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What to Watch: Hostile bid for Just Eat, Premier Inn profit slump, UBS

Edmund Heaphy
Finance and news reporter
A Just Eat food delivery rider in Wales, United Kingdom. Photo: Matthew Horwood/Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

South Africa’s Naspers makes hostile £5bn bid for Just Eat

A unit of South African technology investment firm Naspers on Tuesday launched a hostile £4.9bn all-cash offer for Just Eat (JE.L).

Prosus (PRX.AS), which is Europe’s largest consumer internet company, has offered Just Eat shareholders a 20% premium on the price offered to them as part of the proposed all-stock merger with the Dutch Takeaway.com.

Prosus is majority owned by Naspers, and launched on the Amsterdam stock exchange early last month.

In July, the London-based Just Eat said that it had agreed to merge with Takeaway.com, creating an £9bn company with roughly 360m global takeaway orders.

Under the proposed deal, which would be structured as a takeover of Just Eat by Takeaway.com, Just Eat shareholders are being offered 594p a share, a 15% premium on the July trading price.

Shares in Just Eat had declined to around 589p since the Takeaway.com offer, however. They surged by almost 25% on Tuesday, to 733p, in the wake of the Prosus bid.

Just Eat had been under sustained pressure from activist investor Cat Rock Capital to combine with a rival delivery firm. But Eminence Capital, one of Just Eat’s largest shareholders, had called the Takeaway.com offer “high opportunistic”, saying it grossly undervalued the company.

Both Just Eat and Takeaway.com are in a heated battle in Europe with Deliveroo and Uber Eats. Amazon in May announced a £575m investment in Deliveroo, but that deal has been put on hold pending an inquiry by the competition watchdog.

Prosus has a valuation of more than €100bn, largely thanks to stakes in technology companies such as Tencent. It controls iFood, the largest food delivery company in Latin America.

Premier Inn blames Brexit uncertainty for profit slump

Premier Inn-owner Whitbread (WTB.L) warned that continued Brexit-related uncertainty was denting its bottom line, as the company said on Tuesday that pre-tax profits in the first half of its financial year fell 7.1% to £220m.

The company, the UK’s largest hotel operator, said that weak confidence in the business and leisure sectors had coincided with “heightened political and economic uncertainty”.

This had impacted demand for hotel rooms in the UK, where 80% of Premier Inn hotels are located, the company said.

Noting that the weak demand and uncertainty had continued into the second half of its financial year, Whitbread said it was “difficult” to predict how the situation would evolve over the next year.

Revenue for the first half of the year, which ended in August, was “broadly flat” at around £1.08bn. The figures exclude contributions from Costa Coffee, which Whitbread sold to Coca-Cola in 2018 for £3.9bn.

While the company reported 7.6% growth in London, total UK accommodation sales fell by 0.6%. Like-for-like sales, meanwhile, fell by 3.6%.

UBS warns 'low and negative interest rates' hitting business

UBS (UBSG.SW) reported a fall in income and pre-tax profit on Tuesday, as it warned that the global economy remains “challenging.”

The Swiss bank reported pre-tax profit of $1.3bn for the third quarter, down 21% on the same quarter last year but above analysts expectations. Shares rose 2% in Zurich.

Profit declined in all businesses except asset management. UBS blamed the “challenging environment”.

“Geopolitical tensions and trade disputes continue to impact investor confidence,” the bank said. “Positive momentum toward resolving these issues would likely improve confidence and the economic outlook.”

The bank warned that “low and persistent negative interest rates and expectations of further monetary easing” would also continue to hurt the business. A bank’s core business of writing loans depends on a spread between the interest rate it can attract capital at and the interest rate it lends at. Low rates cut margins and negative rates leave banks facing loses.

The headline Swiss interest rate is -0.75% and UBS already charges some rich clients for holding cash deposits. The European Central Bank (ECB) cut interest rates to -0.5% in September and other central banks around the world are expected to cut rates in the coming months.

Auditors had concerns about Thomas Cook for years

Auditors repeatedly asked Thomas Cook management for reassurances the business was not about to go bust for a decade before its collapse, MPs heard on Tuesday.

Hemione Hudson, head of audit at PwC, told the Business, Energy, and Industrial Strategy (BEIS) select committee there was “considerable debate and challenge of the board” of Thomas Cook while PwC was auditor between 2007 and 2016.

“Quite often going concern was raised,” Hudson told MPs.

‘Going concern’ is an accounting label given to a business that can continue to pay its bills for the next year. If a business is not a ‘going concern’ it will most likely have to raise money or risks going bust. Auditors have a duty to warn investors if they think a business is at risk of losing its ‘going concern’ status.

“The company needs to form a view with regard to whether or not they believe they’ll be able to meet their liabilities as they fall due from the 12 months from the date of the signing of the accounts,” Paul Cragg, an audit partner at PwC, told MPs. “The auditor, and I as audit partner, need to be comfortable… that the assessment made by management is appropriate.”

European stocks mixed

European stocks were mixed on Tuesday, with the FTSE 100 (^FTSE) climbing by around 0.4%. Germany’s DAX (^GDAXI) was steady, while France’s CAC 40 (^FCHI) declined 0.32%.

The pound hovered against the dollar and the euro as MPs prepared for another crunch vote in parliament on the UK government’s new Brexit deal.

UK prime minister Boris Johnson is launching another last-ditch bid to push through Brexit legislation before the 31 October deadline.

Sterling remains near five-month highs against the dollar, but dipped slightly in early trading, sinking by 0.2% to around $1.29 (GBPUSD=X) and by 0.1% around €1.16 (GBPEUR=X).

What to expect in the US

Futures are pointing to a slightly lower open for US stocks.

S&P 500 futures (ES=F) are down 0.06% and Dow Jones Industrial Average futures (YM=F) are down similarly. Nasdaq futures (NQ=F) are also down marginally.

Companies reporting later on Tuesday in the US include:

  • JetBlue Airways (JBLU)

  • McDonald’s (MCD)

  • Chipotle Mexican Grill (CMG)

  • Procter & Gamble (PG)

  • Harley-Davidson (HOG)