Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

House on fire

Written by Li-Ann Chin, associate
Edited by Adam Shaw, associate partner

9 December 2021

Good morning,

Founded in 1977 by “vulture capitalist” Paul Singer, activist fund Elliott Advisors specialises in buying shares in publicly listed companies and then agitating for accelerated change to boost their share prices. It has earned a reputation as a no-holds-barred activist investor, with an unusually large appetite for public face-offs having taken on some of the world’s biggest companies. The hedge fund masterminded Samsung’s restructuring in 2016 and pressured mining giant BHP to demerge its US petroleum assets and scrap its dual listing in London and Australia in 2017.  Earlier this week it was reported that it had secretly bought a stake in Taylor Wimpey, making it the third time the activist investor has been linked to a FTSE 100 company this year. The housebuilder’s share price has stagnated despite the strong housing market and feverish demand for new homes across Britain. Chief executive Pete Redfern stepped down with little explanation just days after Elliott bought a stake in the company. It is also currently tussling with Scottish energy group SSE and pharmaceutical giant GlaxoSmithKline (GSK). Elliott is reportedly pushing for SSE to separate or sell its renewables business, arguing that a break up of its assets could unlock greater value. In July, it demanded GSK’s chief executive, Emma Walmsley, remove herself from the helm of the company, citing “severe underperformance” and “years of under-management”.The last time it went toe-to-toe with a FTSE 100 company was when it pressured Whitbread, the hospitality group that owns Premier Inn, to sell off the Costa Coffee chain in 2018, after building up a stake of more than six percent in the business. It was right after Costa Coffee reported a significant fall in sales, which triggered concerns Britain’s coffee shop boom had ended. Elliott aggressively pursued the demerger idea, believing that the coffee shop chain and Premier Inn were two very distinct businesses with little overlap and that at least £3bn of value could be created by splitting off Costa. Whitbread eventually sold Costa Coffee to The Coca-Cola Company for £3.9bn less than a year laterElliott has not publicly confirmed its position in Taylor Wimpley or the size of its stake. There are rumours, however, that the hedge fund is angling for so-called corporate activity, which may include a takeover – something that Elliot has never shied away from proposing.The Taylor Wimpey board has been put on alert, and understandably so. There is no sign of smoke just yet, but their house may well be on fire.  

News

Speaking at a Downing Street conference yesterday, prime minister Boris Johnson announced so-called ‘plan B’ measures in England to slow the spread of the virus and lower Omicron hospital admissions. Guidance to work from home will be reintroduced for those who can do so on Monday; mandatory masks will be extended to most public venues, including theatres and cinemas, from this Friday; from next week, the NHS Covid pass will be mandatory for nightclubs and venues where large crowds gather in England. The Metropolian police confirmed it will not investigate the Downing Street Christmas party widely reported to have been held during the height of lockdown last year. Scotland Yard said in a statement that the decision was taken on the basis of the “absence of evidence” that rules were broken and in line with Met policy of not retrospectively investigating alleged breaches of coronavirus laws. Cabinet secretary Simon Case is expected to press ahead with the internal inquiry ordered by Johnson yesterday. BioNTech and Pfizer released their first joint statement yesterday claiming that results from a preliminary study indicated three shots of the Pfizer or BioNTech Covid-19 vaccine is able to generate a neutralising effect against the new Omnicron variant. They also stated that they would be able to deliver a vaccine specifically for Omicron by March 2022 if needed.

Business and economy

Business groups, the likes of the Federation of Small Businesses and Night Time Industries Association, warned that the introduction of vaccine passports and a new work from home order would be devastating to bars, restaurants and nightclubs that had been counting on Christmas trading to recover lost revenues. The new restrictions have been described as a “body blow” to a hospitality industry already struggling after successive lockdowns. (£) Royal London, one of SSE’s biggest shareholders, dismissed Elliott Advisors’ campaign to break up the Scottish energy group, arguing that the ensuring disruption would be bad for shareholders and hurt the UK’s path to net zero emissions. Eliott’s campaign is “very share price focused and that’s just one element to the situation,” said Mike Fox, head of sustainable investments at Royal London Asset Management. (£) Labour called on the government to provide urgent financial support for industries including ceramics, glass and steel, which have been hit hard by the spike in energy prices. Jonathan Reynolds, the shadow business secretary, cautioned that if these industries collapsed, the UK would end up importing the same product from overseas, with higher environmental costs. (£)

