Category: WORLD BUSINESS & ECONOMY

Charles Abuede

As the global pandemic intensifies the demand for digital banking globally, WorldRemit, United Kingdom online money transfer company, has entered into an agreement to buy Sendwave, an Africa-focused, app-based remittance firm in a deal worth over $500 million, which is set to give a combined company value of more than $1.5 billion.

Breon Corcoran, WorldRemit chief executive officer said about the transaction: “What we saw immediately after lockdown orders is a real acceleration toward digital with the rate of new account activations more than doubling this year,” adding that the company is making a bet that the pandemic-fueled swing to digital banking will become permanent.

“This is a fast-growing part of the broader payments space and increasingly, our businesses will be viewed as more akin to Venmo or PayPal,” Corcoran said as he hinted that the firm would continue its search for more acquisitions although, no plans for initial public offerings are in the pipeline.

The company further revealed that Sendwave acquisition will help strengthen WorldRemit’s coverage of Africa, as the Y Combinator-backed startup allows customers in Europe and North America to send instant payments to friends and relatives in Eastern African countries and West African countries including Ghana, Nigeria, and Senegal.

However, “Sendwave, with the acquisition will continue to function as an independent business entity and retain its management, employees and key partners,” the companies said.

On the other hand, WorldRemit and Sendwave have improved their combined profits by more than 50 per cent to $280 million in the 12 months ending in June compared with a year earlier, as customers initiated transfers worth about $7.5 billion in transactions value, the companies said.

Global Payments decline

Meanwhile, the World Bank is anticipating a 20 per cent decrease in worldwide remittances this year as a result of the financial crisis coming from the pandemic. While the pandemic has pushed more individuals to bank carefully, they are sending less cash abroad.

In the same vein, the multilateral lender projects that diminishing wages and business opportunities for migrant workers who regularly send cashback to loved ones are anticipated to haul down remittances to low-middle income nations to $445 billion this year. The figure, however, is expected to recoup to $470 billion one year from now.

Phillip Isakpa

• Blackstone to take over Takeda’s consumer healthcare business
• Takeda values consumer unit at £1.75bn
• Deal to boost Takeda net profit by £760m

Blackstone, the £48.75 billion valued American multinational private equity and alternative investment management and financial services company with a price earnings ratio of 48.60, took its acquisitive appetite Monday to Japanese Takeda Pharmaceutical Company after it had earlier this month spoken of plans to acquire Ancestry.com for £3.59 billion.

It announced that an agreement has been signed that will enable it buy the consumer healthcare business of the pharmaceutical company.

When the deal is concluded and the consumer business is excised, Takeda said it would turn its focus wholly to rare diseases and developing drugs that will address unmet medical needs.

The shares of Blackstone did not immediately respond encouragingly in early trading on Monday as the shares were trading at £40.72 per share. A tracking of its performance shows that amid COVID-19 impact on global economic activities, Blackstone had tanked to £27.55 per share in March. A recovery of 50 percent has now brought the company’s per-share price close to what it was when the year opened.

Takeda sees unit worth £1.75 billion

The Japanese drug maker has for some time been working to reduce its over the counter assets through a divestment programme, while the Blackstone deal is seen as being aimed at minimising its debt, after the 2019 acquisition of Shire plc for £45 billion, Invezz reported.

Christophe Weber, chief executive officer of Takeda said “My responsibility is to make sure that we don’t destroy value (for OTV businesses) but create value, and to create value we need to grow businesses and it’s not good to keep business and not invest sufficiently into that.”

The price Blackstone is paying for taking the consumer healthcare business of Takeda under its wings has not been disclosed, although Takeda says it values that business at £1.75 billion, while admitting that the actual price of the acquisition will be based on several factors, including its debt.

Deal to boost Takeda net profit by £760m

Competition to own the Takeda consumer healthcare unit was fierce as there were other prominent names in the fray, including CVC Capital Partners, Bain Capital, and Taisho Pharmaceutical Holdings, showing interest in acquiring Takeda’s consumer healthcare unit.

According Invezz, Blackstone had only in late June showed interest in owning facilities where TV and films are produced.

Having signed the deal, all parties will now work to see to its completion by the end of March, 2021. It is also expected that the transaction will help lift Takeda’s net profit by as much as £760 million.

According to Blackstone, this acquisition will bring to two its Japanese acquisition, having earlier acquired Ayumi Pharmaceutical Corp in 2019 for £760 million. Ayumi Pharmaceutical is a specialist in anti-rheumatism drugs.

Phillip Isakpa

• Rivals eye BT Group for £15bn ($19.6bn) takeover
• Firm asks Goldman Sachs for new defence strategy against potential takeover
• Firm sees nearly 9% rise in share price Monday after weekend reports

A potential £15 billion takeover bid for British Telecommunications (BT Group) led to about nine percent gain in the group’s share price on the London Stock Exchange on Monday, as per report by United Kingdom’s Invezz monitored by Business A.M. in Lagos.

According to Invezz, following weekend reports of the $19.6 billion (at current exchange rate) potential bids, the BT is reportedly now preparing a defence strategy should any such takeover contact be made to it.

Goldman Sachs on standby

It is also understood that investment banking giant, Goldman Sachs is on standby to help the group prepare a new defence strategy against such a bid by its rivals after BT Group’s share fell as a result of a dividends suspension.

