Fintech Revolut Britain's first digital bank to break even

Financial technology firm Revolut has become the first of a new breed of digital banks in Britain to break even on a monthly basis after a swelling user base and a suite of new products helped it bolster revenues in December.

Revolut, which has gained popularity with users for cheap and easy foreign exchange and is in the process of securing a banking license, now has 1.5 million users across Europe.

The firm is one of a number of digital banks that have sprung up in Britain in the past few years, offering slick apps, cut-price fees and a “marketplace” where users can shop around for products from a variety of providers.

Some have seen significant user growth since, but all are loss-making.

Revolut founder Nikolay Storonsky told Reuters that December’s result was driven by strong user growth and uptake of its products -- trends that had continued into 2018.

“In January we had an even stronger month...and again we are up 20-25 percent on revenues compared to December,” he said.

The firm’s closest peers including Monzo, Starling Bank and Tandem, which all have British banking licenses, told Reuters they had not yet seen a month without losses.

Another app-only bank, Atom, which has a different business model, also said it had not broken even yet. Germany’s digital bank N26, which has expanded across Europe, declined to disclose details on its financials.

Unlike its rivals, Revolut offers paid-for premium and business accounts, that have proven lucrative for the start-up.

It is also the only British digital bank to operate across Europe so far. Strong growth in countries like France, Germany and Switzerland and the Nordic region helped drive its user base up by 50 percent in the last two months. Expansion plans are also underway in India, Brazil, South Africa and the UAE.

Revolut is in the process of securing a banking license in Lithuania, which it then plans to passport elsewhere in Europe.It already offers device and travel insurance through its marketplace, two of the new products that helped grow users and the firm’s monthly transaction volume to $1.5 billion - a 700 percent increase in the past 12 months.

Another was the ability to buy, hold and sell cryptocurrencies within the Revolut app.

Storonsky said there had been strong demand for this from customers since the capability launched, although this fell back a bit when the value of Bitcoin and other digital currencies dropped.

By –Reuters

Unpacking the Dropbox IPO filing

In the first big-name IPO of the year, Dropbox has filed to go public on the NASDAQ under the symbol DBX. News of the public regulatory document comes about five weeks after the San Francisco-based company filed confidentially.

The debut of the file-sharing giant will be one of the most high-profile IPOs in recent years. With a private valuation of $10 billion as of its most recent financing round, Dropbox, which allows users to store, share and collaborate on documents in the cloud, is one of the most valuable venture-backed companies in the US.

It's possible Dropbox will be the first in a string of well-known private companies to go public. Although it's worth less than massive businesses like Airbnb ($31 billion) and WeWork ($21 billion), it's not surprising Dropbox is kicking off what could become a domino effect of unicorn IPOs. For one thing, the company was founded and received its seed round back in 2007. For VC-backed companies, the median time from first VC round to IPO is 8.3 years, per PitchBook data. By that measure, Dropbox is well past due to go public. Another factor supporting speculation that Dropbox would IPO ahead of its private-market peers is the $600 million credit line it secured last March, as taking on big debt is common for companies prepping for a public offering.

By– PitchBook

China's Geely buys US$9bil Daimler stake

The founder of Zhejiang Geely Holding Group Co. has accumulated a stake worth about 7.3 billion euros ($9 billion) in Daimler AG, marking the biggest investment in a global automobile manufacturer by a Chinese company.

Li Shufu acquired the 9.7 percent holding through Geely Group, a company owned by the billionaire and managed by his carmaking group, according to a company statement Saturday.

Bloomberg News first reported that Geely has become the single largest investor in the parent of Mercedes-Benz by building up a position of just under 10 percent through purchases in the stock market in recent weeks.

The investment furthers Hangzhou-based Geely’s foray into the European premium automotive market and ends months of speculation about a tie-up.

The Chinese company already owns Volvo Cars AB, whose refreshed line-up of vehicles have made it a popular alternative to the German luxury stalwarts.

“A Geely stake in Daimler would underscore their push for cooperation that’ll help them get more expertise, like electric cars,” said Frank Biller, a Stuttgart-based analyst with Landesbank Baden-Wuerttemberg. “At the same time, this opens another path into China for Daimler.”

