Spotify Strikes Merlin Deal
The music streaming leader has signed a new multi-year deal with the digital rights agency that represents 20,000+ independent record labels.
Editor’s Remarks: Merlin is already Spotify’s fourth biggest supplier of songs, making the global licensing deal an important building block for Spotify’s efforts to create the groundwork for an IPO despite its current loss-making model. Having hooked Universal, the world’s largest record label, with a deal earlier this month allowing Spotify Premium subscribers to ‘window’ albums two weeks earlier, Spotify might now offer the same privilege on Merlin’s huge range of artists. Through Merlin, it gains a host of smaller labels with important names on the other side of the Atlantic, from Beggars Group’s Adele and Radiohead to Warp’s Aphex Twin and Flying Lotus, casting a wider net for monetising opportunities.
What to watch: Spotify AB, Merlin Entertainment, Sony Music Entertainment, Warner Music Group
Philip Morris Burnt on Earnings
The tobacco titan saw more than $6.5bn wiped off its market value after its first quarter report fell short of expectations.
Editor’s Remarks: The world’s largest publicly listed tobacco company saw disappointing figures, including a 0.3% fall in net revenues (excluding excise taxes) to $6.06bn during the first three months of the year – well short of analysts’ average expectations of a rise to $6.47bn – sending its shares down 3.7% by the end of the day. Philip Morris’ sales have been hit in recent years as more and more smokers stub out their habits, particularly with the rise of vaping, illustrated by the 11.5% slump in cigarette shipment PMIs this quarter. Big Tobacco is well aware of the falling trend though, so much of Philip Morris’ bad surprise may be down to a strong dollar hitting the US-based company’s revenues.
What to watch: Philip Morris, Imperial Brands, British American Tobacco
UK’s £2.3bn Green Investment Sale
Britain’s state-owned Green Investment Bank’s delayed sale to Macquarie has been signed off for £2.3bn.
Editor’s Remarks: The deal marks the first major privatisation under Theresa May, originally drawn up by former Chancellor George Osborne as part of his deficit reduction programme. The bank, which has invested more than £2.7bn in green energy projects, has been up for sale since 2015, but repeated delays due to political opposition from left-leaning UK parties has drawn it out until Australian infrastructure bank Macquarie finalised the deal. Concerns have been raised over potential asset stripping by its antipodean suitor, though if it lives up to expectations that it will commit another £3bn to projects over the next three years, it might make little difference to the future of the green economy either way.
What to watch: UK Green Investment Bank, Macquarie Group, Sustainable Development Capital
High Frequency Mega-Deal
Virtu Financial will by its high-frequency trading rival KCG Holdings for $1.4bn.
Editor’s Remarks: The acquisition will make the combined company one of the largest players in the US equity market. The change could come at a timely moment for both sides as the HFT world has been squeezed by shrinking profits due to the lowest levels of market volatility in around twenty years. At the same time, the cost of data and the latest technology has swollen. Virtu hopes the merger will go some way to solve this – it predicts cost savings of $208m (net of pre-tax expenses), for example – but the $1.65bn of debt it is taking on to finance the deal makes it a big gamble on the future.
What to watch: Virtu Financial, Citadel Securities, KCG Holdings
Oman Catches Privatisation Bug
The sultanate’s oil minister said it is looking into privatising parts of its state-owned energy infrastructure.
Editor’s Remarks: Oman could end up selling some major downstream assets (those involved in the post-extraction part of the oil industry) as it looks to deal with the general slump in crude prices in the short-to-medium term, and in the longer term diversify its economy – and deal with its deep budget deficit, which now stands at 17% of GDP. It looks as though Oman has been influenced by Saudi Arabia’s decision to float a stake in its state-owned oil-producing giant Saudi Aramco, though Oman’s plan differs from its Gulf neighbour in that it has ruled out selling any upstream assets.
What to watch: Mohammed al-Rumhy, Salalah Methanol Company, Gulf Cooperation Council, Saudi Aramco IPO