Private equity firms and their co-riders love a consortium mashup, so one can’t be surprised that Apollo has dropped the idea of bidding solo for Morrisons and is instead trying to insert itself into the Fortress-led combo.
That consortium already looked crowded since, besides the Japanese-owned US investment firm, it also includes a Canadian pension fund and US conglomerate Koch Industries, but there’s usually room for a latecomer. It makes the original crew feel like they’re on to a winner.
Infatti, the significance in Apollo’s move is probably that it chose to sidle up to Fortress & co rather than Clayton, Dubilier & Rice, the other private equity runner in the race. We don’t know if CD&R was open to having a partner, but the assumption must be that Apollo thinks the Fortress-led team will win. That bet is reasonable. Fortress has the only offer on the table, at 254p a share, or £6.3bn, complete with a recommendation from Morrisons’ board. It is in pole position.
Note, though, the reaction in Morrisons’ share price to Apollo’s shuffle: nothing. The price was virtually unchanged at 261p, even though a three-horse contest has come down to a head-to-head rivalry.
The lack of reaction says two things. Primo, Apollo always looked shaky as a standalone bidder and, second, Morrisons is still expected to fetch more than 254p. The big picture hasn’t changed and the biggest question remains why Morrisons’ board rolled over and recommended a price that cannot be called a knockout.
Is that a break in the clouds at easyJet? Flying 60% of capacity in the July to September quarter is a big stepup from the 17% achieved between April and June and adds weight to the idea that underlying demand hasn’t been damaged one jot by the pandemic.
Chief executive, John Lundgren, points to the Netherlands, where easyJet is flying more planes than before Covid, as an example of what can happen when a country has a well-understood travel policy in which traffic lights don’t change at short notice and new “amber plus” categories aren’t invented on the hoof.
Grumbling about the UK government’s approach is obligatory for airlines these days and, up to a point, is fair: travel restrictions are inevitable; confusing messaging from government is not. Two-thirds of bookings on easyJet flights are currently coming from continental Europe, whereas the UK would account for about 50% in normal times.
Easyjet’s problem, though, is that it can tweak its business model by switching capacity to continental Europe, but it cannot reinvent it. A meaningful recovery must inevitably involve more UK passengers. In the last quarter, the planes overall flew with one-third of seats empty, a dire statistic in an industry that banks on 90%-plus occupancy in peak season.
EasyJet made a headline loss of £318m in the quarter, quale, as it emphasised, was “in line with expectations”. A cash burn of £55m was also roughly as advertised. Very good. The £500m cost-saving programme is clearly working and, if half those savings are truly permanent, easyJet may indeed “emerge transformed” one day, as Lundgren promises. But the glimpse of a bluer sky is a vision for 2022.
Share prices enjoyed a little rally on Tuesday after Monday’s fun. Bitcoin didn’t. It slipped below $30,000 (£22,000) on more angst about regulatory interventions in cryptocurrency markets or, perhaps, it was just that the bitcoin buzz is fading.
Evidence for the latter could be found in the IPO prospectus for Robinhood, the US trading app that is set to go public in New York next week. The company forecast lower revenues in the current quarter compared with the one that ended in June “as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies”.
There’s more to Robinhood than crypto trading (di 17% of revenues) and the not unrelated phenomenon of meme investing. But it’s hard to shake the top-of-the-market vibe about this IPO. A barely-profitable company is pitching for a valuation of $35bn (£25bn) after enjoying fertile conditions in the early months of this year in which the price of almost everything was rising. It feels as if the world has moved on.