⛏️ Glencore Tries Again

UK stocks continued their green streak, Glencore came back for a second bite of Teck, UK IPOs have dived off a cliff edge this year, UK consumer spending increased (but still lagged inflation) and the IMF slightly eased on their downbeat outlook for the UK.

April 12, 2023

Good morning. In today’s update - UK stocks continued their green streak, Glencore came back for a second bite of Teck, UK IPOs have dived off a cliff edge this year, UK consumer spending increased (but still lagged inflation) and the IMF slightly eased on their downbeat outlook for the UK.

Markets

A solid day all round for UK markets on Tuesday as stocks finished higher, buoyed by miners (positive sentiment around Glencore’s increased bid for Teck) and housebuilders (broker upgrade for Persimmon). On the other hand, JD Wetherspoon, Hilton Food Group and Premier Foods all turned lower on news that UK consumers have been eating out less. Overall, the FTSE 100 and FTSE 250 gained +0.6% and +0.8% respectively.

Top Stories

⛏️ Glencore came back swinging

Just one day after Teck Resources’ CEO called its initial bid a “non-starter”, Glencore hit back with a sweetened offer for the Canadian Mining giant. The new offer is at the same valuation ($22.5bn), however it provides Teck shareholders with an option to take cash, rather than shares, in the proposed coal business spinoff. This is key for Teck shareholders who had raised objections to the original all-share proposal, as it left them with exposure to Glencore’s thermal coal business*. Analysts at Jefferies believe Glencore will also need to up the price if they want to secure Teck’s approval.

*For context - Glencore’s plan is to combine the two company’s metals businesses (plus Glencore’s oil trading unit) into one (“MetalsCo”), whilst also combining Teck’s steelmaking coal unit and Glencore thermal coal unit together (“CoalCo”). Teck shareholders are kicking up a fuss over Glencore’s thermal coal business, which is the most polluting fossil fuel.

📉  UK IPO proceeds nosedived in Q1 this year

A report from EY on Tuesday showed proceeds from UK IPOs dropped 80% in Q1 compared to the same period last year (and down a staggering 99% compared to 2021). Total proceeds raised total just £81m, with only two IPOs on the Main Market so far (Dar Global and Streaks Gaming). However, keeping the UK’s performance in context - global IPO proceeds are also down 61% year-on-year in Q1 as markets collectively deal with macroeconomic uncertainty, geopolitical tension and rampant inflation.

🛍️ Consumer spending lags inflation

Data from Barclays showed UK consumer spending increased year-on-year to March, but lagged inflation by a significant margin. Spending increased just 4% compared to the latest inflation figure of 10.4%. Barclays’ survey found people were still concerned about sky-high energy bills, choosing to cut back in areas like eating out (restaurants reported a 5.6% drop in customer spending) and clothing.

Separate data from the British Retail Consortium on wider UK retail spending also showed similar trends, increasing just 5.1% year-on-year to March.

🇬🇧 IMF’s gloomy outlook on UK eases (somewhat)

In its twice-yearly World Economic Outlook, the IMF now expect the UK’s economy to shrink by 0.3% - up from its previous prediction of a 0.6% drop and the biggest improvement for any G7 country - followed by a 1% rise in 2024. However, this still puts the UK at the bottom of the G7 for 2023, with Germany the only other country expected to see a pullback in GDP. The IMF’s forecasts were slightly worse than those of UK fiscal body OBR, whose latest forecasts see the UK shrinking 0.2%.

What Else Happened?

Economics / Politics / General

The number of UK pubs shutting down per month increased 60% so far in 2023 as higher costs bite…

…and the number of UK companies entering administration jumped to the highest level since the height of the pandemic in March 2020.

Deals

Potential buyers of Manchester United head for a third round of bids.

Spectral MD - an AIM-listed healthcare company - is moving its stock market listing to the NASDAQ in a $170m SPAC deal, at a 260% premium to its current valuation.

An emerging markets-focussed investment trust is eyeing a £100m IPO this year in a boost to the London Stock Exchange.

Infogrid - the UK startup using AI tools to analyse data on companies physical spaces, including temperature and air quality - raised a $90m Series B led by Northzone.

Residential energy services provider Hometree is set to announce a $46m equity raise, led by Legal & General, alongside the acquisition of a green home improvement financing platform.

Elsewhere in VC land - Glasgow-based SOLASTA Bio raised a £4m Series A to fund an eco-friendly insecticide, Allotrope raised £5.3m to support development of its batteries that are powered by trees, and BX Technologies raised £1.5m to fund its journey of decarbonising the food and drink industry.

Company News / Trading Updates

Cineworld shares were sent to all-time low as restructuring plans filed in Texas provided no return for equity holders (which, in fairness, is what Cineworld repeatedly said would happen).

Revenue at bowling venue operator Hollywood Bowl grew 11% year-on-year to a record £111m for the six months to March; CEO Stephen Burns hailed the company’s “great value for money” offering amidst the cost of living crisis. (Official)

🌎 Global Snapshot

Big four accountant EY has parked plans to split up its audit and advisory businesses following internal disputes at the US office.

US-listed miner Newmont tabled its best and final offer for Australia-based Newcrest Mining, at $19.5bn, in what would be the third largest ever deal for an Australian company.

Warren Buffet has his sights set on Japanese trading houses; Berkshire Hathaway raised stakes in all five of its holdings, with Buffett saying he would “love” to partner with them.

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