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Pound jumps as Barnier eyes Brexit deal within weeks

The pound has jumped to a five-week high against the dollar, weighing on the FTSE 100, as chief European Union negotiator said it was ‘realistic’ to expect a Brexit deal within ‘six to eight weeks’.

The pound jumped a cent against the dollar to trade at $1.302 while the euro fell a third of a penny against sterling to 89.1p.

That weighed on the FTSE 100, which gave up the morning’s gains to trade seven points in the red at 7,271.

A stronger pound tends to weigh on the UK blue-chip index, whose stocks rely on overseas markets for around three-quarters of their earnings.

‘Once again a Brexit-inspired movement from the pound came to dominate an otherwise quiet afternoon session,’ said Connor Campbell, analyst at Spreadex.

‘If one person can shift sterling at the moment it is Michel Barnier. The currency is desperate for any signs of good news from the EU’s chief negotiator.’

Banks have jumped to the top of the FTSE 100 amid investor hopes that Italy will avoid a clash with European Union rules as the country prepares its 2019 budget.

The UK blue-chip index rose 24 points, or 0.3%, to 7,301, with lenders leading the way.

Royal Bank of Scotland (RBS) was up 2.2% at 250.4p, Barclays (BARC) added 1.4% to 177p and Lloyds (LLOY) rose 1.3% to 59.5p.

Bank stocks were among the beneficiaries of reassurances from Italy’s government that the upcoming budget would respect EU fiscal rules.

Investors had fretted that the government, featuring the anti-establishment Five Star movement and far-right League, would push for higher spending in their first budget.

But economy minister Giovanni Tria said yesterday measures such as a minimum income, pension reforms and tax cuts, would be implemented ‘gradually’.

Banks were joined at the top of the index by Morrisons (MRW), as analysts at HSBC raised their rating on the supermarket to ‘buy’ from ‘hold’.

On the FTSE 250, shares in RPC (RPC) soared 17.2% to 801p as the plastics group said it was in talks over a possible sale to private equity investors Apollo Global Management and Bain Capital.

‘The next month will be pivotal for RPC,’ said Peel Hunt analyst Harry Phillips.

‘If there is no bid, the bears will take hold, while if there is a bid we expect it to come at a healthy premium to Friday’s close of 684p.’

Among ‘small-cap’ stocks, Debenhams (DEB) tumbled 10.6% to a record low of 11.5p on reports the embattled retailer had asked KPMG advisers to assess its options.

Reports claimed possible measures included a company voluntary agreement, a form of insolvency proceedings that can be used to close stores and renegotiate rents.

In response to the reports, chairman Ian Cheshire said the board ‘continues to work with its advisers on longer term options, which include strengthening our balance sheet and reviewing non-core assets’.

‘This activity is in order to maximise value for shareholders and protect other stakeholders, including our employees.’

Freshfields PHOTO

Q1 rankings see resurgence of UK firms, as Freshfields rises up tables

UK law firms have returned to dominance in the Q1 M&A tables after playing second fiddle to the US elite last year, with Freshfields Bruckhaus Deringer rising up the rankings following a busy quarter for the firm.

Figures from Mergermarket show Freshfields topped the European deal value ranking for the first quarter of the year, after acting on 37 deals worth a total of $121bn (£86bn).

While last year the Q1 European M&A rankings were dominated by US firms, this year the top five spots were taken by four magic circle firms and Herbert Smith Freehills (HSF).

Freshfields’ strong showing also saw the firm rise to second in the global M&A rankings, up from ninth last year, after acting on 45 global deals worth a total of $141bn (£100bn).

Skadden topped the global and US deal value tables for Q1, after advising on 47 global deals worth a total of $194bn (£137bn) and 39 US deals worth $170bn (£121bn).

Slaughter and May came top for UK M&A by value, having acted on 12 deals worth a total of $37bn (£26bn), with Herbert Smith Freehills (HSF) second and Clifford Chance (CC) third.

Meanwhile, DLA Piper took the top spot for European deal volumes, acting on 50 deals worth a total of $52bn (£37bn). Kirkland & Ellis took first place for global deal count, acting on 112 deals worth $67bn (£47.5bn) during the quarter, with CMS top for UK volumes with roles on 21 deals.

Total global deal value increased by 18% on Q1 last year to $891bn (£632bn), although global deal volume dropped 19% to 3,774, the lowest quarterly figure since Q3 2013.

Deal count in Europe also fell by 22% year on year to 1,409, the least active quarter since Q1 2013. Despite the fall in deal numbers, total deal value across the continent rose to $256bn (£182bn), a 22% increase on last year’s Q1 total of $211bn (£148bn).

