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Message: <blockquote data-quote="Jaysen" data-source="post: 16085" data-attributes="member: 1">27 November 2019Welcome to this week’s Commercial News Update!Topics covered this week are:1. LVMH’s Takeover of Tiffany (by [USER=1160]@Alice G[/USER])2. Back to Basics: WeWork (by [USER=1]@Jaysen[/USER])3. National Grid and SSE’s Bold Offshore Move (by [USER=1550]@Sairah[/USER] )4. Uber is refused London licence (by [USER=201]@bugsy malone[/USER])**************************************************************************************************************************1. LVMH’s Takeover of Tiffany (by [USER=1160]@Alice G[/USER]) The Story The world’s largest luxury goods group by sales, France’s LVMH, has secured an all-cash deal to acquire Tiffany, the reputed American jeweller, for $16.6bn - which values Tiffany’s shares at $135 each. LVMH had originally offered $120 a share but this was deemed to be not enough, and the final purchase price has therefore risen by around $600mn. For some context, Tiffany’s share prices were around $98 each before the takeover bid was made public. The CEO of LVMH, Bernard Arnault, has publicly noted his admiration for the American jeweller because of its long-standing brand reputation and heritage. Impact on Businesses and Law Firms The retail sector has been suffering of late but, according to analysts, the luxury jewellery market is set to continue growing by up to 7% next year. Arnault has vocalised his intentions to expand and deepen Tiffany’s appeal in Europe and China, beyond its current core market of the US and Japan. Although Hong Kong is a major luxury market which is currently experiencing significant disruption, Arnault remains undeterred and confident in his ambitions. The luxury goods space differs within the retail sector in the sense that enduring brand reputation and heritage are important to those looking to buy. This means that for the likes of LVMH, when looking to diversify into a market like high-end jewellery, there can be few options available because of this heritage requirement. Therefore, this takeover offers a very good opportunity for Arnault and LVMH. For law firms, this deal demonstrates that whilst retail at large may be struggling, there is an opportunity within the luxury goods space. With a deal of this size, the largest ever in the luxury goods market, it seems the luxury goods space may well be poised for further M&A activity and more high-value deals, since LVMH’s competitors will no doubt be worried about their market position and the fresh competition LVMH poses. This is also an interesting case from a branding and IP perspective where the heritage of a company can significantly factor into the deal price.  2. Back to Basics: The Tragedy of WeWork (by [USER=1]@Jaysen[/USER]) The Story WeWork was to change the world. It was not just another co-working space provider, but a tech unicorn that aspired to ‘elevate the world’s consciousness’, according to co-founder Adam Neumann. Its huge liabilities didn’t matter because it was relentlessly pursuing growth and scale, with the backing of SoftBank, the world’s largest tech investor. At least that was the promise when WeWork announced its IPO.Within a few months of WeWork's public filing, the company's valuation had crashed, the IPO had been pulled, Neumann was out, and the company’s credit rating fell to junk status.   What happened? What does it mean? Going public is a trade-off. An IPO provides a company with access to a wide pool of investors, but, in return, it faces onerous regulations and must open itself up to the scrutiny of the public markets.WeWork’s filing revealed the scale of the company’s losses (which, last year, amounted to losing $220,000 every hour of every day) and investors were worried. The company’s business model relied on taking on the risk of long-term leases and providing short term contracts to clients; but what would happen to these huge liabilities if there was a downturn?Then there were concerns over WeWork’s questionable corporate governance practices, ranging from the millions WeWork had lent to Neumann at favourable rates, to a complex capital structure that offered the co-founder substantial control after going public.  It didn’t take long for the media to uncover further issues, such as the $60 million private jet the company bought to allow Neumann to travel around the globe.WeWork might have been able to get away with an extraordinary valuation, controversial financial metrics (including its self-styled ‘community-adjusted EBITDA’) and lax corporate governance standards as a private company, but it’s important that it did not survive the scrutiny of the public markets. The hope is that the tragedy of WeWork will force other tech 'unicorns' to shape up before heading to the public markets. 