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Seven Days: 9 April 2020

A round-up of the biggest business stories of the past week
April 8, 2020

Construction output tanks

Work stoppages

March data revealed the fastest downturn in UK construction output for almost 11 years, as emergency steps to stop the spread of coronavirus led to work stoppages and a fall in new orders. The IHS Markit/CIPS UK Construction Total Activity Index tumbled to 39.3 last month, from 52.6 in February. Anything below 50 signals a contraction. All three categories of construction work recorded a fall in output. Civil engineering activity saw the sharpest rate of decline, at 34.4, followed by commercial building (35.7). The residential reading came in at 46.6.

 

GSK teams up with Vir

Coronavirus research

British pharma giant GlaxoSmithKline (GSK) has entered a partnership with California-based Vir Biotechnology (US:VIR) to find treatments for the disease Covid-19, caused by the new coronavirus. As part of the collaboration, GSK is to make a $250m (£202m) equity investment in Vir. At $37.73 a share, this constitutes a 10 per cent premium to Vir’s closing price on 27 March. GSK said that the partnership will use Vir’s proprietary antibody technology to accelerate existing and identify new antiviral antibodies that could be used as therapeutic or preventative ways of helping to address the current pandemic and future outbreaks.

 

Debenhams to file for administration

Stores remain closed

Debenhams is to file for administration, while its 142 UK department stores remain closed in line with the government’s advice regarding the Covid-19 pandemic. The group said that it was making preparations to resume trading within those stores once restrictions were lifted. It is preparing to enter a “light touch” administration, which would see the existing management team remain in situ under the control of the administrators. Meanwhile, it has also emerged that fashion and accessories brand Cath Kidston plans to appoint administrators. 

 

Airbnb secures $1bn

Difficult environment 

Investment firms Silver Lake and Sixth Street Partners are to inject $1bn into Airbnb – an online platform for short-term accommodation rentals – in a combination of debt and equity securities. Airbnb said that the new resources will support its ongoing work to invest over the long term in its hosts, as well as work to serve all of its stakeholders. Silver Lake co-chief executive and managing partner Egon Durban noted that while the current circumstances are challenging for the hospitality industry, “the desire to travel and have authentic experiences is fundamental and enduring”.

 

NMC lender pushes for administration

Board disagrees

Beleaguered hospital operator NMC Health (NMC) – whose shares remain suspended – has been informed by lawyers acting for lender Abu Dhabi Commercial Bank (ADCB) that the latter has filed an application to appoint administrators for NMC. NMC’s board is in discussions with ADCB and other creditors to address their concerns; to have the application withdrawn; and to avoid the appointment of administrators, which it does not believe would be in the interests of shareholders as a whole. It said that the resolution is likely to involve material changes to the group’s corporate governance and the board’s composition. 

 

Boeing suppliers cancel merger

Hexcel and Woodward

Hexcel (US:HXL) and Woodward (US:WWD) – two suppliers to Boeing (BOE) – have agreed to put an end to the all-share merger that had only been announced in January. The termination was approved by the boards of both companies. The decision was made “in response to the increasing impact on both the aerospace and industrial sectors, and global markets broadly, resulting from the health crisis caused by the coronavirus (covid-19) pandemic”. The companies said that they hoped to be able to find opportunities to collaborate on next-generation platforms in the future.

CMA weighs in on Kingspan deal

Buying Building Solutions

SIG’s (SHI) disposal of Building Solutions Limited to Kingspan (KGP) for £37.5m, announced last October, has hit an obstacle. The sale required approval from the Competition and Markets Authority (CMA). However, following a phase one investigation, the CMA has raised concerns over competition in the supply of specialist insulation panels. The watchdog is concerned that the transaction would see the largest player, Kingspan, merge with one of only two meaningful competitors, potentially resulting in higher prices or lower quality. The two parties were given five working days to address the CMA’s concerns to avoid an in-depth phase two investigation.

 

UK house prices were flat last month against February, and up by 3 per cent year on year. 

March started with similar trends to previous months, said Russell Galley – managing director at Halifax – with a sustained level of buyer and seller activity. “These factors all underlined a positive trajectory and increased momentum in the early part of the year, with confidence rising as political and economic uncertainty eased”. 

But the month ended very differently, with most activity paused amid the coronavirus pandemic. Mr Galley said it was too early to assess what the long-term impacts of the current lockdown would be on the housing market.