Jewelry Acquisition, HBC Troubles, Alberta Pension Plan
LVMH buys Tiffany & Co
Louis Vuitton Moët Hennessy (LVMH) treated itself to an early Christmas present, purchasing Tiffany & Co for a cool $16 billion USD. LVMH is the world’s biggest luxury company, holding brands like Christian Dior, Sephora, Marc Jacobs, and Fendi. The move is a strategic play by LVMH to capture the ‘hard luxury’ market, which is one of the fastest growing (and most profitable) sectors in the fashion business. Tiffany & Co will join LVMH’s extensive jewelry holdings which include Bulgari and Tag Heur as it attempts to compete with industry leader Richemont, which owns Cartier and Van Cleef & Arpels.
Spotify wants to become your podcast destination
Spotify has been quietly making moves to become your go-to destination for all earbud related content, by aggressively moving into the podcast space. First, Spotify has released 22 exclusive podcasts with celebrity hosts (including the Obamas, casual), and acquiring smaller podcast producers and platforms to encourage listeners to download and spend more time on Spotify rather than bigger competitors like Stitcher or Apple Music (which is where 52% of podcast fans get their music). The move isn’t just about expanding Spotify’s lines of business – podcasts draw in more advertising money than music, and unlike music, do not require Spotify to pay royalties.
Saudi Aramco to IPO* this week
On December 4, Saudi Aramco, the world’s largest oil and gas company, (and the Earth’s most valuable company, no biggie), will go public. Aramco, which is currently owned by the Saudi state, was hoping to retrieve a $2 trillion USD valuation by going public, but things haven’t been looking so hot. The lack of buyer interest has forced Saudi Arabia to scale back its original plan to sell 5% of their shares to just 1.5%, significantly lowering the company’s exposure to market risk. Whatever the outcome though, they’ll almost certainly surpass the current record holder for the world’s biggest IPO – Alibaba IPO’d in 2014 for what now seems like a mere $25 billion USD.
*Reminder: An Initial Public Offering (IPO) is the process by which a private company ‘goes public’ and becomes listed on a stock market. The marketplace then determines the value, or valuation, of the company’s share price as traders buy and sell. Learn more here.
Hudson’s Bay Might Have a Buyer
Hudson’s Bay- the iconic Canadian department store retailer- has been struggling to keep up with consumers since online shopping has taken the industry by storm.
Reports of store closings, asset liquidation, and management changes have been troubling The Bay over the past five years. This week has been especially hard on the former retail giant, appearing twice in the news for receiving a valuation of $0 on one of their iconic pieces of real estate and for defaulting on creditors in the Netherlands.
Wednesday marked the third headline for Hudson’s Bay with Catalyst Capital Group Inc., a Canadian firm which holds a 17.5% stake in The Bay, offering $11 a share in cash for the entire company. Its bid is fully financed, and the proposal represents a 6.8% premium to the $10.30 a share that Hudson’s Bay Chairman Richard Baker and his partners initially agreed to pay for the privatization of the company in October.
On December 17th shareholders will vote on which bid to proceed with. If shareholders can’t agree to sell to the highest bidder and cash out, the privatization drama will continue to play out in the news.. and here on Btchcoin, of course.
Alberta’s Teachers Are Angry…
Have you heard about Bill 22 in Alberta? The omnibus bill was rushed into a law in a staggeringly short amount of time – first introduced on November 18th, Bill 22 received royal assent (becoming official law) by November 22nd.
So what does Bill 22 have to do with finance? Most notably, it will lock in pension assets from all public sector pension plans under the management of Alberta Investment Management Corporation (AIMCo), which currently manages the investment of $108.2 billion worth of endowments and other government funds.
Not everyone is happy about this – the Alberta Teacher’s Association, which will have over $18 billlion dollars of retirement funds transferred to AIMCo, voiced concerns that contributions would increase and teachers’ pension plans would drastically change. Notably, the Alberta Teacher’s Retirement Fund has outperformed AIMCo’s returns in the past – so teacher’s aren’t thrilled about switching money managers.
Alright, let’s hit pause and back it up for a second.
First, where did this start? As part Premier Jason Kenney’s ‘Fair Deal Panel’ to advance the economic interests of Alberta, the repatriation of nearly $40 billion in Canada Pension Plan assets will be explored.
The justification? Alberta is a relatively young province and many Albertans decide to relocate to the coast or interior B.C. when they retire. As a result, Albertans pay approximately $3 billion more in payroll taxes than what Albertan retirees receive in CPP benefits.
Part of the apprehension over the transfer of funds to AIMCo stems from a concern that the money will be used to stimulate investment in the Canadian oilsands to an extent that is more political than financially responsible.
For one, many large financial institutions are reducing or completely divesting from fossil fuel companies due to pressure from climate activists.
Second, some doubt whether AIMCO, with it’s heavy investment in the Canadian oil and gas industry, can be relied upon to produce the investment returns needed to meet obligations to retirees in the coming decades. As it stands, AIMCo lacks geographical diversification – 80% of AIMCo’s holdings are investments in North America.
One thing’s for sure – teachers aren’t known to back away from a fight. It’s likely this issue will be top of mind for Albertans into the new year.