BP reverses course after pressure from Elliott
Happy Friday!
This week, Arunima Kumar and Anousha Sakoui were first to report that BP was set to scrap a target to increase renewable generation 20-fold by 2030, returning the focus to fossil fuels, as part of a strategy shift to tackle investor concerns over earnings. BP announced the moves two days later, confirming the Reuters scoop.
The oil major, which has underperformed peers like Shell and Exxon, has come under increasing pressure to change strategy after news U.S. activist investor Elliott Investment Management has built a 5% stake in the company.
BP cut planned annual investment in renewable energy businesses by more than $5 billion, from its previous forecast, to between $1.5 billion and $2 billion per year.
It now aims to grow oil and gas production to between 2.3 million and 2.5 million barrels of oil equivalent per day (boepd) in 2030. It pumped 2.36 million boepd in 2024.
It is the latest big energy company to change its position in response to the need to lower carbon emissions and curb climate change, returning the focus to oil and gas.
Under Auchincloss' predecessor, Bernard Looney, BP pledged in 2020 to cut oil and gas output by 40% while rapidly growing renewables by 2030. It lowered that target to 25% in 2023.
BP also revised its approach to so-called Scope 3 emissions by removing its previous target of a 20% to 30% absolute reduction between 2019 and 2030. The emissions account for greenhouse gases, such as carbon dioxide, released in the atmosphere from a company's supply chain and the consumption of its products by customers.
It now aims to cut the carbon intensity of its energy products by up to 10% over the same period.
Auchincloss said the transition to renewable energy has been slower than BP initially expected following the war in Ukraine, the pandemic, volatile energy markets and changing attitudes towards renewable energy in some countries.
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Elsewhere, Milana Vinn reported that Bain Capital is weighing options, including a sale, for Rocket Software that could value the U.S. automation software provider at as much as $10 billion, including debt.
Bain's deliberations come as the artificial intelligence boom is forcing large corporations to increase their technology spending to upgrade outdated business software and automate more routine tasks.
Global information technology spending is expected to grow nearly 10% to touch $5.61 trillion this year, according to technology research firm Gartner.
Bain has tapped Moelis and RBC Capital to advise Rocket on its sale process, which is expected to launch in the coming weeks.
A deal could value Rocket between $8 billion and $10 billion, two of the sources said. The auction is expected to attract interest from private equity firms who could choose to partner with each other, considering Rocket's size.
Rocket is hoping to command a valuation equivalent to more than 10 times its earnings before interest, taxes, depreciation, and amortization of nearly $800 million.
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Kane Wu and Julie Zhu scooped that KKR, Fountainvest Partners and PAG are among the buyout firms interested in acquiring a stake in Starbucks' China business, as the U.S. coffee chain looks to revive flagging sales in its second-largest market.
Chinese companies, including state-owned conglomerate China Resources Holdings and food delivery giant Meituan, have also been approached as potential buyers.
Starbucks' executive vice president and chief financial officer, Rachel Ruggeri, is expected to be among senior company executives visiting China in the coming weeks to hold sale talks.
The talks come as Starbucks CEO Brian Niccol, who took the top job at the coffee chain in August, faces the daunting task of steering the company back to growth amid falling demand in the U.S. and China as well as a decline in its share price.
Starbucks said on Monday it would eliminate 1,100 corporate roles as Niccol's "Back to Starbucks" plan focuses on streamlining business through job cuts and by improving customer experience at its U.S. stores.
The size of the stake to be sold in Starbucks' China business has not been determined and would be subject to negotiations. The names of the interested bidders have not been previously reported.
The Seattle-based company would likely prefer a franchisee deal with a strategic partner as part of a stake sale plan, said two of the sources. In a franchisee deal, Starbucks China would be valued at more than $1 billion.
Niccol said at the time that he saw several near-term changes Starbucks could make to strengthen its business while continuing to explore strategic partnerships to grow in China.
And finally, Shankar Ramakrishnan reported that asset managers T. Rowe Price and Columbia Threadneedle are pushing back against private equity firms that pursued aggressive debt raises in a practice that hurt high-yield debt investors over the past two years.
Portfolio managers at the two firms who oversee investments in high-yield debt told Reuters that they now either outright refuse to entertain debt sales involving some firms or demand a lot more protections before investing.
"We have a blacklist of sponsors that have done a number of LMEs in the last two years," said Vesa Tontti, senior portfolio manager at Columbia Threadneedle Investments, who is part of the U.S. loan team that manages $4.3 billion of assets. "When my analyst comes to me asking about investing in debt being offered by some sponsors on that list, it is a straight no.”
T. Rowe Price meanwhile, has refused to take part in debt trades backed by firms in the past even on suspicion that they may do debt raises on the side that would dilute their claims on assets, said Kevin Loome, U.S. high-yield portfolio manager at the investor.
"A healthy dose of skepticism is required when underwriting credits to ensure prudent longer-term risk management," said Loome, who manages $2.8 billion in assets.
The caution from these two major institutional investors, which has not been previously reported, follows a practice over the past two years that came to be known as “creditor on creditor violence.”
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And here’s the best of the rest from the Reuters corporate finance file:
Family-owned candy giant Mars is preparing to sell bonds worth between $25 billion and $30 billion as soon as next week to help finance its takeover of Pringles maker Kellanova, according to people familiar with the matter, in a deal that would headline a $40 billion rush of acquisition financing bonds.
Private equity firms Apollo Global Management and Sycamore Partners are among the bidders who are competing to acquire Family Dollar, a discount retail chain operated by Dollar Tree, according to people familiar with the matter.
Unilever may struggle to attract buyers for its plant-based meat business, complicating the company's plan to cut its exposure to products which are falling out of favour with consumers, industry experts said.
When Schroders CEO Richard Oldfield presents his revamp of the 221-year-old British fund manager next week, one group of investors will be watching more closely than usual: the founding family.
Private equity firm Roark Capital has signed a deal to acquire Dave's Hot Chicken for roughly $1 billion, according to sources familiar with the matter, in a deal that will reinforce its foothold in the restaurant industry.
Cantaloupe is exploring strategic options, including a potential sale or a go-private transaction, four people familiar with the matter said, the latest specialized U.S. payments processor to consider such a move.
State-owned China International Capital Corp is set to merge with its peer China Galaxy Securities, said five sources, in a deal that would create the country's third-largest brokerage with $193 billion in assets.
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Have a wonderful weekend!
Best, Anirban
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News