The same trend was seen in the UK, with a fall in the total number of deals coming against an increase in deal value. UK deal numbers for Q1 fell 31% year on year from 386 to 266, alongside a 41% increase in total deal value across the same period to $59bn (£42bn), up from $42bn (£20bn).

HSF M&A partner Caroline Rae said: “Several of the issues we faced in Q1 2017, including Brexit, remain unresolved, but many UK corporates now have the confidence to plough on and execute their M&A strategies despite the ongoing uncertainty.

“One of the key trends in 2018 will be technology as an important factor for M&A strategy. Technology is having an impact across sectors and we are seeing a lot of clients who are looking at how they are going to keep up with their competitors. They are looking to M&A as a way to acquire technology.”

Allen & Overy (A&O) global co-head of corporate Richard Browne added: “The market is strong across a broad base, and we are not seeing any sign of it slowing up. Quite a lot of significant deals have been announced in the quarter, including a lot of good-sized private M&A deals. There are a lot of political macro events out there that can affect the market, but the fundamental dealmaking environment is still strong.”

The rankings are notable for the resurgence of UK firms in the top 10 European advisers by value, with six making the top 10.

Freshfields, Linklaters, CC, A&O and HSF ranked first to fifth respectively, with DLA Piper in eighth. For 2017, the Q1 rankings saw just three UK firms make the top 10 European and UK advisers by value.

The largest UK deal of the quarter was GlaxoSmithKline’s $13bn (£9bn) purchase of a 36.5% stake in its consumer health joint venture with pharma giant Novartis. Freshfields advised Novartis while Slaughters represented GSK.

Slaughters also won a role on the second largest UK deal, representing FTSE 100 engineering business GKN on its bitterly contested takeover by Melrose. Its initial £7bn bid was rejected, but Melrose won support of more than half of GKN’s investors and its subsequent $12.1bn (£8.6bn) bid was accepted last week (29 March).

Meanwhile, the biggest European deal this quarter was E.ON’s €46.6bn (£33bn) deal to acquire a controlling stake in renewable energy business Innogy from German rival RWE. That deal handed key roles to Freshfields for RWE, Linklaters for E.ON and Hengler Mueller for Innogy.

Going forward, partners believe activity levels will continue to hold up, despite Brexit looming on the horizon.

Skadden M&A partner Scott Simpson says: “Everyone saw a slowdown of M&A activity during the time of the Brexit vote and thereafter, but M&A activity has returned. It doesn’t mean the uncertainty is behind us, but people are getting on with their plans and probably concluding Brexit is not going to disturb their long-term investment plan for Europe.”

Linklaters PHOTO

Exclusive: Linklaters opens fifth German office to chase banking work

Linklaters will open its fifth office in Hamburg in the first quarter of this year to capitalise on an increase in banking work for German clients.

The firm has made no lateral hires with the launch, instead transferring two existing partners from Frankfurt and Dusseldorf.

Linklaters LLP is a multinational law firm headquartered in London. Founded in 1838, it is a member of the “Magic Circle” of elite British law firms. It currently employs over 2,000 lawyers across 29 offices in 20 countries.

In 2016, Linklaters achieved revenues of £1.31 billion ($1.97 billion) and profits per equity partner of £1.45 million ($2.2 million), making it the world’s fourth highest-grossing law firm, and the most profitable member of the Magic Circle. In the UK, the firm has top-tier rankings across many practice areas, including corporate/M&A, capital markets, litigation, banking and finance, restructuring and insolvency, antitrust and tax. Linklaters counts more FTSE 100 companies among its clients than any other law firm. For direct deals by institutional investors in the first half of 2016, Linklaters tied for first place. In the 2012 Global Elite Brand Index, Linklaters was named the third strongest global law firm brand.

UK’s highest paid female boss ever is worth more than Richard Branson

Bet365 founder Denise Coates was paid a salary of £199,305,000 along with dividend payments of £18m last year. But who is the billionaire gambling boss who amassed a multi-billion pound fortune after founding Bet365 in a Portakabin in Stoke-on-Trent?

Who is Denise Coates?

The 50-year-old billionaire began her career as a cashier in her father’s betting shops, known as Provincial Racing. She graduated with a first class degree in econometrics from Sheffield University and became manager of the family business when she was 22, expanding it to almost 50 shops.

She started Bet365 – still a privately held company – from a temporary office in a Stoke car park in 2000 after reportedly buying the Bet365.com domain on eBay for $25,000 (£19,000).

