Pound drops below $1.29 after Brexit vote; factory downturn worsens –business live

Graeme Wearden

from Economics | The Guardian on 2019-10-22 20:05 (#4SZJ4)

Rolling coverage of the latest business and financial news, as home delivery firm Just Eat receives a rival takeover offer

Earlier:

Premier Inn suffers from economic uncertainty

9.05pm BST

Finally, the Brexit drama appeared to knock stocks a little lower in New York.

The main US equity indices have just closed in the red, amid Brexit disappointment (and possibly some confusion about another day of arcane parliamentary procedure).

US stocks failed once again to reach record territory and investors hit the sell button once Brexit became impossible to be delivered by October 31st. The market was beginning to become a little too optimistic that a Brexit deal was going to get done. Market uncertainty is the biggest bane to the UK economy and until we go through the motions of the general election, we should see the British pound slowly grind higher.

8.29pm BST

Paul Dales of Capital Economics reckons a disorderly Brexit now looks less likely, as Johnson has 'paused' the legislation to bring his deal into law.

He suggests a short delay could boost the pound:

A delay to Brexit now appears the most likely scenario and the chances of a near-term deal have diminished a bit.

A short delay to finalise a deal would not be a blow to economic growth and the pound, especially if it were followed by a deal that would eventually prompt both to rise. In that case, we suspect the pound would climb pretty quickly from $1.29 now to around $1.35.

8.27pm BST

Here's Naeem Aslam of Think Markets on the pound's sudden rise, then tumble back below $1.29.

Traders pushed the sterling on the back of the first vote and then traders quickly took the profit off the table as the second vote came in. The short term time table was never going to fly and now we are looking for extension.

The no-deal Brexit threat is off the table and the fact is that if we this drama leads us to election, Johnson is going to be the strongest candidate and highly likely to win the election.

Pound takes a bit of a tumble after govt is defeated on timetabling of Brexit legislation. Here it is vs US$: pic.twitter.com/uiHn4hn9j6

7.44pm BST

Newsflash: Sterling has taken a dive back to $1.29, as MPs reject the government's timetable for the Brexit bill.

The vote isn't even terribly close -- with 322 MPs rejecting the plan, and 308 in favour.

Pound drops back to $1.29 as MPs reject Brexit bill timetable. Not a plunge, though, as the bill is now 'paused' https://t.co/qEuzCFsYKa pic.twitter.com/oS3SmXJMmI

7.23pm BST

Newsflash: The pound has rallied back towards the $1.30 mark, after the UK government won the first of two crucial votes on Brexit.

MPs have voted to allow the government's withdrawal agreement bill to pass to the next stage of the parliamentary process.
They voted by 329 votes to 299; a majority of 30 on the second reading.

5.56pm BST

The prospect of a bidding war helped Just Eat to close 25% higher at 735p, above today's 710p offer.

5.55pm BST

The FTSE 100 index has closed 48 points higher at 7,212, up 0.68%.

The weaker pound lifted exporters and multinationals, while trade war optimism also pushed equities higher following positive noises from China and New York.

4.27pm BST

The pound is clambering back a little as the Brexit debate continues, back to $1.295.

But if parliament rejects the government's legislative timetable tonight, it could fall back sharply....

pound testing 100-hour moving average. Doesn't like prospect of this deal being pulled tonight if program motion fails pic.twitter.com/3x8TIieZwZ

3.33pm BST

The WeWork saga has taken another dramatic twist, with Adam Neumann reportedly signed a $1.7bn deal to step back from the company he founded.

It's part of a $10bn rescue plan for the troubled office rentals company, led by its biggest investor, Japan's SoftBank.

According to The Wall Street Journal, SoftBank will give Neumann almost $1.7bn as part of the deal - $1bn from the sale of his shares plus a $185m consultancy fee and a $500m line of credit.

The payout comes as WeWork weighs up sacking about 2,000 people. The redundancies are on hold while WeWork refinances but are expected soon.

Adam Neumann just landed a $185 million "consulting fee" after overseeing one of the biggest corporate meltdowns of this very fine era.

I think that's more than literally any CEO in this country made last year, except for Musk and the man who runs Tilrayhttps://t.co/tGhlCLyZzC

3.23pm BST

Takeaway.com has responded to Prosus's 4.9bn attempt to gatecrash its merger with Just Eat.

