The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Peter Thal Larsen
LONDON, Nov 9 (Reuters Breakingviews) - Welcome back! For the first time in a while, the U.S. stock market is falling. The S&P 500 Index has shed 4% from its peak on October 29, while the tech-heavy Nasdaq Composite Index is down 6%. Is this a temporary blip, or the beginning of a bigger correction? Email me with your thoughts. If someone forwarded you this newsletter, sign up here to receive it every Saturday.
OPENING LINE
“It’s the question that just won’t go away among mining bankers and investors: could Rio Tinto RIO.L gatecrash Anglo American’s AAL.L nil-premium offer for $21 billion Canadian miner Teck Resources TECKb.TO?”
Read more: Rio can dig up trouble for Anglo’s Teck deal.
FIVE THINGS I LEARNED FROM BREAKINGVIEWS THIS WEEK
Chinese carmakers’ sales in Europe increased 94% in the year to August.
The number of countries adopting fiscal rules doubled to 122 between 2000 and 2024.
Sales at U.S. Pizza Hut stores that have been open at least a year dropped 6% in the third quarter.
Sky and ITV combined could have roughly 70% of UK television advertising.
The iShares Global Clean Energy ETF is up 50% this year.
NOVO COMBO
There’s nothing quite like a transatlantic takeover battle to get investment bankers’ blood pumping. Last weekend I urged Week in Breakingviews readers to watch this space after Denmark’s Novo Nordisk NOVOb.CO launched an aggressive offer for U.S. biotech Metsera MTSR.O, trouncing a $7 billion bid from pharma giant Pfizer PFE.N. In the following seven days, the fight escalated. It offers clues about how cross-border M&A deals are contested in today’s exuberant and highly politicised markets.
First, a quick recap. Metsera is developing promising obesity treatments but will not generate an operating profit until 2030, according to analysts’ forecasts collated by Visible Alpha. That’s why Pfizer offered $47.50 per share in cash but also threw in a so-called contingent value right $(CVR)$ worth $22.50 per share, which pays out if Metsera’s drugs reach certain development milestones.
Enter Novo, which crashed the party by offering up to $9 billion with an unusual twist: the Danish company promised to pay $56.50 per share in cash immediately after signing the deal, and a CVR similar to Pfizer’s if the deal goes ahead. If Novo fails to win approval from shareholders or competition regulators, it ends up with a 50% non-voting stake in Metsera. Pfizer responded by suing both Metsera and Novo, while tweaking its offer to increase the cash component. Novo then upped its bid to almost $10 billion, Pfizer matched that figure, and Novo hiked again, Reuters reported. Late on Friday, Metsera accepted Pfizer’s offer of $65.60 per share in cash, plus a CVR worth up to $20.65 per share.
There are three takeaways from this week-long slugfest. The first is that financial discipline is often the earliest casualty when two big companies go head-to-head. Pfizer’s most recent offer implies it will earn a return on its investment of just 6.4% in 2030. Novo, already one of two dominant suppliers of obesity treatments, may have extracted more benefits. But it could equally have ended up as a forced seller of non-voting stock in a company it was not allowed to own.
The second lesson is that courts are unlikely to help. Pfizer sued to stop Metsera’s board from accepting the Novo offer and triggering the cash payout. But Delaware’s Court of Chancery refused. Though Pfizer said it would fight on, its decision to counterbid suggested it was not entirely confident about its legal approach.
The final point is that U.S. competition authorities made what looks like a decisive intervention in Pfizer’s favour. The Federal Trade Commission quickly waved through the American company’s offer. It also questioned whether Novo’s approach was circumventing the U.S. antitrust process, Bloomberg reported. That raised the unpalatable prospect of Metsera accepting Novo’s cash payout but then being forced to return it. The Danish company on Thursday struck a deal with President Donald Trump to lower U.S. prices for obesity treatments. Yet that agreement does not appear to have helped Novo secure more favourable treatment from American competition cops.
The only clear winners right now are Metsera shareholders, whose investment is worth 2.5 times more than it was two months ago.
CHART OF THE WEEK
Wall Street titans descended on Hong Kong this week for the Asian financial hub’s annual summit of financial leaders. When I attended the confab two years ago, the attending CEOs did their utmost to avoid talking about China’s moribund stock market and troubled property sector. This time the mood was more optimistic. However, the U.S. banks are feeling the pinch: most of the benefits of the pickup in activity have flowed to Chinese deal advisers, rather than big American firms.
THE WEEK IN PODCASTS
How is China faring in the artificial intelligence race? Many executives think the U.S. is still ahead. But others, like Nvidia’s NVDA.O Jensen Huang, reckon the People’s Republic is winning, even though it lacks the U.S. tech giants’ raw spending power and advanced chips. That was the topic of debate on the Viewsroom this week, as Robyn Mak and Karen Kwok joined Aimee Donnellan and Una Galani to compare the two rivals.
On The Big View, I talked to John Studzinski, the veteran financier and philanthropist who is vice chairman of the fund management giant PIMCO. We talked about his career in finance, and how to motivate people to share their wealth.
PARTING SHOT
As climate negotiators convene in Brazil this weekend for the annual United Nations climate summit, it’s easy to be pessimistic. Trump is winding back green policies in the United States, while U.N. Secretary-General António Guterres has effectively declared dead the goal of limiting global warming to 1.5 degrees centigrade above pre-industrial levels. Yet there are points of light amid the gloom – even if it takes longer than climate activists had hoped.
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US banks’ share of Chinese client offshore investment banking fees is falling https://www.reuters.com/graphics/BRV-BRV/akvejqqnlpr/chart.png
(Editing by Liam Proud; Production by Oliver Taslic)
((For previous columns by the author, Reuters customers can click on LARSEN/peter.thal.larsen@thomsonreuters.com))