The board of the group was said to have swung into action and asked the investment banker to help it work out any takeover bid of around the 151 pence per share.

But besides Goldman Sachs, it was also being reported that the London-based Robey Warshaw LLP, an adviser to Vodafone, is likely going to be involved as well. The bank is known to be a strong participant, in helping the UK develop its 5G network after it banned Huawei’s 5G equipment.

For the first time in 36 years, BT, once fully government-owned, decided to suspend yearly dividend payment this year and made itself vulnerable after it emerged that this had left its market capitalisation at just £10 billion, calculated to be 50 per cent of what its Openreach infrastructure assets are believed to be worth.

“One of the factors that sent its shares down is because BT Group suspended its dividend in the midst of the pandemic, with its market value dropping by 37.1% over the past year. Given that BT is heavily involved in defence and vital national infrastructure networks, any takeover bids for the company will have to obtain approval by the government,” Invezz further reported.

Prior to this development, a couple of statements had been made that tended to provide a snippet of outlook for the industry in the UK. It started with one government minister saying that he would present a bill in the autumn to remodel the UK’s approach to national security and foreign investors.

This was followed by a statement credited to Philip Jansen, BT’s chief executive officer, urging the Boris Johnson, the prime minister, not to rush expunging Huawei’s contribution in the countrywide 5G network. 

Potential takeover soars share

A nearly nine percent rise in its stock greeted BT Group in Monday trading after reports emerged of a potential takeover bid. According to Invezz analysis, a portion of gains have managed to get erased by sellers now that the stock is trading around 5.5% higher.

The analysis also noted that given the poor performance of the BT Group stock price this year, “there’s a huge upside for the stock should investors look to buy” the company’s stock ahead of any possible takeover.

A year-to-date analysis shows that the company’s shares have dropped by 48 percent, closing at GBX101.8 last Friday; accordingly the analysts say BT Group’s shares are 13.5 percent in the red since the start of lockdown restrictions in March. 

Charles Abuede, with FT report

Global company bankruptcies are rising despite the injection of $11 trillion liquidity and other government help in 2020, a report by the Financial Times has asserted.

It said stocks and securities are at record-breaking highs and sovereign, with corporate yields at all-time lows, but that companies around the world are becoming bankrupt at the quickest pace since the Great Depression.

“Since the 2008 crisis all policy actions have been aimed at keeping sovereign bond yields low, bailing out bloated government spending and deficits and the massive liquidity injections have benefitted the large quoted companies that have used the money to shield their valuations through buy-backs and cheap debt,” the paper reported. 

According to the British financial newspaper, trillions of liquidity are giving financial specialists or investors and governments a misguided sensation that all is well and good since yields are low and valuations are high, yet it is a hallucination driven by central bank purchases that can’t camouflage how quickly organisations are going into long term solvency issues. It added that this was significant in light of the fact that rising cases of bankruptcy points to less employment, investment, and low growth on a later date.

Over 45 large US firms have filed for bankruptcy as at August 2020

The large US corporate bankruptcy filings are presently running at a record pace and are set to outperform levels reached during the 2009 financial crisis, as a record 45 firms each with assets of more than $1 billion have petitioned for Chapter 11 insolvency, as of August 17, 2020, reports the FT.

Further revelation from the report shows that in Germany, around 500,000 organizations are considered marked by an inconsequential “indebtedness law” that essentially extends the agony of businesses that are in fact bankrupt, adding that in Spain, the Bank of Spain alarmed that 25 per cent of all companies are near shutting down because of bankruptcy.  But according to Moody’s assessments, over 10 per cent of firms in leading economies are in extreme financial crisis with many in technical bankruptcy.

“However, cheap money has also triggered mal investment, poor capital allocation and higher-than-normal levels of debt. Small businesses did not see the alleged benefits of the massive liquidity and deficit programmes, while large companies became too comfortable with elevated levels of a dent, poor return on capital employed and solvency ratios that were simply too low in a growing economy,” the report shows.

On the other hand, the report further revealed that cheap cash and massive bailouts have planted the seeds of a dissolvability crisis that was set off by the reckless choice of certain governments closing down whole economies. On the off chance that you have an economy that is profoundly utilized and with feeble profitability and dissolvability proportions, closing down the economy for two months is the last nail in the final resting place.

Bailing out zombie firms will worsen matters as new lockdowns could be deadly

Although, the report states, rescuing what it called “zombie firms” will just worsen the situation, and that further lockdowns could be deadly.

The report noted that solution could be supply-side measures that activate the systems of refinancing, re-structuring, and productivity improvement; while more demand-side policies and more liquidity injections will just compound the situation and drive the economy to a stagflation crisis where the next issue might be to go into bankruptcy and banks’ assets valuations fall and non-performing loans (NPLs) swell despite Central Bank actions.

It also noted that governments will like to go down the Japan course: More debts, more bailouts, and huge government spending. But the report stated that in any case, it will just prompt stagnation and propagating irregular imbalances that can’t be concealed when the slip-ups of Japan are actualized by the eurozone, China and the United States. There is no conceivable manner by which huge spending and liquidity gorges will deliver anything besides higher debts, weaker growth, and lower real wages.