Billionaire pays himself £1 million a day | What You Missed

Speaking of big numbers, somebody else has taken home a big number this week

Chris Hone. Yes, the £1.2 million per working day pay out $278 million, I think

Yeah, and you can imagine what some will say about this, a sort of city greed, hedge fund manager

taking loads of cash, enjoying, you know, sort of general visions of dinner parties and backslapping

Another week finishing up in the city of London. Lester editor of City AM

I'm here with this is Rupert Hargreaves, news editor of City AM

And we're going to whistle through a few topics that have been keeping us busy this week at CityA.M

Towers. Rupert, I want to talk about the London Stock Exchange. Which part? Which part

Plenty of it. We've been talking for a long time in London and at City AM about the fact that London companies listed here

aren't necessarily able to keep their valuations as high as they might like for a whole number of reasons

And that's left a fair few of them vulnerable to take private, effectively private equity

turning up, taking them off those public markets with offers that I guess are a little bit at a discount

And what you'd obviously want is the public markets to keep those valuations nice and high

keep those companies safe and sound from private equity raiders. One today, we had SMS, a smart metering services company, being picked off by KKR for 1.4 billion

We had the 10 entertainment group, which runs bowling centres in the UK, picked off for about 300 million

And we also had Tui, the travel giant, saying that they're considered

considering delisting themselves and just listing in Frankfurt because of liquidity. It's a big deal this, isn't it

Yeah, and it's interesting you say that they're going private at premiums and they're

going private at massive premiums. The hotel shopload a few weeks ago, it was a hundred percent plus premium to its valuation

That's not a rounding error. That's a significant change. Same with 10 and the KKR buyer we've seen with smart metries systems, these were significant

premiums and their private equity companies that are obviously seeing the opportunity here

They don't hate the UK as much as the UK investors do, apparently. Yeah well it not something you hear quite often when we out and about in the city is this sort of frustration from CEOs from investment relations people of these companies that are looking at their valuations they looking at their results and how they doing and they saying hang on we doing pretty well

Or at least it looks like we're doing pretty well on paper. And yet it's not being reflected in those market prices

But as you say, private equity, ever the opportunist, saying, well, I'm a bit of that

They're generating a lot of cash. And private equity can buy this cash cheaply, a double-digit free cash flow yields

and they can lever up and give their sharehold at the private equity investors, lots of return

Yeah. If they will take it. Yeah. So I guess the question is always, does it matter if London's equity markets are depressed if the valuations are low

Because, you know, the companies might go into private ownership and be healthier and thrive

But I guess the argument back is for not just our own prestige as a financial capital

but you need equity markets to work in order for private markets to work

because those private equity raiders, they're also thinking about their exit, right, down the way

And in order to have that, in large parts, you often need a thriving IPO market and a thriving public market

So it's a bit of a catch-22, and I guess the hope is that all this private equity on it coming in

means that in a few years' time, there will be appetite that there isn't necessarily now for bigger bumper IPOs, I guess

Or if they come back, or if they come back somewhere else, or if they just stay private

But also, where's the money going? I mean, a small UK listed business will invest in the UK

Private equity company will lever up to seven times EBITR. Borrow money from the American banks

That money will go to American banks through offshore tax havens. It won't go back into the UK economy

That's a lot of value that's coming out of London going around the world

and it's not going back into the UK. One other company on the London Stock Exchange

which has never been accused of having a rough valuation, although its valuation is smaller than it used to be

as British American tobacco, kind of on the front line of a shift away from traditional cigarettes

towards newer products like vapes and heated tobaccos. They tell markets this week they were taking a 25 billion pound right down

on the value of their US legacy brands. Sort of thing that anti-smoking campaigners should be quite happy about

but shareholder BAT investors in BAT not exactly thrilled about that No it marks where the company is And if you actually read in the details those value so they bought Reynolds American in 2017 I think for billion

They're now saying they've written it down. It's written it down by $25 billion, perhaps $30 billion

