Breakingviews - Corona Capital: Luxury negotiators, Tencent, Dmall
MILAN/HONG KONG (Reuters Breakingviews) - Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
- Del Vecchio vs. Arnault
- Leyou unleashed
- Funding Dmall
DIVERGENT LUXURY. Investors give Leonardo Del Vecchio greater odds of renegotiating a pre-pandemic cash deal than Bernard Arnault. The large takeovers agreed last year by Del Vecchio’s EssilorLuxottica and Arnault’s LVMH appear to offer little legal wiggle room. To fend off attempts to lower LVMH’s $16 billion takeover price, Tiffany & Co rejigged debt covenants in June and extended by three months on Monday a deal deadline. Meanwhile, Del Vecchio’s attempt to undermine optical retailer GrandVision, which EssilorLuxottica is set to buy for over 7 billion euros, stumbled as a Dutch court rejected a request for additional financial data.
Market prices suggest divergent outcomes. GrandVision shares trade 19% below EssilorLuxottica’s takeover price of 28.42 euros a share against just 6% for Tiffany. This suggests investors believe Tiffany’s deal extension will give it time to win crucial European Union antitrust blessing. Brussels may, however, force GrandVision to sell part of its network. Del Vecchio may have a later chance to review the price. (By Lisa Jucca)
THE FINAL QUEST. The pandemic is forcing Tencent to improve its M&A game. The internet titan is nearing a take-private deal of Hong Kong-listed Leyou Technologies, according to Bloomberg, which would value the video games developer at $1.3 billion. That ends a months-long saga that has seen $677 billion Tencent indirectly back two separate bids before entering into exclusive talks with Leyou last month. At the time, Japan’s Sony was also considering entering the fray.
Virus disruptions have hammered Leyou, which swung into the red in the six months to June from a year ago, with a $4.7 million net loss. The company blamed stay-at-home measures for delays to new content. Still, a global boom in gaming is fuelling demand for fresh hits, and Leyou owns a stable of lucrative money-spinners like “Warframe”. At the mooted offer price, Tencent would be paying 26 times 2019 EBITDA – a hefty premium to most peers. It’s the price to play. (By Jamie Lo)
CHECKOUT AISLE. Online grocer Beijing Dmall E-commerce is looking to raise as much as $600 million in a new funding round, Bloomberg reports, which could value the Tencent-backed company at $2 billion before the investment. The pandemic has fuelled online shopping for fresh produce, adding to a flurry of fundraising activity of late. Dmall, which works with 112 chain retailers and supermarkets across 13,000 stores, also faces competition from startups like MissFresh, which raised $495 million last month, and hybrid operations like Alibaba’s Hema.
The migration of grocery sales online, accelerated by Covid-19, has squeezed supermarkets and hypermarkets, according to a new report by Bain & Co, although hypermarkets’ sales per square metre was declining in South Korea and China before the outbreak. The consultancy forecasts that up to 45% of the online spending surge will survive the easing of lockdown measures. Grocers need to adjust to the new normal. (By Sharon Lam)
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