Finimize - ✌️ Britain's biggest buyout in years

Morrisons finally gives us an answer | Volvo arrives in style |

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Today's big stories

  1. The bidding war over UK supermarket chain Morrisons has finally come to an end
  2. There are three scenarios that could play out in the Chinese market, and you could profit from any one of them – Read Now
  3. Swedish carmaker Volvo announced plans to go public

Peace Offering

Peace Offering

What’s Going On Here?

It’s been a long, grueling bidding war, but American private equity (PE) firm Clayton, Dublier, and Rice finally agreed to buy UK grocery store chain Morrisons over the weekend.

What Does This Mean?

PE firms – which buy companies in hopes of selling them on for a profit further down the line – are always on the lookout for companies that make money in good times and bad. And grocery store chains have certainly proved their mettle in the last 18 months, as shoppers turned up in their droves to buy something, anything that’d make lockdown more bearable.

That explains why a handful of PE firms have been locked in a bidding war to buy Morrisons since spring. Now, though, the company has accepted a $9.5 billion offer from Clayton, Dublier, and Rice (CD&R) – about 60% more than its shares were worth before the bidding war began, and enough to make it the biggest British buyout of a public company in over a decade. CD&R can’t wait to get started: it’ll focus on growing Morrisons’ wholesale and ecommerce businesses in hopes of boosting the chain’s market share.

Why Should I Care?

For markets: There’s always Plan B.
CD&R’s gain was Fortress Investment Group’s loss, but the rival PE firm said it’s still keen to invest in the UK in the future. Investors, then, are speculating that it might move on to bigger and better things – namely Britain’s second-biggest grocery chain, Sainsbury’s, which saw its stock climb nearly 4% on Monday.

The bigger picture: There’s always Plan C.
There’s another reason PE firms were so interested in Morrisons: the company owns about 85% of its 500 UK stores, which adds up to an estimated $10 billion worth of real estate. And since that amounts to more than CD&R’s offer, the PE firm has arguably made a foolproof investment: it could theoretically make all its money back by selling off that property portfolio alone.

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Analyst Take

The Good, The Bad, The Ugly: Three Potential Outcomes For The Chinese Property Market

The Good, The Bad, The Ugly: Three Potential Outcomes For The Chinese Property Market
Photo of Stéphane Renevier

Stéphane Renevier, Analyst

What’s Going On Here?

Opinions about the post-Evergrande Chinese property market are like… well, you know. Everyone has one.

But whatever your opinion, there’s a way to profit.

Because let’s say you’re actually quite bullish, expecting China’s government to step in and smooth out all this drama. There’s a play for that.

Or let’s say you think things are about to get worse,  and you think the effects could ripple through the world’s markets. There’s a play for that too.

So that’s today’s Insight: the bull opportunity, the bear opportunity, and how to invest if you’re sitting on the fence.

Read or listen to the Insight here

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EV Money

EV Money

What’s Going On Here?

Volvo announced plans on Monday to list on the stock market, as the Swedish carmaker commits wholeheartedly to life in the sustainable lane.

What Does This Mean?

Volvo was planning to make its stock market debut back in 2018, but the carmaker – worried that the then-unavoidable trade war would hurt its valuation – ultimately decided against it. But things are different now: Volvo reported its best-ever results for the first half of a year in July, and investors have been keen to buy into major initial public offerings (IPOs) at any given opportunity. Throw in the fact that Polestar – 50% of which is owned by Volvo – saw strong investor demand when it announced plans to go public last week, and you can see why Volvo thinks now’s the time to bite the bullet. The IPO is set to value Volvo at more than $30 billion and should raise the carmaker around $3 billion in cash, which it’s planning to use to transition to electric vehicles (EVs) in earnest (tweet this).

Why Should I Care?

The bigger picture: Catch Tesla if you can.
Volvo might be right to double down on EVs, with demand going from strength to strength. Just look at Tesla: the OG EV-maker said over the weekend that it delivered a record-breaking 241,000 cars last quarter. Good thing the company is boosting production by building new plants in Texas and Berlin, then.

Zooming out: Change is here to stay.
You can see the trend playing out on a much bigger scale too: European EV sales are forecast to be 500% higher by the end of this year than they were in 2018, and 25% of new cars bought in China are expected to be electric within four years. And carmakers don’t want to miss out: one research consultancy says they’re planning to spend $330 billion on fine-tuning EV technology over the next five years – 40% more than they were shooting for last year.

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💬 Quote of the day

“Just because something doesn’t do what you planned it to do doesn’t mean it’s useless.”

– Thomas A. Edison (an American inventor and businessman)
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