accounts for significantly less. Microsoft now brings in 25% of revenue from Office and just 18% from Windows.
Microsoft leapfrogged Apple and Amazon to join the exclusive club of temporary trillion-dollar tech giants. Both Apple and Amazon surpassed the trillion-dollar mark last year but have since declined and are currently valued at roughly $960 billion.
6. AMAZON PROFITS
Amazon doubled its profits for the first quarter of 2019 to $3.6 billion, up by $2 billion compared to last year. Revenues were also up by 17% to $59.7 billion. The tech giant has invested heavily in its cloud computing and ad services have been paying off. Its cloud computing unit posted sales of $7.7 billion in the quarter, up 41%. Huge chunks of Amazon’s revenue however, are put back into investment. Amazon has launched its checkout free Amazon Go supermarkets, bought broadcasting rights to live sports, and even invested in self-driving technology and electric cars to name of few. The tech giant seems set on becoming a dominant force across all consumer sectors.
7. BEYOND MEAT IPO
Meat free food producer Beyond Meat has revealed plans to go public. Beyond Meat offers plant-based meat substitutes and is renowned for its Beyond Burger. The Beyond Burger is sold at Whole Foods and restaurants such as TGI Friday’s. Beyond Burger aims to raise $183.8 million, valuing the company at $1.21 billion.
The money raised will go towards funding R&D, opening new manfucturing plants and expanding existing ones. The money will also go towards sales and ad campaigns. Less than one in twenty US shoppers are vegans or vegetarians so Beyond Meat’s primary target is in fact meat eaters. The company is not yet profitable. In the first 3 quarters of 2018, Beyond Meat posted revenue of $56.4 million but net losses $22.4 million. It also posted $20 million + losses for the previous two years. Whether the IPO will help achieve the mass market prevalence it desires remains to be seen.
8. VERSACE SUED
A photographer has sued Versace over pictures of Jennifer Lopez posted on Instagram. Splash News photographer Robert Barbera alleges Versace breached copyright by posting two unlicensed photos of Jennifer Lopez in Versace clothing on Instagram. Not only was it posted without authorisation, it was altered to remove Barbera’s copyright management information such as watermarks. Barbera is now seeking damages of between $2,500 and $25,000 per violation. This will include any profits or gains made by Versace as a result of the wrongdoing. The photo itself received over 135,000 likes on Instagram. The lawsuit was filed in New York against Versace’s American arm.
9. SNAP RESULTS
Snap surpassed expectations with it q1 financial results. The parent company of Snapchat posted better than expected revenues and reduced losses. Snap posted revenue of $320 million for the first quarter, a 39% year on year increase. Daily active user growth showed modest gains, up 2% to 190 million.
Since Snapchat’s inception in 2011 until 2018, its user base grew much faster than was ever expected. Unfortunately, Snap hadn’t worked out to effectively monetize this user base, so profitability has always been an issue. Now that the company has matured and its gained the ability to better monetize its user base, user growth is stagnating. There is now significant concern amongst analysts that Snapchat is in decline, hence why for the past year Snap’s share price has remained around 50% lower than its 2017 IPO price. Whether Snap can turn things around remains to be seen.
Check out our company watch page for more on Snap.
10. UK COAL CONSUMPTION
Britain has gone 90 hours without using coal generated electricity, a new record. With government plans of eliminating coal power by 2025, Britain needs a drastic shift to achieve this. Coal accounts for under 7% of Britain’s energy supply. It’s been two years since the UK first went it’s full day without using coal power.
The reduction in coal power has not necessarily led to a significant increase in the use of renewable energy. Renewables still only account for 9% (2015)of the UKs energy supply. To hit the target of an 80% reduction in greenhouse gas emission by 2050 (compared with 1990) is a big ask. As protestors claim, the threat of climate change disaster is imminent, whether these long term measures will be sufficient to save the planet remains to be seen.