Commercial Awareness Update – W/C 23rd December 2019

The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.

The takeaway battle: who will deliver the best deal?

Article by Gina Asadi, recent BPP LLM Legal Practice (Solicitors) graduate.

The food delivery giant, Just Eat has been the latest target of a takeover battle. The competing bids for Just Eat come from Takeaway.com, a Dutch food delivery company, and Prosus, an investment division of Naspers, the internet conglomerate.

Late July 2019, Just Eat announced a statement explaining that it was contemplating a merger with Takeaway.com. As Just Eat is a UK listed company, the merger would be implemented through an offer for Just Eat by Takeaway.com. The proposed deal would lead to the formation of one of the largest food delivery companies, to be known as Just Eat Takeaway.com and valued at around £8.2bn. This merger came about as a move to tackle the two companies’ growing rivals, Deliveroo and Uber Eats.

Shortly after the news became public, investors began casting doubt over the merger. Major shareholders claimed that they would vote against the deal, arguing that the offer undervalued Just Eat. Takeaway.com’s offer valued Just Eat’s shares at 731p per share, when Just Eat’s shares had consistently traded at above that rate. Following the low valuation, analysts speculated that Just Eat would become a target for other bidders. As predicted, Prosus made a competing bid for the target, valuing Just Eat’s shares at 710p per share. Just Eat’s board subsequently rejected the offer, rendering it a hostile bid.

In a move to escalate the battle with Takeaway.com, Prosus increased its offer for Just Eat to 740p per share, as well as, cutting the level of acceptances required from 90% to 75%. Meaning for Prosus’ takeover of Just Eat to be completed, Prosus only requires 75% of the Just Eat’s shareholders to accept the offer. Further, Prosus has promised to help Just Eat tackle competitors that are offering in-house delivery service. As currently, Just Eat and Takeaway.com rely on restaurants to deliver to their customers, rather than operate their own in-house delivery service. Despite the positive revision and promises, Just Eat rejected Prosus’ sweetened offer. However, Prosus pushed ahead and revised their offer for the second time, valuing Just Eat’s shares at 800p per share. As a result, Takeaway.com finally increased their offer, raising it 25% valuing Just Eat’s shares at 916p per share. With Just Eat’s board of directors backing the takeaway.com offer, the shareholders have a difficult choice to make, having until 10 January 2020 to make their decision.

Regardless of the outcome, this takeover battle is evidence of the growth of the food delivery sector. Further, serving as an indication of future deals in this sector, which can be seen as a positive for law firms, as City law firms will be battling to take the lead on these exciting and lucrative deals. With Allen & Overy acting for Prosus, while Linklaters and Slaughter and May took the lead on the proposed merger between Just Eat and Takeaway.com.

You can read more here, here, here and here.

De La Rue: An insight into the company’s future: collapse or turnaround?

Article written by Tofunmi Bello, LLM student at the University of Sheffield.

De La Rue, the company that prints UK banknotes for the Bank of England and more than 100 other central banks has recently announced that they have significant doubts regarding the company’s future unless a significant turnaround takes place. The company has also been manufacturing British passports since 2009 at its Gateshead factory, where it employs around 600 people.

It has been said that the impending fall is because of numerous factors:

De La Rue has faced some setbacks in the past two years including the loss of printing UK post-Brexit passport to the Franco-Dutch firm named Gemalto; a decision which the chief executive Martin Sutherland allegedly said was both surprising and disappointing in equal measures, given that the BBC had abandoned their plan to appeal the government’s decision in April 2019. This change resulted in a 400 million loss in revenue for De La Rue, and lowered the share price significantly.

Following this, De La Rue had to suspend its dividends to tackle its debts as it reported its first half loss. Its shares took a hit,  resulting in a loss of 36 million pounds from its value.

This affects other stakeholders too,  such as the 2,500 people that De La Rue employs. Louisa Bull, the Unite national officer stated its precarious future is worrying development for their workers and should be ringing alarms for the government.

Other stakeholders that are affected are its shareholders. It is worth bearing in mind that this report is based on a worst-case scenario and they still have a chance at a sustainable turnover under new chief executive, Clive Vacher.

New management could be a key determinant in how they make a comeback. Some reports show key players such as Russ Mould of AJ Bell suggesting “they needed a change of business module as the world became increasingly cashless and suspected they had poor management at a time that they needed superior leadership”. Clive Vacher could potentially be the management change that De La Rue urgently needs, as he stated, “coming into this business, there is nothing that cannot be fixed”. His approach focuses on their two businesses; the currency unit and their authentication.

De La Rue’s collapse would likely result in its closure.  Although De La Rue is the sole supplier of banknotes to the Bank of England, failure would not affect the country’s supply of banknotes as they can be replaced by the Bank of England which owns the main facility in Debden.

Overall, they stand a fair chance at a turnaround, as key sources have confidence in Mr Vacher.

Read more here, here, here and here.

Andrew Bailey Appointed as New Governor of the Bank of England

The Chancellor of the Exchequer, Sajid Javid, has announced that Andrew Bailey will succeed Mark Carney as the next Governor of the Bank of England when Mr Carney’s eight year tenure comes to an end in March.

Mr Bailey worked at the Bank of England for 30 years until leaving to become the chief executive of the Financial Conduct Authority (FCA) in 2016.  This expertise in regulation will have been a key factor in his appointment.  In addition to the Bank of England’s roles in setting interest rates, issuing bank notes, and acting as a lender of last resort, it also has a regulatory role.

This is a relatively new function of the central bank and so is perhaps less familiar to many.  In the wake of the 2008 financial crash, the former Financial Services Authority was split into two new regulatory agencies: the FCA and the Prudential Regulation Authority (PRA), which is part of the Bank of England.  There is some overlap between their roles but in basic terms the PRA directly supervises financial institutions, whereas the FCA is more concerned with protection of consumers.

Although he is seen as a relatively safe appointment, Mr Bailey’s time at the FCA has not been without incident.  The FCA was criticized after failing to act on warnings about London Capital & Finance, a mini-bond issuer that collapsed earlier this year, leading to losses of £236 million for over 11,000 investors.  The agency was also criticized for not taking any action into Royal Bank of Scotland’s controversial Global Restructuring Group, which seriously mistreated small businesses in the wake of the financial crash, ruining many lives in the process.

Furthermore, it was announced this week that the FCA is actually investigating the Bank of England for a security breach that allowed certain hedge fund managers to access an audio feed of one of Mark Carney’s press conferences and act on it before it was announced to the rest of the market.  Navigating the investigation of the agency he oversees by the agency he used to oversee will cause for an interesting start to Mr Bailey’s tenure.

Find out more here and here.