Reuters
Reuters

MILAN (Reuters Breakingviews) – Breaking up UniCredit could hand its shareholders a 3 billion euro reward. Chief Executive Jean Pierre Mustier is accelerating plans to separate the 16 billion euro bank’s Italian assets from its Germany-centred foreign business, Reuters reports. A spinoff could boost the stock by up to 20%. In a deal with Commerzbank or BNP Paribas, the returns could be even higher.     

Even after a deep clean since Mustier became CEO in 2016, UniCredit’s stock is languishing. At 28% of its tangible book value, Italy’s second largest bank is valued only a little more highly than weaker, smaller domestic rivals like Banco BPM and Banca Monte dei Paschi di Siena. Investors unfairly penalise UniCredit for its Milan base even though it made some 60% of revenue abroad last year. Its Italian exposure also deters foreign suitors and pushes up funding costs.  

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Reuters
Reuters

LONDON (Reuters Breakingviews) – Bertrand Camus is doing his best to evade Veolia’s grasp. The boss of 10 billion euros water-to-waste group Suez has backed a prospective takeover bid by French private equity group Ardian to ward off its rival. Shareholders should remain sceptical.

Ardian’s last-gasp deal attempt appears rather desperate. On Thursday, it said itself and a “mostly French” group of funds intended to bid for Engie’s 29.9% stake in Suez. Camus then added that, if the consortium succeeded, Ardian would immediately make a cash offer on the same terms for the rest of Suez.

An Ardian approach would have some merits. It would ensure all shareholders are treated equally. It carries lower execution risk: Ardian doesn’t have the same anti-competition concerns that Veolia brings. And without the same scope for cost savings, Ardian could offer Suez steel-plated job guarantees in the middle of a pandemic.

Yet

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NEW YORK/LONDON/HONG KONG (Reuters Breakingviews) – Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. REUTERS/Nick Oxford

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– Devon Energy/WPX Energy

– ShipBob funding

MIXED M&A ENERGY. The latest merger between two Permian Basin oil drillers contains just about everything investors need as the industry deals with a coronavirus-induced demand shock. Devon Energy Chief Executive David Hager said Monday’s almost $2.6 billion agreed purchase of WPX Energy will be “immediately accretive on virtually every relevant financial metric in year one.” Some $575 million in savings help; those are worth as much as $4.5 billion taxed and capitalized, or some 75% of the combined market value of the two firms on Friday.

The two are

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Reuters
Reuters

LONDON (Reuters Breakingviews) – Preparing for the worst is a tricky way to shore up confidence. But that is the balancing act Unibail-Rodamco-Westfield attempted on Wednesday with a plan to raise 3.5 billion euros from investors and 4 billion euros by selling assets. The self-bailout should help the owner of shopping malls protect its credit rating. But it requires buyers and shareholders to take a more optimistic view.

The so called “reset plan” is about keeping debt costs down. Ever since Unibail-Rodamco bought Australia’s Westfield in 2018, it’s grappled with a debt pile which topped 24 billion euros at the end of June. Chief Executive Christophe Cuvillier reckons the latest deleveraging, combined with further cost-cutting and paying dividends in stock, will reduce debt to around 30% of assets. That’s down from 41% in June and a long way from the 60% that would trigger debt covenants.

A safety

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Reuters
Reuters

LONDON (Reuters Breakingviews) – Policymakers want to heal the economic wounds caused by Covid-19. Unfortunately, they are driving without headlights on an unfamiliar road.

The confusion starts with public health. It would be useful, to say the least, if politicians, central bankers, business leaders, financiers and other big decision makers knew what to expect from the coronavirus. Instead, they have to base their decisions on guesswork.

Take Rishi Sunak, Britain’s finance minister. He has to decide how long to keep subsidising the salaries of workers who have been sent home because their employers lack the revenue needed to pay them. His plan to end the current generous arrangements in October look premature, set against the rising number of positive virus tests. Stricter limits on social gatherings, announced by Prime Minister Boris Johnson on Wednesday, are likely to dampen spirits and slow down rehiring.

However, the declining number of

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Reuters
Reuters

HONG KONG (Reuters Breakingviews) – China’s tech-focused growth boards are at risk of losing focus. Carmaker Geely wants to raise $3 billion on Shanghai’s hot STAR exchange, part of a surge of mature companies chasing stratospheric valuations on venues built for earlier-stage firms. The trend could water down Beijing’s push to help smaller, cash-strapped companies raise equity.

Shanghai’s STAR market was launched in part to serve young companies that are excluded from the main boards because of strict profitability requirements. China needs to fund its next wave of biotechnology and artificial intelligence upstarts, which burn through cash at light speed but lack collateral for loans.

Besides having looser listing criteria, however, the STAR board also scrapped the semi-official valuation cap of roughly 23 times earnings for companies going public on mainland exchanges. That lured executives at older companies, who correctly concluded that STAR traders would juice their valuations.

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Reuters
Reuters

MUMBAI (Reuters Breakingviews) – Mukesh Ambani is wrapping up a deal to buy a brick-and-mortar shopping rival with a golden bow. A unit of his Reliance Industries conglomerate has agreed to buy the retail, wholesale and supply chain businesses from Kishore Biyani’s Future Group. It’s a fiddly but clever acquisition that girds for online battle with Amazon and Walmart-owned Flipkart.

As a first step in the transaction, Biyani will consolidate his sprawling assets, including Big Bazaar supermarkets and modern warehousing, into the Mumbai-listed Future Enterprises. That company is swapping shares to absorb five related listed companies. It also will swallow up more than a dozen mostly smaller and unlisted firms. Once that’s done, Future Enterprises plans to sell the retail assets to Reliance for an enterprise value of $3.4 billion.

The terms of the Future share swaps are, in one way, generous for shareholders of the affiliates. Owners

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