Tesco and Booker shareholders give marriage blessing

By James Davey, Alistair Smout

LONDON (Reuters) - Tesco’s 4 billion pound ($5.5 billion) takeover of Booker was overwhelmingly backed by shareholders of both companies on Wednesday, clearing the final hurdles to the creation of a new powerhouse in Britain’s 200 billion pounds-a-year food market.

A company logo is pictured outside a Tesco supermarket in Altrincham northern England, April 16, 2016. REUTERS/Phil Noble/File Photo

Investor approval, which followed the regulatory green light in December, means the cash and shares deal to combine Tesco (TSCO.L), Britain’s biggest retailer, with Booker (BOK.L), the country’s largest wholesaler, is set to complete on March 5.

The support is a personal victory for Tesco Chief Executive Dave Lewis, who stunned the market in January 2017 with an agreed deal with Booker that was originally valued at 3.7 billion pounds.

He won the argument despite dissent from some Tesco and Booker investors and from his own board, with critics on both sides unhappy over the price being paid and the potential for the tie-up to disrupt operations. The late Richard Cousins resigned in protest as senior independent director at Tesco in January last year.

The takeover is the boldest move yet by Lewis, who took over in 2014 shortly before an accounting scandal plunged Tesco into the worst crisis in its near 100-year history.

Booker says shareholders back Tesco takeover at scheme court meeting

At a general meeting of Tesco investors, 85 percent of votes cast approved the deal. At two Booker shareholder meetings - a scheme court meeting and a general meeting - 84 and 83 percent respectively of votes cast backed the takeover, easily passing the required 75 percent threshold.

“The successful approval of the Booker deal levels one of the main pillars of uncertainty surrounding the Tesco investment case,” said Freddie Lait, chief investment officer and founder of Latitude Investment Management, a Tesco investor.

Shares in Tesco closed up 1.8 percent, while Booker was up 1.6 percent.

“By coming together Tesco and Booker will be able to unlock growth in the food industry in a way that neither could do so easily alone,” Tesco Chairman John Allan said at the retailer’s meeting in central London, attended by just 65 shareholders, with most votes cast by proxy.

Already the dominant player with a 28 percent share of Britain’s retail grocery market, the takeover provides Tesco with greater access to the “away from home” part of the food sector - something that angered competitors who failed in their attempts to convince regulators to block the deal.

That market is worth 85 billion pounds and growing at over 3 percent a year.

Tesco also expects the deal to provide pretax synergies of 200 million pounds per annum after three years.

Booker serves 450,000 caterers and small businesses, and counts chains Carluccios, Wagamama and celebrity chef Rick Stein as clients. It also owns about 200 cash and carry warehouses and supplies 120,000 retailers, including the Budgens, Londis, Premier and Family Shopper chains, which are run as franchise operations.


The combined business will on Monday kick off a plan that Allan said was called “Joining Forces”.

An initial 90-day program would carefully bring Tesco and Booker together. “They are both performing very well at the moment, we don’t want to do anything that will actually take the wheels off either business,” he said.

Allan also reassured investors the deal was not the start of a buying spree. “It’s an important move which we will get the best out of over the next few years before we think of moving on to anything else,” he said.

Tesco’s move on Booker has, however, sparked more consolidation in the UK grocery market as supermarkets seek additional sources of growth and uses for excess capacity in their supply chains.

Last year the Co-operative Group (42TE.L) bought the Nisa convenience chain, while Morrisons (MRW.L) sealed a wholesale supply deal with the McColl’s (MCLSM.L) chain.


M&A Boom Fuels Spin-Offs

Corporations are spinning out parts of their businesses to boost performance as the equity bull market (despite recent volatility) drives the appetite for deals.

Groups including Dutch telecommunications group Altice, US conglomerates Honeywell  and General Electric, UK oil major BP and French luxury group Kering are considering setting up independent companies for some of their activities as a way to generate value for shareholders.

While spin-offs or spin-outs are not new, analysts have linked increased interest in them to a burst in mergers and acquisitions activity.

“The general boom in M&A drives spin-out activity for two reasons,” says Freddie Lait, managing partner at Latitude Investment Management. “First, companies who believe their stock is undervalued, often because they have a few distinct businesses within their company, can spin off a division and unlock some of the part’s value. The second is that, when enacting large-scale M&A, regulators often enforce competition rules which require tweaking of the corporate structure.”

According to Deloitte’s 2018 M&A trends survey, more than 60% of US executives said they expect the number and size of deals to increase. Seven in 10 said they plan to divest businesses in 2018 because of financing needs and changes in strategy.