“We mortgaged the betting shops and put it all into online,” she said in a 2012 interview with The Guardian. “We knew the industry required big startup costs but … we gambled everything on it. We were the ultimate gamblers if you like.”

The company has since become one the biggest online gambling firms in the UK as the industry has boomed. Ms Coates retains a majority stake in the company.

She was awarded a CBE in 2012 and was named one of the 100 most powerful women in the UK in 2013 Radio 4’s Woman’s Hour. She has become known as the “patron of the Potteries” for employing a significant number of people in Stoke, however, Bet365 moved the base for much of its gambling operations to Gibraltar in 2014. Ms Coates now lives in a farmhouse in Sandbach, a market town in Cheshire, north of Stoke.

Why has she been paid £200m?

Bet365 customers wagered £47bn last year, an increase of more than £10bn on the previous year. Revenue from gambling in the 2016-17 financial year jumped 39 per cent to a record £2.15bn, while profits from gambling were up 15 per cent to £514m.

How does this compare with other pay packets?

The average pay for the bosses of Britain’s 100 largest publicly-listed companies was £4.5m last year, which was a fall of 17 per cent on the £5.4m awarded in 2015. Ms Coates has been awarded more than 40 times that sum, and more than four times last year’s highest FTSE 100 salary of £48.1m for Sir Martin Sorrell, of advertising group WPP. It’s also more than the £129m Taylor Swift is estimated to have earned last year.

Bet365 paid Ms Coates the equivalent of £3.8m per week, which is almost eight times more than FC Barcelona pay star player Lionel Messi, and 7,000 times the average full-time weekly earnings in the UK.

Even before the bumper £200m payment, Ms Coates and her family had £5bn in the bank, which is more than Sir Richard Branson, according to the most recent Sunday Times Rich List. Ms Coates is Britain’s wealthiest self-made female billionaire with her personal fortune currently estimated at £3.06bn, according to Forbes.

Controversy.

Some have expressed concern that Ms Coates’ enormous salary has come at the same time as the number of people’s lives hurt by gambling has risen.

Industry regulator the Gambling Commission estimates there are now 2 million people who are either problem gamblers or at risk of addiction.

A spokesperson for campaign group Fairer Gambling said on Monday: “As losses from Britain’s gamblers continue to spiral out of control, so has executive pay. The entire gambling industry donated just £8m to research, education and treatment last year. If these companies can afford to pay their executives millions of pounds a year, there is no excuse for such chronically underfunded treatment services.”

Coates said in a statement to shareholders that Bet365 was “committed to developing an evidence-based approach to responsible gambling”.

“To this end, the group continues to work with research partners on a number of projects to improve its methods of identifying harmful play and deliver more effective harm-minimisation interventions,” she said

“The group is assured that its efforts over the past year will continue to evolve over the coming months, and will make further progress in the prevention and minimisation of gambling-related harm.”

UK stock market hits record high despite first interest rate hike in 10 years

The index of blue chip shares finished the trading session up 0.07 per cent at 7,560.35, beating the previous record close of 7,556.24 set on 12 October.

The FTSE 100 closed at a fresh record high on Friday, despite the Bank of England’s decision earlier this week to raise interest rates for the first time in over a decade.

The UK index of blue chip shares finished the trading session up 0.07 per cent at 7,560.35, beating the previous record close of 7,556.24 set on 12 October.

The FTSE 100 has increased by around 20 per cent since the June 2016 Brexit referendum, although it has been supported by a slump in the pound in the wake of the vote.

Since many of the firms in the index are multinationals with revenues in foreign currencies, a weaker sterling tends to support profits and valuations.

Sterling finished the day up 0.57 per cent against the euro at €1.1262 and up 0.15 per cent against the dollar at $1.3070.

Since the referendum sterling remains 13.8 per cent down against the greenback.

“Cash savers might still be waiting for the latest interest rate rise to feed through into their bank accounts, but stock market investors continue to reap the rewards of loose monetary policy and an improving global economy,” said Laith Khalaf of Hargreaves Lansdown.

“The global economy is doing pretty well at the moment, and with interest rates still staying low, that bodes well for the prospects for the stock market.”

On Thursday the Bank of England lifted its base rate from 0.25 per cent to 0.5 per cent, the first increase in the general cost of borrowing since July 2007, and the Bank’s forecast suggested at least two more hikes would be needed over the next three years to bring inflation back down to 2 per cent.

However, the decision prompted a 1.7 per cent drop for sterling against the dollar on Thursday, suggesting some scepticism among financial traders about whether such a degree of monetary tightening will be feasible as the UK heads towards Brexit in March 2019.