The Dutch food delivery firm insists its offer is superior (even though it's only worth less in cash terms).

"We think our bid is better as it gives shareholders of Just Eat the opportunity to benefit from the advantages of our merger,"

"We also offer shareholders more certainty."

2.44pm BST

Ed Conway of Sky News points out that the pound may be on Boris Johnson's side, for a change....

Interesting change in pattern of how sterling reacts to Brexit developments. Up until last wk when Commons defied govt, sterling would tend to rise. These days when Commons defies govt it tends to fall. For first time in ages, markets, in this sense, seem to be on govt's side. pic.twitter.com/ddYjy7Fk3q

2.34pm BST

Here's a neat chart from Vincent Flasseur of Reuters Breaking Views, to illustrate the Just Eat takeover battle:

Naspers spinoff wades into UK food delivery fight https://t.co/tCm4E399kF @KarenKKwok pic.twitter.com/c9NSq2zkW9

1.56pm BST

Brexit jitters have pushed the UK-focused FTSE 250 index down 0.3% today, as investors worry about further delays and confusion.

But the FTSE 100 is up, as the weakening pound boosts exports. Just Eat's 25% surge is helping too.

1.50pm BST

The pound has now fallen below $1.29, down half a cent today, as Brexit anxiety rears up again.

Political journalists are reporting that Boris Johnson will abandon plans to get his Brexit deal into law this week if MPs reject the three-day timetable.

Not sure he will spell it out at the despatch box, but it seems if MP s won't agree govt timetable for Brexit legislation tonight, they will pull it, and if EU then offers a delay, they would push straight for an election instead

No 10 source says, 'if Parliament votes again for delay by voting down the programme motion, and the EU offers delay until 31 Jan -- then we will pull the Bill, there will be no further business for Parliament and we'll move to an election before Christmas'

Understand there have been pretty fraught conversations among Tory MPs over whether to do this or keep going and accept a slower timetable set by Parliament - govt seems to have chosen instead essentially to go on strike if the Brexit legislation doesn't progress tonight

NEW: If MPs vote down the timetable for today's Brexit bill, the govt will pull it completely and go for an election before Christmas. That will be very hard for Labour to refuse, if the EU confirms an extension until the New Year.

1.29pm BST

MPs on the business committee have been uncovering what went wrong at Thomas Cook today, and has some stern words for its auditors.

Committee chair Rachel Reeves told EY and PricewaterhouseCooper that the auditing profession is 'complicit' in recent failures.

"I wonder how many more company failures, how many more egregious cases of accounting do we need? We've had BHS, we've had Carillion, we've had Patisserie Valerie and now we have Thomas Cook. How many more do we need before your industry opens its ideas and recognises that you are complicit in all of this and that you need to reform?"

"We can't rely on you to do the right thing and legislation is needed. We need tougher regulation because your industry is not willing to make the changes needed. Reform is long overdue."

Martin McTague of the FSB comments that #ThomasCook was in the habit of paying its suppliers late. This was apparent from its books, though I haven't mentioned it before. Huge "trade payables" item on its balance sheet, omitted from "net debt" and therefore not backed by cash. 1/

McTague also observes that because so many UK companies pay suppliers very late, late payment is not necessarily a sign that a company is in trouble. I disagree: there is evidence that systematically late payment is a red flag for investors.

1.06pm BST

The pound just dipped again on reports that veteran Conservative backbencher Ken Clarke may oppose the government's schedule to rapidly approve its Brexit bill this week (explained earlier).

That vote (at 7.15pm UK time) could be very tight -- if Boris Johnson loses, it's hard to see how a deal can be agreed in time for 31 October.

KEN CLARKE PROB VOTE AGAINST TIMETABLE - EVENING STANDARD

Feeling in Downing Street: losing programme motion would show that this parliament would not and could not pass any form of brexit. So waste of time to press ahead + PM has a brexit deal for general election platform

12.55pm BST

Adam Vettese, an analyst at multi-asset investment platform eToro, predicts a bidding war for Just Eat... although buyers should beware, given its recent slowdown in sales.