So that's a significant write down of something that happened only a few years ago. And they're going to write down the rest of the value of the assets

smoking assets, over the next 30 years, which kind of suggests they think smoking is going to have disappeared in 30 years' time

Certainly in developed markets in the US. I was looking at numbers the other day. 20% of US males in 2011 smoked. It's now around 11%

And there's no reason really to believe, despite the sort of public health panic over vapes

that people puffing away on their bubble gun-flavoured things are going to suddenly start picking up cancer sticks again

So there's no reason to believe that's going to go forward. So you're right, they're all banking on a, or BAT call it a smokeless future

Well, their smokeless arm has become profitable two years ahead of forecast

I think that's what they were hoping the market would concentrate on, not the 25 billion pound right day

Well, the first time I read the results, I did focus on that, and it was only when I read it again

that I thought, that's a big number. But they're maintaining their dividend. Yeah, they are maintaining their dividend

Speaking of big numbers, somebody else has taken home a big number this week

Chris Hone. Yes, the £1.2 million per working day pay out $278 million, I think

Yeah, and you can imagine what some will say about this, a sort of city greed, hedge fund manager, taking loads of cash, enjoying, you know, sort of general visions of dinner parties and back slapping

Actually, this guy's the biggest philanthropist in the UK. Yeah, I mean, well, first of all, it's a 50% pay cut roughly since last year

He was paid nearly 600 million last year. Cost of living crisis. It's everybody

Yeah. Now, his hedge fund TCI was set up on the basis that a certain percentage of its profits would be donated to charity

And his charity does have several billion pounds worth of assets. And it donated a couple hundred million last year

So he's a very charitable man, but he pays himself quite a lot. Speaking of that world of hedges and fund management less good news I think it fair to say for Jacob Bruce Mogg Somerset Capital his fund manager which he set up a fair few years ago with a few friends and

associates. It's had an interesting period, but they're now announcing that it will be wound down

and all of this slats shift on move by St James's place itself fairly in battle

Yeah. Well, they've been under pressure to reduce their fees and they decided they were going

to, as part of that shift, they were going to move away from Somerset Capital. Well, wait and see what Jacob Rees-Molk has to say about that on his G.B. News show. I wonder if there are people

I wonder if there are people. There are easier ways than trying to manage money. Yeah, there are easier ways, although I wouldn't necessarily recommend

Actually, no, G.B. News probably is an easier way to make money for Jacob Rees-Mogg. Certainly, it looks like he's in his natural habitat

There's been lots, it feels like one of those weeks where there's been lots going on

But looking ahead, the city, we had a piece this week by one of our reporters, Charlie Conchie and his colleague Lars Mockle John

looking at investment banks in the city, which have been a fixture of the square mile for

decades, right, these names we can roll off the time, NUMIS, P.L. Hunt, etc., etc. They've been hit

by this IPO slowdown that we were talking about early. The fact that the public markets are depressed is obviously hitting their bottom lines. So Charlie and Lars were intimating, and speaking

to a fair few ysts that suggested that these deal makers, those who have been involved in other

people's deals, might seem be the subject of their own deals, with them very much in the crossairs

Yeah, and that makes sense. Scale is everything. You mentioned Peel Hunt

It's a big player in London, but it's not a big player internationally. And the big American banks

will be able to take market shares. So by combining these smaller players

will be able to fight the bigger invaders more effectively. Invaders, it always reminds me

that Monty Python scene with the Crimson Assurance Company with these old city gents fighting off the American portlets

Sailing across the Atlantic. Exactly, well, it's coming the other way. We've certainly had a busy week. I'm sure we'll have a busy week again next week. It's the last big week, I suppose, of corporate results and so on before the Christmas wind down

Rupert, thanks for joining me in CTIAM studios. And don't forget all the news, views, opinion, ysis, everything from the square mile on the wider business community on our website and, of course, all over our social media channels as well. Until next time