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WEEKLY MARKET ROUND-UP – 5/07/19

Bags of cash

After buying a struggling Christian Dior in 1984, Bernard Arnault has amassed a 12-figure personal fortune while building his luxury goods empire, LVMH. Today LVMH has sales of c$53bn and over 70 major brands including Louis Vuitton, Givenchy and Hennessy.

Trump unleashes air war

The US could raise tariffs on a further $4bn of EU goods, including Scotch and Irish whiskies, in an ongoing dispute over aircraft subsidies.

In April the US released a preliminary list of potential EU tariff targets to offset what it claims is an estimated $11bn of trade harm caused by EU subsidies to Airbus. But after consultation a further 89 items worth around $4bn, including pasta, cheese, ham and olives, as well as whisky, are now under consideration.

This is the latest move in an almost 15-year WTO dispute over subsidies to Boeing by the US and to Airbus by the EU. 

The EU announced in April it would retaliate in kind should the tariffs go ahead, but confirmation of the trade countermeasures the US could take is expected to hinge on the results of a WTO arbitration due over the summer.

Saudis opt for euro debt

Saudi Arabia has signalled plans to issue its first euro-denominated bonds as a means to diversify its investor base during a year when it plans to raise over $30bn in borrowing to help cover recent falls in the oil price and a $300bn government spending binge.

As Quilter Investors credit analyst Tim Li, opines: “This is a shrewd move from the capital-hungry Saudis who have become one of the biggest emerging market issuers in recent years. It gives them access to a broad new pool of investors while allowing them to take advantage of Europe’s ultra-low interest rate environment.

“If recent history is any guide, these euro-bonds will be heavily over-subscribed thanks to the dearth of yield in developed markets. It’s no surprise that the final pricing is extremely tight.”

The toast of Asia

Plans by Anheuser-Busch InBev to list its Asian business on the Hong Kong stock market could raise $9.8bn, making it the largest IPO this year.

The world’s biggest brewer is planning to sell 1.63bn shares of the Budweiser Brewing Company APAC (Budweiser Asia) at a price of between 40-47 Hong Kong dollars, which would raise between $8.3bn-$9.8bn, well above Uber’s $8.1bn debut in May. At the top end this would value Budweiser Asia at up to $63.7bn.

The money raised by the listing would help AB InBev pay down some of the $100bn debt it has built up after the acquisition of SABMiller in 2016. However, AB InBev noted one of the reasons for the listing was to create a ‘champion’ in the region, with reports suggesting the move could also be a way to open up further M&A opportunities.

Lego men lay siege to homeland in £6bn deal

The private equity fund which represents the founders of Denmark’s iconic Lego has partnered with Blackstone and a Canadian pension fund to buy the remaining shares in Merlin, the owner of Madame Tussauds (and part owner of Legoland Windsor), in a £5.9bn deal to take the company private once more.

Merlin, the world’s second-largest operator of visitor attractions after Disney with 120 tourist sites in 25 countries, saw its shares jump 14% on the news.

Taking the company private after a relatively short and disappointing stay on the stock market would enable it to reinvest in growth areas such as China and to complete the refurbishment of classic UK family locations such as Legoland, Madame Tussauds, Alton Towers and the London Eye.

Chart of the week

Independence Day: Data this week will reveal whether or not increased oil output has made the US independent of overseas oil producers. Even so, its goods deficit with the rest of the world remains perilous.

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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