Li has tapped overseas banks to help finance the investment, according to people familiar with the matter. In its statement, Geely said Li has a "long-term commitment" to the Daimler stake, and that neither Geely Group nor any other company in the ZheijangGeely Holding Group intend to acquire additional shares for now.

Daimler, which said it welcomes another major investor, has been on an upward trajectory, reclaiming the No. 1 spot in luxury cars from BMW AG by broadening its offerings to include more SUVs and freshening its lineup with sportier designs. The Stuttgart-based carmaker sees the investment as a vote of confidence, spokesman Joerg Howe said by phone.

“Li Shufu is a Chinese entrepreneur Daimler knows well and regards highly in terms of his competency and focus on future developments,” Howe said. “Daimler already has a strong footing in China. We have a very strong partner with our existing cooperation with BAIC Motor.”

Chinese companies have been more active buying into German companies in recent years. HNA Group Co., the aviation-to-hotel conglomerate, has a stake of about 8.8 percent in Deutsche Bank AG, and industrial-robot maker Kuka was purchased by Midea, the world’s largest appliance maker.

In December, Li became the biggest shareholder in Sweden’s Volvo AB, the world’s second-largest truckmaker. In 2010, he acquired Volvo Cars from Ford Motor Co., and last year won control of British sports-car maker Lotus Cars Ltd.

The Chinese firm, which controls Hong Kong-listed Geely Automobile Holdings Ltd., has ambitious expansion plans for both its home market and overseas as it takes on global car majors. Geely plans to start selling a compact five-seat SUV, currently marketed under the Lynk& Co brand, outside China from mid-2019. It’s likely to look first at Europe.

Daimler itself is planning the biggest corporate overhaul in a decade, firming up plans toward the end of 2017 to break up its rigid conglomerate structure, instead creating a holding company with three separate units: Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and the financial-services division.

While Daimler said the move isn’t a prelude to a spin-off of any of the businesses, some investors have called on the company to consider an eventual split on the back of the clearer delineation between the units.

Kuwait’s sovereign wealth fund, which has been an investor in Daimler for decades, was the largest stakeholder in the automaker as of the end of December with a 6.8 percent holding.

“The competitors which technologically challenge the global car industry in the 21st century are not part of the automotive industry today," Li said in the statement.

"But with challenges come opportunities. No current car industry player will be able to win this battle against the invaders from outside independently. In order to succeed and seize the technology highland, one has to have friends, partners, and alliances and adapt a new way of thinking in terms of sharing and united strength," he said. - Bloomberg

From – The Star

General Mills to Buy Blue Buffalo Pet Food for $8 Billion

General Mills Inc. agreed to buy Blue Buffalo Pet Products Inc. for about $8 billion, adding the maker of natural dog and cat food to a portfolio that includes Haagen-Dazs ice cream and Cheerios cereal.

The company plans to pay $40 a share for Blue Buffalo, which sells products like “antioxidant-rich” dog nutrition and cat food under brands such as Blue Life Protection Formula, Blue Wilderness and Blue Basics. That’s a 17 percent premium from Thursday’s closing price.

The deal comes as global food giants snap up makers of natural and organic products, which are outpacing mainstream brands in growth.

“In pet food, as in human food, consumers are seeking more natural and premium products,” General Mills Chief Executive Officer Jeff Harmening said in a statement.

Shares of the Wilton, Connecticut-based pet-food maker rose as much as 17 percent to $39.95. Over the past three years, Blue Buffalo has delivered compound annual net sales growth of 12 percent, the companies said, reaching $1.3 billion in the 2017 fiscal year.

General Mills investors, meanwhile, gave a cool reception to the deal. Its shares fell as much as 6 percent to $51.66 -- the most intraday in five months. The stock had already lost 9.6 percent in the last 12 months through Thursday. Blue Buffalo shares gained 35 percent in the same period.

Pet-Care Scramble

General Mills is one of several consumer-product giants focusing on pet care, a $30 billion market in the U.S. alone. Nestle SA has said its Purina division is a central focus as the Swiss company divests slower-growing units like its U.S. confectionery business. Cargill Inc. in January agreed to buy Pro-Pet, the maker of Black Gold dog food.