"The bidding war for Just Eat has added a bucketload of spice to the UK's already ultra-competitive takeaway market. "While Just Eat has rejected the unsolicited bid from Prosus, it wouldn't be a huge surprise to see both it and rival bidder, Takeaway.com, return to the dinner table with better offers.

"But this comes at a time when there are big question marks over the UK's 8.1 billion a year takeaway market. "This week, Just Eat itself warned of 'softer consumer spending' - or essentially that people are spending less on takeaways - as it announced a slump in revenue growth compared with the same period last year.

12.54pm BST

Today's surge has taken Just Eat's share price back towards the highs seen in July, when Takeaway.com launched its share-based takeover bid.

At you can see, Just Eat has been falling steadily since -- matching the decline of Takeaway.com's equity.

12.37pm BST

Just Eat's 11th-largest shareholder has come out and opposed today's 4.9bn takeover, claiming it's not big enough.

Cat Rock Capital Management, which owns 3% of the food delivery firm, claims 710p per share is too low -- even though that's 20% above last night's closing price.

"The Prosus offer underscores the significant long-term potential and strategic value of Just Eat's business. However, unlike the Takeaway.com offer, the Prosus offer does not allow Just Eat shareholders to participate in any future value creation through the equity of the combined businesses.

Prosus should share this future value creation with Just Eat shareholders by paying a fair premium.

The Prosus offer of 710p per share dramatically undervalues Just Eat's equity, representing a multiple of only 3.8x fiscal year 2020 consensus revenue before ascribing any value to Just Eat's valuable stake in iFood in Brazil.

Based on historical transaction precedents and market multiples, Prosus should pay at least 5.0x Just Eat's fiscal year 2020 revenue, again attributing no value to Just Eat's valuable stake in iFood. This multiple would translate to an all-cash offer of at least 925p per share.

12.09pm BST

Today's CBI industrial trends report really is a stinker, with factory bosses extremely pessimistic about the future:

Rotten @CBI_Economics survey of UK factories.

Every gauge of future activity has hit a multi-year low: pic.twitter.com/UFwIjQ5lcu

12.07pm BST

UK government borrowing is rising faster than planned, in a blow to the government's claim to be tackling the deficit.

New ONS figures show that Britain borrowed 9.4bn to balance the books in September. That's 600m more than in September 2018, and the first September year-on-year borrowing increase for five years.

The chancellor has suffered a squeeze on public spending in the run-up to next month's budget after an increase in borrowing to 9.4bn in September.

A spending upturn across Whitehall departments and the rising costs of the winter fuel allowance for pensioners pushed borrowing beyond last September's 8.8bn, knocking Sajid Javid's plans to inject billions of pounds into public services and infrastructure projects in his first budget on 6 November.

The government's economic management is in chaos and this doesn't even take into account the unfounded electioneering spending promises Johnson has made. Nobody can believe he will fulfil any of these publicity stunt promises. https://t.co/jbBUIMTQ3f

12.02pm BST

UK factories' fear of quotas and red tape getting in the way of exports now highest since 1983, according to the CBI.

Trade wars, Brexit taking a toll. pic.twitter.com/3nZNIr6kmh

11.49am BST

Back in the City, shares in Just East have jumped 26% to 742p.

That's sharply above today's surprise 710p takeover offer from Prosus.

Just Eat 740p now - #biddingwar

11.36am BST

UK factories are being hit by a double-whammy of Brexit woes and trade war anxiety, says the CBI:

A combination of ongoing Brexit uncertainty ahead of the 31 October deadline and weaker global growth seems to have played a large role in the worsening of export order expectations.

Notably, the share of manufacturers citing political/economic conditions abroad as a factor to limit export orders in the next three months was at a survey record high.

11.32am BST

The CBI also points out that other European manufacturers are also downbeat.... just not as gloomy as in the UK.

11.25am BST

UK companies are also slashing their investment plans in the face of Brexit uncertainty, today's CBI report shows:

11.16am BST

Newsflash: UK factories order books are shrinking at the fastest pace since the last recession.

The CBI's latest healthcheck on British manufacturing shows that output and orders are both falling sharply, as Brexit uncertainty hurts the economy.

Manufacturing output continued to fall in the three months to October.

