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Between the lines week 47 - November 2021

Date: 25 November 2021

Footing the bill

The UK’s spending on pandemic support measures has already sailed past £300bn causing public sector borrowing to balloon. According to the latest Office for National Statistics estimates, UK public sector debt is now expected to hit 15.1% of GDP in the financial year to 31 March 2021 – a level not seen since the end of World War II.

Debt to society: UK public sector net borrowing (excl. public sector banks) as a share of GPD infographic

Record M&A deals for Christmas

Shares in the beleaguered Telecom Italia jumped more than 30% on Monday (22 Nov) following a €33bn (c£28bn) buyout bid from the US private equity giant KKR. The offer valued shares in Italy’s largest phone company at a 45% premium to their closing price on Friday (19 Nov) and includes KKR taking on Telecom Italia’s mountainous gross debts of €30.5bn (c£25.7bn).

KKR plans to take the troubled former monopoly private in what would be one of Europe’s biggest such deals to date. Its bid for the Dutch telecom provider, KPN, was rejected earlier this year.

Elsewhere, Monster Beverage Corp announced it’s in merger talks with Constellation Brands, the brewer of Corona beer, but little is currently known as to the potential structure of any deal.

According to Refinitiv data, the first nine months of 2021 saw by far the highest number of global merger and acquisition (M&A) deals ever with over $2trn worth of deals in the US alone and some $4.4trn globally from more than 40,000 transactions.

AO World of problems

Shares in Britain’s biggest online electrical retailer, AO World, slumped some 27% on Tuesday (23 Nov) completing a 70% drop in the shares so far in 2021 as the company issued its second profit warning in two months.

AO World claims to be the latest victim of supply-chain woes, product shortages and rising costs. Each of which is taking a large bite from its all-important Christmas trading period. It highlighted poor availability in certain categories, especially for new products, when it slashed its profit outlook for a second time. Last month it warned that a driver shortage was disrupting its supply chains and bleeding its profits.

The company, which sells laptops, mobiles and white goods saw profits triple last year as Britons learned to work from home, but it has now halved its core profit outlook to £10m-£20m for the year to 31 March 2022.

It claims to have recruited some 500 new drivers to address the issues but said it still expects full-year sales to be flat to 5% lower.

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Between the lines week 47

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