Commercial Awareness Update 12th December by Ben Triggs

1. Murdoch bids for Sky

Ruport Murdoch owned 21st Century Fox has tabled a bid to takeover Sky. The company already owns 39.1% of the telecommunications company, with Murdoch offering £11.25 billion for the remaining stake – valuing Sky at £18.5 billion. Sky’s share price has struggled this year and many believe the company will lose out as a result of Brexit. However, with a 15% decline in the Sterling compared to the Dollar, British companies have become an attractive proposition for foreign investment. 

Fox chief executive James Murdoch was made Chairman of Sky earlier this year, leading to further speculation over a takeover. However, this has concerned many investors who want to ensure Sky’s board push to secure a higher bid from the US media giant. MPs have also raised concerned about a lack of competition in the media industry if this bid was to go ahead. The Government has a responsibility to stop monopolies in a particular industry being detrimental to the customer.

Fox has until 6th January to outline their intentions regarding the proposed takeover. This deal looks very likely to happen and Sky’s share price rose 30% last week on the announcement of the takeover bid.

Questions to ask yourself… Could it be problematic for Murdoch to own more of the British media industry? Should the government be encouraging foreign takeovers of British companies?

2. Strong week for markets

It was an excellent week for the FTSE 100 as mining and oil were the big winners in the markets. Oil prices increased by nearly 5% as the non-OPEC (Organisation of the Petroleum Exporting Countries) oil producing nations agreed a deal to limit production, leading to Royal Dutch Shell’s share price rising by 3% and BP’s 2%. It was also a good week for the British mining industry as unions are on the verge of a deal with Tata Steal to keep their Port Talbot plant open and save thousands of jobs.

It wasn’t all good news in the markets - shares in Capita fell by 14% as the outsourcing firm issued a profit warning and said they would be selling off assets. Earlier this year the City was expected the firms profits to be £614 million for the year, but the latest announcement suggests it will only be at £515 million. It was also a bad week for Sports Direct who’s share price lost 7.5% after it was revealed their half year profits were down 57%. 

Questions to ask yourself… Why does an increase in oil prices have such a big impact on the markets? What can Sports Direct do to turn things around after a poor year?

3. Decline in ‘everyday’ biscuits

Sales in the ‘everyday’ biscuit have sharply declined in the UK, as consumers favour healthier snacks and more indulgent treats. The UK biscuit market is worth £2.4 billion, but sales in the everyday biscuit category fell by 7.1% compared to the previous year. Rich Tea, Custard Creams and Digestives were some of the hardest hit, as the premium category of biscuits made significant gains. 

People in the UK appear to be eating less biscuits, but when they do treating themselves to higher quality, more expensive treats. Healthier oat biscuits are also seeing a grow in sales, suggesting Britain is becoming more health conscious. 

Question to ask yourself… Does our biscuit eating habits reflect a more health conscious Britain?

4. The European Central Bank (ECB) takes it foot off the accelerator – just a bit

The ECB has been directly buying government bonds of European countries in an effort to reduce the interest rates that companies in those countries need to pay in order to borrow money. This works because as the ECB buys bonds, the yield (or interest rate) that those bonds offer go down (click here for an explanation). The lower interest rates feed through to loans that banks make to individuals and companies (in theory, at least). With lower borrowing costs, people and businesses are more likely to borrow, and thus spend, money – therefore boosting economic activity. The fact that the ECB is decrease support for the economy – even very moderately – is a sign that the European economy is starting to pick up a bit of steam.

5. And finally… 

Amazon launched a concept grocery store in Seattle with a revolutionary premise: no queues! Shoppers scan their smartphone on their way in, take their goods and simply walk out of the store. Sensory imaging and artificial intelligence is used to determine what the person bought – and charges their Amazon account accordingly. The program, called Amazon Go, has the potential to revolutionise retail – but also highlights how improving technology can threaten jobs (e.g. no more cashiers).