The buzz around the pet-food sector means another suitor may emerge for Blue Buffalo, said Pablo Zuanic, an analyst at Susquehanna International Group.

“We think there is potential for counterbids,” he said in a research note. J.M. Smucker Co. wants to beef up its pet-food presence and the sector is a priority for Nestle, he said.

General Mills, based in Minneapolis, will finance the deal with debt, cash on hand and about $1 billion in equity. The price represents a 23 percent premium to Blue Buffalo’s 60-day volume-weighted average price. The deal has been approved by both companies’ boards but needs to be cleared by regulators.

Goldman Sachs Group Inc. advised General Mills on the deal, while Cleary Gottlieb Steen & Hamilton LLP was the company’s legal counsel. JPMorgan Chase & Co. and Centerview Partners LLC served as the financial advisers to Blue Buffalo, with Simpson Thacher& Bartlett LLP providing legal advice.

General Mills, like its U.S. competitors, has been struggling through a prolonged sales slump as customers change how they eat and shop. That’s pressured Harmening, who took over last year, to find a way to reignite sales growth. This has been complicated by a grocery price war that’s pressured margins and a decline in the popularity of longtime household staples.

The company has seen revenue drop the last three years, with a cereal slide and troubles at its yogurt unit hampering performance.

AkshayJagdale, an analyst at Jefferies LLC, estimated the deal’s valuation at 25 times earnings before interest, taxes, depreciation and amortization, or “one of the richest transactions in the food space.”

Consolidation Surge

Sluggish growth has fueled a surge of consolidation, driving up prices as the biggest companies look to snap up smaller competitors. In 2017, the average multiple for food-and-beverage deals was 17.7 times Ebitda. That’s up 36 percent from the prior year and almost 50 percent more than the average dating back to 2010, according to Jagdale’s estimates.

In December, Campbell Soup Co. agreed to pay about $6 billion for Snyder’s-Lance, spending 21 times Ebitda for a push into salty snacks as canned soup sales slump. Last year, deals in the food industry totaled $110 billion globally, data compiled by Bloomberg show. More than half of that came from acquisitions of U.S. food companies, which more than doubled from the previous year to almost $56 billion.

But there are limits to how much buyers are willing to spend, said Jagdale, who doesn’t see another company stepping forward to acquire Blue Buffalo.

“We would not expect a more compelling competing bid given the price tag,” Jagdale said in a research note.

From – Bloomberg

Siemens Unit's Value in IPO Slips Toward $32 Billion

Siemens plans to announce price range later this week

The potential value of Siemens AG’s health-care unit in an initial public offering is slipping based on early investor feedback, according to people with knowledge of the matter.

Buyers are indicating that the business should be valued in a range of about 26 billion euros ($32 billion) to 30 billion euros, the people said, asking not to be identified because the details aren’t public. Executives at Siemens Healthineers are still meeting investors to gauge their appetite ahead of disclosing later this week a price range for the equity offering, the people said, adding that no final decisions have been made on the valuation.

Siemens aims to raise as much as 10 billion euros by selling up to 25 percent of the health business in the first half of the year, people familiar with the matter had said earlier this year. The health-care unit could be valued at 30 billion euros to 40 billion euros, they said.

A Siemens representative declined to comment.

The IPO, which could be the largest in Europe this year, comes on the heels of market volatility this month that temporarily dampened investor appetite. Siemens Healthineers is also betting on the success of its Atellica portfolio of lab equipment and products, launched in 2017. Some investors have found forecasts for its sales to be too optimistic and want to see more proof of its success before raising the business’s valuation, the people said.

Atellica is a new entrant in a market dominated by companies including Roche Holding AG and Abbott Laboratories.

“Siemens has closed the gap relative to the competition,” Morgan Stanley analyst Ben Uglow said in a note in January, commenting on its market share. “But we are not yet convinced it will allow the company to regain lost market share, as switching cost for reference labs and hospitals is material.”

Siemens Healthineers posted profit of 2.49 billion euros on revenue of 13.8 billion euros for the year ended Sept. 30, according to a November statement from the parent company.

From – Bloomberg

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