Columns of note

Experts have repeatedly said that eating less meat can significantly lower greenhouse gas emissions and is one of the best things we can do for the planet. Yet, a United Nations poll from February makes it clear that switching to plant-based diets is, for most people, the least favoured solution to climate change. Enter food-tech start-ups that are working on disrupting meat to find a suitable plant-based protein. Some use algae, others make “bacon” and “chicken” using a fungus called koji. Pea protein, in particular, is fairly popular. Elaine Moore explores the future of food in this piece in the FT. In a recent survey for Raja Workplace, respondents said their perfect job would offer a four-day week on £44,000, have a 17-minute commute, a nice view, free hot drinks, “duvet” days on request, and six weeks of holiday a year. But what about purpose? Alice Thomson questions in The TimesA sense of mission or worth is crucial in deriving satisfaction from our work, she argues.

Markets

What happened yesterday?

London stocks ended yesterday just below the waterline, as investors braced themselves for fresh Covid-19 restrictions to be imposed on England. The FTSE 100 ended the session down 0.04% at 7,337.35, and the FTSE 250 was 0.04% weaker at 23,229.88. Sterling was down 0.08% on the dollar at $1.3233 and 0.65% weaker against the euro at €1.1678. US stocks edged higher Wednesday, with major indexes near record highs, aided partly by news suggesting the omicron variant of the coronavirus may not disrupt economies as much as feared.The S&P index rose 0.35% to 4,701.21, while the Dow Jones Industrial Average edged up 0.1% to end at 35,754.75. The Nasdaq Composite Index, on the other hand, firmed up 0.5% to reach 15,786.99. In company news Mercedes terminated its sponsorship deal with Kingspan, a firm that made insulation material involved in the Greenfell Tower disaster, a week after it was announced. The Formula 1 team were heavily criticised over the deal, with survivors of the June 2017 tragedy describing it as “truly shocking”. Lobby group London First unveiled plans to change its name in a bid to avoid a clash with Boris Johnson’s levelling up agenda, which looks to focus on towns in the north of England instead. Investment bank Jefferies Financial Group cancelled all client parties and most travel, requesting staff to work from home wherever possible due to a recent spike in Covid-19 cases. The firm recorded 10 cases of Covid amongst employees on Tuesday and has had more than 40 new Covid cases in December.

What’s happening today?

Finals
On The BeachVictorian Plum

Interims
Smith (DS)Dwf GroupLendinvestWatches SwitzMoonpig Gr

AGMs
Doric Nimrod 3BioventixDoric NimrodRound Hill Mus.Lok N StoreUk MortgagesRidgecrestWestmount Engy.Orchard FundingDoric Nimrod 2Frontier IPBlackrock Great

Trading Announcements
Balfour BeattyRolls-Royce Holdings

Int Economic Announcements
(13:30) Initial Jobless Claims (US)(07:00) Current Account (GER)(10:00) Gross Domestic Product (EU)(15:00) Wholesales Inventories (US)(07:00) Balance of Trade (GER)(13:30) Continuing Claims (US)(00:01) RICS Housing Market Survey

Source: Financial Times

did you know

If you want to use a photo of the Eiffel Tower for commercial purposes, you need permission if it was taken at night but not if it was taken in the day. The copyright on the tower and its image has expired, but the copyright on the tower illumination installed in 1989 has not. (Source: Qikipedia)

Parliamentary highlights

House of Commons

Oral QuestionsVarious Business StatementBusiness questions to the Leader of the House Select Committee StatementSelect Committee Statement on the Fourth Special Report of the Defence Committee, Protecting those who protect us: Women in the Armed Forces from Recruitment to Civilian Life: Government Response to the Committee’s Second Report of Session 2021-22, HC 904 Backbench BusinessDebate on a Motion on Consular Support for British CitizensDebate on a Motion on Contribution of Financial Services to the UK Economy AdjournmentProvision of services to vulnerable women and children asylum seekers in Stockton 

House of Lords 

Oral questionsVarious DebateRole of civil nuclear power in meeting the UK’s electricity needs and energy securityScotland’s contribution to economic recovery and renewal, and how this may support wellbeing and quality of life across the UK Short debateDetails of the Extraordinary Funding and Financing Agreement for Transport for London for the period after 11 December

Scottish parliament 

General questionsVarious First Minister’s questions Members’ BusinessHuman Rights Day 2021 Portfolio questionsVarious Ministerial statementScottish budget 2022-23

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