Hi All,
Please see below the updates for this week (Wednesday 29 April 2020). Thanks again to the team this week for such a smashing job!
Alibaba’s Sky High Investment in Cloud Computing
By [USER=1550]@Sairah[/USER] Saeed
The Story
China’s largest E-commerce company, Alibaba Group, announced an investment of $28.2 billion into its cloud computing division over the next three years. The funding will be used to develop the operating systems, servers and network technologies of Alibaba Cloud, its cloud computing subsidiary. This move has been prompted by increased demand for services including video conferencing and live streaming, as businesses adapt their operations during the COVID-19 pandemic.
Alibaba is also set to focus its attention on building ‘next-generation data centres’ on top of its existing 63 zones, which covers 21 regions, including Australia, Malaysia and Singapore. It hopes this initiative will allow it to grow its market and compete against public cloud titans, such as Amazon Web Services and Microsoft Azure, as companies seek cloud infrastructure providers to support their evolving business operations.
What It Means For Businesses and Law Firms
In this current climate, many companies have started to move a large proportion of their workloads to the cloud. Likewise, consumer shopping habits have also changed during the lockdown, with rapid growth in the online shopping space, which Unilever’s Chief Executive, Alan Jopeis, predicts to be a “lasting change”. Therefore, to ensure survival throughout both these financially trying times and into the future, consumer-oriented businesses will need to develop a digital presence, built on the cloud. Alibaba’s decision to invest such a large amount in cloud services at this point of time is a logical next step for the company given the increased future reliance on cloud storage products.
Cloud storage is likely to attract ever-increased interest from investors. Alibaba Group’s stock may prove particularly attractive; February marked a new milestone for the company, when its cloud business generated $1.53 billion in revenue for the first time. However, it could be difficult for Chinese companies to establish a strong foothold outside of China, given the current privacy concerns surrounding granting Chinese companies’ access to data.
Data centre M&A deals have been in full swing in 2020 and are expected to rise, given COVID-19 appears not to have weakened the cloud services market. The value of data centre M&A deals closing in the first four months of 2020 surpassed the 2019 total (Synergy Research). This included the $8.4 billion (£6.8bn) acquisition of Interxion by Digital Reality, the largest-ever data centre deal, which closed in March.
Pret Fret Over Rescue Loan
By [USER=3442]@Rachel S[/USER]
The Story
The food-to-go chain, Pret A Manger (“Pret”) is in talks with banks, BNP Paribas, HSBC and Santander to raise an urgent €100m ‘rescue’ loan. While Pret has weathered the temporary closure of stores during lockdown and started to re-open ten sites near NHS hospitals, the company’s Chief Executive, Pano Christou, stated funding is needed for a "test and learn stage" involving the development of new systems and products to be introduced into stores, when they can re-open.
To adapt to changing trading conditions, Pret is launching a supermarket range of coffee beans and also hopes to introduce click-and-collect services for customers to consume products at home. Alongside its existing deal with Deliveroo, last week Pret announced new partnerships with takeaway platforms UberEats and Just Eat, to sell sandwiches and boxes of produce.
What It Means For Businesses and Law Firms
With Chiquito and Carluccio’s having entered administration in recent weeks, ensuring flexibility of operating models and securing extra funding is vital for the survival of food chains, such as Pret. Just as many alcohol and clothing companies have been able to switch production lines to meet demands for hand sanitiser and face masks, food chains may follow Pret’s example by building a digital presence, offering new products and arranging deliveries, even as lockdowns ease. For example, Côte Brasserie has sped up plans for a retail range selling chilled versions of dishes for customers to cook at home while Burger King and KFC have reopened for takeaways.
Given the uncertainty surrounding the duration of the UK’s lockdown measures, Pret is likely to be the first of many companies requiring emergency funding to ensure they can weather the current difficult trading conditions. Research has shown that many businesses are struggling to secure government-backed emergency loans under the Coronavirus Business Interruption Loan Scheme (British Chamber of Commerce). It also found that half of the businesses have at most three months cash left and 6% have already run out of cash. Therefore, inability to secure a bailout loan makes survival difficult, particularly for small businesses without significant capital or investors to fall back upon.
No law firm has yet confirmed it has been instructed to assist with Pret’s emergency funding, however, Skadden and Freshfields worked on Pret’s purchase of rival food chain EAT last year and Travers Smith acted for Pret when the chain was acquired by JAB holdings.
Saudi Investment Fund Score Newcastle United
By [USER=4422]@Curtley Bale[/USER]
The Story
Newcastle United FC look set to be acquired by one of the world’s largest sovereign wealth funds - Saudi Arabia’s Public Investment Fund (PIF). The group has had a £300m bid accepted by Mike Ashely, the owner of Newcastle. The PIF is led by Saudi’s Crown Prince and is putting up 80% of the all-cash deal. The remaining investment is coming from British business tycoon, Amanda Staveley, and her private equity fund. The PIF owns over $300bn in assets and is keen to take advantage of the current economic climate by making a variety of long-term investments to diversify their portfolio.
What It Means For Businesses and Law Firms
Mike Ashley, the well-known owner of Sports Direct and House of Fraser, has been looking to sell the football club for many years. Since his initial £134m takeover in 2007, Ashley had to save the club from bankruptcy by paying off over £110m in debts. Since then, the businessman has been reluctant to invest in the playing squad, leading to a large proportion of the fans turning against him. Selling the football club will allow him to focus on his other business ventures which are part of the struggling British high street.
Saudi’s PIF will now have control of a club in one of the world’s most popular leagues. The Premier League is broadcast globally, enabling the fund far greater exposure. Ms. Staveley tried to takeover Newcastle in 2018, but the deal fell through. The businesswoman has a history of securing Middle-Eastern investments for UK clubs after facilitating Abu Dhabi’s Sheik Mansour’s acquisition of Manchester City in 2008.
Lawyers will be involved in helping to structure the deal, which includes a vendor’s agreement from Mike Ashley to Staveley. The multi-jurisdictional element of the deal will see the PIF having to comply with English football’s stringent “directors’ and owners’” test, which requires clubs to meet higher standards than is required under the general law, to protect the reputation and image of the game. Should all go to plan, the deal will see Newcastle become a club with one of the world’s largest spending capabilities.
This may be the first of several acquisitions made by the fund throughout the crisis. PIF recently acquired an 8.2 per cent stake in cruise line operator, Carnival, and PIF are reportedly seeking opportunities. The fund appears unconcerned by the uncertainties surrounding the future of both football and the cruise industry, as they enter into a number of significant deals to diversify their investment portfolio, as part of a wider effort to diversify Saudi Arabia’s economy, reducing its reliance on oil.