Total new orders declined at a similar pace to July, driven by falls in both domestic and export orders. Brexit concerns have clearly driven concern about the near-term outlook for exports, with citations of political & economic uncertainty abroad and quota/import licence restrictions spiking to multi-decade highs.

10.59am BST

Prosus is trying to take advantage of the fact that Takeaway.com's all-share offer has fallen in value since it was pitched in July.

That's because Takeaway.com's stock has been steadily dropping. So, having initially valued Just Eat at 731p, the latest implied offer for the company prior to the Prosus bid was a more meagre 594p, says Neil Wilson of Markets.com.

The more Takeaway.com shares fell after the bid the less attractive the offer and the greater the likelihood of a cash counter bid. Takeaway.com shares are trading +4% on this.

There have been doubts about the Takeaway.com offer being a bit low-ball. The Prosus offer is in many ways very cheeky and even more low-ball - it's still under the 731p initial offer from Takeaway.com and whilst it has been rejected, will certainly up the ante and could force Takeaway.com into raising its offer as it looks in a weakened position due to the stock's decline. As we mentioned in July after the news of the Takeaway.com bid, investors were minded to think there was a prospect of a bidding war, with potentially Amazon coming in after the CMA called a halt to its integration with Deliveroo.

10.31am BST

Prosus's surprise takeover bid is online here: Cash offer for Just Eat by Prosus

Just Eat's rapid rejection is online here: Rejection of unsolicited Offer by Prosus N.V.

10.20am BST

Arash Massoudi of the Financial Times believes Prosus may have to stump up even more money for Just Eat.

Its current offer of 4.9bn is substantially more than the 4bn the firm was worth yesterday -- but may not be enough!

How long did Just Eat take to scorch the Prosus offer? About an hour. Hearty rejection. This is going to get ugly. "significantly undervalues" aka bump by more than 10% expected if you want us to consider. https://t.co/L5bPFY2b0o

10.10am BST

BREAKING: Just Eat has rejected the 4.9bn all-cash offer from Prosus.

In a statement to the City, it claims that Prosus's proposal "significantly undervalues Just Eat and its attractive assets", and its prospects on a standalone basis and through a merger with Takeaway.com.

Accordingly, the Board of Just Eat unanimously recommends that shareholders reject the Prosus Offer.

The Board of Just Eat has engaged fully with Prosus throughout this process, including providing access to Just Eat management and due diligence information in accordance with its obligations under the Code and with the intention of providing Prosus with sufficient information to put forward an attractive and compelling valuation of Just Eat.

Prosus has not provided such a valuation and proposal to the Board of Just Eat.

10.04am BST

Prosus's CEO Bob van Dijk is discussing the offer now.

He says that Just Eat's shareholders will appreciate the "merits" of Prosus's proposal (including its offer of cash, rather than shares in Takeaway.com).

We presented this idea to the Board of Just Eat, in good faith, but we have been unable to engage constructively in what we see as a compelling proposition for Just Eat shareholders.

9.58am BST

Prosus's surprise takeover bid for Just Eat has caused excitement in the City (and is a welcome distraction from Brexit).

Here's some early reaction:

Food delivery fight! Naspers spinoff Prosus launches 4.9bn cash bid for UK group Just Eat. Challenges rival offer from https://t.co/RvwYqLld4X.https://t.co/ESNo8C9fLu

Non agreed bid approach for Just Eat by Prosus for 4.9 billion. Trumps by 20% the value of https://t.co/XmH6tlT44x share offer previously announced. Consolidation of the food delivery market continues at pace

Naspers spinoff Prosus in with a massive 5 billion pound bid for Just Eat - 20% higher than https://t.co/YpjyM4OpwN's offer. This is a day after Just Eat reported orders were slowing in a highly competitive UK market. What am I missing?!

9.54am BST

This 4.9bn takeover comes only a day after Just Eat disappointed investors with its latest financial results.

Just Eat's revenue growth slowed to 25% in the third quarter of this year, down from 30% in the first half. Although still pacy, this created anxiety that it is losing market share to rivals.

9.45am BST

Prosus is also pledging 'substantial investment' to help Just Eat grow its own delivery arm.

It says:

Based on Prosus's global experience and having met Just Eat management and reviewed the information provided, Prosus believes that the business will require substantial investment, in excess of that planned by Just Eat management.