3. National Grid and SSE’s Bold Offshore Move (by [USER=1550]@Sairah[/USER] ) The Story Last weekend, National Grid and SSE confirmed they have shifted large parts of their UK operations into offshore holding companies. This comes after Labour released its manifesto, with plans to nationalise (move back from private to public ownership) the rail, water and electricity industries, as well as BT and Royal Mail. At present, National Grid and SSE are currently owned by a combination of listed and private groups, including Spain’s Iberdrola.According to the FT, SSE has moved its UK business into a new Swiss holding company, and National Grid has shifted its gas and electricity businesses into new subsidiaries in Luxembourg and Hong Kong. Impact on Businesses and Law Firms Analysts have stated Labour’s plan would have a detrimental impact on millions of people, such as private investors if the nationalisation process fails to restore the full market value of the two companies. Therefore, the move to Switzerland, Luxembourg and Hong Kong have been commended as the appropriate decision. This is because, Switzerland, Luxembourg and Hong Kong have bilateral investment treaties with the UK that ensure investors are protected and paid the market value rate in the event of any state asset buy-back.It is also believed the offshore move could protect the companies’ directors from litigation claims issued by shareholders, as the move will sustain their legal fiduciary duties. While, litigation lawyers may not be needed here on this issue, the directors and shareholders of National Grid and SSE could seek advice from lawyers on how to protect their positions.Many lawyers have already suggested that shareholders can put themselves in the ‘best position’ to secure market-based compensation by relying on international investment treaties to which the UK is a party to. For example, Hong Kong investors can lodge claims under the UK-Hong Kong Bilateral Investment Treaty, and Switzerland and Luxembourg investors are protected under the European Energy Charter Treaty.However, UK investors that do not benefit from any investment treaty protection would instead have to make a potential claim under the Human Rights Act 1998 or the European Convention on Human Rights. But, these claims could face fundamental challenges due to Brexit. So, lawyers will be needed here to guide UK investors in the best direction to protect their financial position. 4. Uber is refused London licence (by [USER=201]@bugsy malone[/USER]) The Story On Monday, Transport for London chose not to renew Uber’s ride-hailing license. This followed news that 14,000 Uber journeys had been conducted uninsured and unlicensed by 43 drivers faking their identity on the app. Uber’s inability to guarantee its drivers were who they say they were left TfL concerned for the re-occurence of such events. TfL’s concerns over passenger safety led them to ban Uber rides in 2017. However, the courts overruled this and granted Uber a 15-month license which was extended until Monday. Uber is appealing TfL’s decision which requires issuing proceedings with a magistrate within 21 days. Uber Rides will be able to continue until the appeal is concluded, based on its previous court battle, this could last over six-months. Impact on Businesses and Law Firms For Uber, losing access to its most lucrative European market is likely to cause added financial pressures, especially, as its rides business accounts for 76% of its top-line. Despite Uber’s ride-hailing dominance across the globe, it is yet to make a profit, reporting a $1.4 billion loss this quarter. This potential loss of revenue, coupled with its disappointing IPO earlier this year and ongoing employee rights disputes, makes it unsurprising that shares fell by almost 6% on TfL’s news.Competition from French Kapten (the start-up backed by BMW and Daimler), and Estonia’s Bolt, which recently returned to London, has pushed ride prices down. This adds further financial pressures for Uber as recent research shows it is already making a loss on most rides.  Moreover, TfL’s decision could have ripple effects on Uber’s operation in other European cities. It confirmed the technical problems allowing driver fraud in London might also have caused problems in other cities. However, it is unlikely other cities will do exactly as London has, as licencing is dealt with by local authorities and London has a more unique regulatory set up for Uber.Unlike regulation facing the likes of Facebook, which applies across its whole operation, Uber’s business is very localised (every city it operates in is slightly different and offers differing services). Therefore, law firms with local knowledge of cities worldwide will be important to advise businesses like Uber. Uber’s lawyers are likely to try to prove it has changed how it does business in London and use customer support to pressure regulators not to deprive London of its service.</blockquote>

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