Monday, May 10, 2021

Bezos is handing over fronting Amazon, but not his grip on his creation | Business

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Jeff Bezos is stepping aside at Amazon – sort of. In fact, he is merely dropping one of his three job titles at thee online retailer. He will no longer be chief executive but will still be executive chairman. And, since he didn’t mention his status as “president” (whatever that involves), one assumes Bezos is keeping that bauble.

This “transition”, including the promotion of its web services boss Andy Jassy to be chief executive from the autumn, has been greeted as a very big deal. Let’s see. Its significance depends on how Bezos plays things. He gets formal leave to spend more time on other interests – everything from the Washington Post to rockets – but he was probably doing so informally anyway. Real change at Amazon may be hard to detect.

As chairman, Bezos will still run the board. And as the most senior executive (still), he has freedom to roam wherever he wishes. If Bezos and Jassy disagree, everybody knows who will prevail. It will be the bloke who also owns 10% of the shares.

By not being chief executive, it becomes easier for Bezos to avoid the next grilling in front of US lawmakers over Amazon’s treatment of small businesses, workers (note this week’s $61.7m [£45m] settlement of claims the company pocketed delivery drivers’ tips) or anti-trust issues. He usually performs awkwardly on such occasions, so it’ll suit both him and Amazon if he’s not on parade.

But that doesn’t mean Bezos won’t be making the big corporate decisions. “Jeff is really not going anywhere,” conceded Brian Olsavsky, Amazon’s chief financial officer. Quite.

GlaxoSmithKline injects vaccine urgency, finally

The Covid vaccine tortoise, as Citigroup’s analyst described GlaxoSmithKline, is stirring. The group has signed a deal with CureVac to produce 100m doses of the US biotech firm’s current vaccine candidate. Then the pair will work on tackling virus variants, with results promised for 2022.

Good stuff – and about time too, some might say. The tortoise jibe is not wholly fair since it is not GSK’s fault that its Covid efforts with Sanofi of France hit delays; that can happen. But it is certainly true that GSK has been eclipsed by AstraZeneca, in partnership with Oxford University, on Covid.

Being outpaced by AstraZeneca will feel familiar for GSK investors for other reasons. You’ve more than doubled your money if you bought AstraZeneca shares when Pascal Soriot became chief executive in 2012. GSK, by contrast, has been a tale of false dawns. The shares reached £18.50 in January 2020 on hopes that its chief executive Emma Walmsley’s revitalisation plan marked a turning point; now they’ve dipped below £13, down 6% on Wednesday.

The full-year numbers for 2020 provided a flavour of why. Nothing has obviously gone wrong under Walmsley, but nor is there much to get excited about. The dividend will be cut when the big corporate re-jig – the demerger of the consumer products division – happens next year, but the distribution has looked unsustainable for ages. Until Walmsley gives the full divi details in June, though, investors are in the dark.

In the meantime, this year’s earnings will fall by a “mid to high single digit percentage”, slightly worse than feared. A significant number of Americans, it seems, will have to delay their GSK shingles jabs in order to get their Covid ones.

Better days are still promised for the long-term, which is perhaps the main point. There are 10 potential “blockbusters” in the late-stage pharma pipeline, said Walmsley. Investors might feel more bullish when a few appear, which is always the challenge with pharma turnarounds.

AstraZeneca, remember, spent years in hibernation until Soriot’s back-the-scientists strategy came good. For a little while yet, Walmsley deserves the benefit of the doubt.

Asda buyers robustly get down to leverage

“We are putting in place a robust capital structure,” say the Issa brothers about the financing of their £6.8bn purchase of Asda. Really? Compared to what?

This is a private equity-backed deal and it shows. Asda’s petrol stations are being sold (to the Issas’ EG Group inevitably), a chunk of the warehouses will be off-loaded via sale-and-leaseback deals and £3.5bn ($4.7bn) of debt is being injected into the mix.

Demand for warehouses is strong and corporate debt markets are full of buyers, so the financial plan should find financiers. Come on, though, this is an old-fashioned leverage buyout. It looks like Asda will be approximately four times leveraged as a ratio of top-line earnings.

Call that robust if you wish. Others would describe it as racy in a supermarket sector that has three strong – and more conservatively-financed – competitors.

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