9.39am BST

Prosus is hoping that its offer to pay cash for Just Eat shares will persuade investors to reject the all-share merger with Takeaway.com.

It points out that shares in the sector have slid since the summer:

Since the start of the Offer Period the High Growth Internet Sector and Online Food Delivery Sector have fallen 16.9 per cent. and 15.0 per cent. respectively

Against this backdrop, continued market volatility and macro-economic uncertainty, the Prosus Offer provides Just Eat Shareholders the certainty of an all-cash Offer.

9.30am BST

Breaking: A tasty takeover battle has just broken out for Just Eat, the food delivery firm.

Prosus has recently approached the board of directors of Just Eat with a number of indicative proposals to acquire Just Eat. Prosus and the Just Eat board have not managed to reach agreement.

Consequently, Prosus is making this announcement in order to give Just Eat Shareholders the opportunity to consider the Offer.

9.20am BST

International investors and business leaders may not be impressed by the latest Brexit developments, fears David Miller, investment director of Quilter Cheviot.

He worries that the sight of Boris Johnson's government trying to ram the Brexit agreement through parliament in just three days could hurt the UK's reputation.

"Order, counter order and confusion remain the order of the day.

The sight of government ministers tiptoeing through the minefield of constitutional convention, let alone the law, is unedifying and one that does little to enhance the reputation of the UK as a safe place to do business. The vote on the Withdrawal Agreement Bill will be watched closely by markets who are waiting to see whether Boris Johnson's will win out in the days preceding the 31^st October deadline.

8.55am BST

Julie Palmer, partner at Begbies Traynor, says Whitbread isn't the only hotel operator suffering from Brexit.

"Our Q3 Red Flag Alert data shows Whitbread isn't alone, with a 29% increase in significant financial distress in the hotels & accommodation sector since the EU referendum in 2016.

"As demand for accommodation continues to fall and tourism is impacted by Brexit, holding on to its significant slice of the hospitality pie will be challenging.

8.46am BST

The pound is starting to dip, and is now down 0.15% today at $1.2940.

It came under pressure after opposition leader Jeremy Corbyn tweeted that Labour opposes the government's "sell-out" Brexit deal, and will push for a second referendum.

Labour opposes Johnson's sell-out deal and will seize every opportunity to safeguard workers' rights, protect our economy and ensure the people are given the final say.https://t.co/2aNf1ZXkHq

8.33am BST

Anxiety over Brexit has forced Travis Perkins, the UK builders' merchants, to halt the sale of its plumbing and heating business.

8.20am BST

Pendragon, the UK car dealer, continues to be shunted by Brexit uncertainty.

Whilst the improved performance during the period is encouraging, we continue to expect economic and market conditions to be challenging, with the ongoing uncertainty around Brexit impacting consumer confidence.

The full-year underlying loss before tax remains in line with the Board's expectations.

8.09am BST

There's clear evidence this morning that the clouds of Brexit uncertainty are hurting UK companies.

Shorter-term trading conditions in the UK regional market have been difficult, particularly in the business segment where we have a higher proportion of our revenue, whilst trading in London remained strong.

Premier Inn owner Whitbread: "UK market conditions challenging with business confidence weak, leisure confidence in decline, coinciding with heightened political and economic uncertainty: impacted demand, particularly in regional market, where 80% of Premier Inn hotels located"

7.48am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Theresa May gave us four days debate for a meaningful vote.

Maastricht Treaty has 19 days debate

This is the most important decision for our country since WWII and Boris Johnson wants it over in a day-and-a-bit

This is truly shocking. A dark day for our standing as a country

Despite the latest hurdles and delays in getting a #Brexit deal through the #UK parliament, $Sterling bulls pushed $GBPUSD to touch the 1.30 level though it traded just below to 1.2960 and looked well supported at that range.#FX #Trading #Forex
Losses may exceed deposits pic.twitter.com/H43C4lvDbx

Short term focus will now be passing Johnson's deal. On balance, we think that the legislation will not be passed in time for an end of October departure, forcing an extension. We expect the EU will accept this extension rather than face a no-deal, although their decision may not be immediate.

Following the large moves in sterling over the last two weeks, we will likely see further volatility in the days ahead as the next phase of Brexit unfolds."

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