“M&A activity globally is very high, which is common in the late stages of an equity bull market as both private equity and corporate owners look to cash in on rich valuations,” Lait explains. Despite recent signs of higher volatility and occasional pullbacks, most analysts don’t see an end to the bull run anytime soon.

Another appealing factor to spin-offs is that they tend to perform well. “Investing in spun-off businesses is frequently a strategy which outperforms the market,” says Lait.  “Provided the businesses are straightforward and you can understand the logic for why they have been spun out, [it is] a smart place to look for value ideas in an otherwise expensive market.” 

S&P Global Market Intelligence ‘Altice USA Shares jump as investors look forward to independent future’

Investors seem to be optimistic about Altice USA Inc.'s future as an independent entity. 

Shares in Altice USA ended the day up around 10% on Jan. 9. Altice NV said late Jan. 8 that it plans to sell its 67.2% interest in Altice USA to Altice NV shareholders, structurally separating the companies. Altice USA CEO Dexter Goei explained during a Jan. 8 conference call that the split, set to close sometime in the second quarter of this year, will "significantly simplify the way each group operates" in terms of responsibilities and decision-making processes, a change that Goei believes will "add significant value."

According to multiple analysts and industry observers, the primary benefit of the transaction is that it will shield Altice USA from the difficulties the parent company has been facing with its European operations. "The Altice NV story, particularly in France, was problematic," MoffettNathanson analyst and long-time cable analyst Craig Moffett said in a Jan. 9 research note emailed to clients. He noted that the European business has been aggressively cutting costs to better compete in the French wireless market, leading to misses on revenue growth and heightening concerns about Altice NV's heavy debt load, which ended the third quarter of 2017 with €49.56 billion in net debt.

According to Moffett, Altice NV's debt had come to cast a dark shadow on Altice USA due to "concerns that the U.S. might somehow be called upon to bail out a weakened European parent."

Pivotal Research Group CEO and Senior Media and Communications Analyst Jeffrey Wlodarczak agreed, saying one of the "biggest overhangs on the U.S. business" was "the potential for the struggles in the French business to bleed into the U.S. business." He added that the spinoff "eliminates that issue."

Kagan analyst Tony Lenoir said there were multiple reasons to believe the time is now right to separate the U.S. and international business, noting that Altice NV's debt load has been "weighing heavily on the group's share price in the last six months." In terms of the planned spinoff, Lenoir explained, "I think Altice's top brass decided it was time to insulate Altice USA from the difficulties the conglomerate, Altice NV, is facing across its international footprint, particularly in Europe." Kagan is a research group within S&P Global Market Intelligence's technology, media and telecom offering.

But Freddie Lait — founder and chief investment officer at Latitude Investment Management, a boutique firm focused on global stocks that follows a long-only investment strategy — noted that the move not only stands to benefit Altice USA but also will help Altice NV.

"This spinoff will certainly go a long way to steady people's nerves and to allow [Altice founder Patrick] Drahi to continue to expand in the areas where he wants to in a more balanced way. The debt levels have been a real concern to me and other investors, and to see an attempt to reduce this burden is a clear positive," Lait said in an interview.

In connection with the split, Altice USA will distribute a special dividend in cash of $1.5 billion, of which Altice NV will receive €900 million. Altice Europe will use €625 million, or 69%, of its proceeds from the Altice USA special dividend to repay debt, while retaining €275 million on its balance sheet. "Altice Europe will remain highly disciplined and will not pursue any meaningful stand-alone M&A opportunities and will use excess cash flow to reduce its indebtedness position," Dennis Okhuijsen, who will serve as CEO of Altice Europe after the split, said during the Jan. 8 conference call.

One question for investors following the U.S. cable business is whether the company will pursue further M&A in the near future once the spinoff is complete. Asked about the company's plans during the conference call, Goei said that while the company is "long-term ambitious" about consolidation, "There's clearly no near-term focus here on M&A."

In the immediate future, Goei said Altice USA will remain focused on building out its fiber-to-the-home network. The cable company has announced plans to build a fiber-to-the-home network over a five-year deployment schedule that began in 2017. Altice expects to reach all of the cable footprint it acquired from Cablevision Systems Corp. and most of the footprint it acquired from Suddenlink Communications during that time frame. In addition, Altice USA is moving forward on its plan to launch a wireless offering through its mobile virtual network operator agreement with Sprint Corp. With the MVNO set to launch later this year, Goei said, "We have a lot of other stuff going on internally, [and] we don't want to take our eye off the ball."

But Goei also did not rule anything out. "To the extent that medium-term things become open to us, of course we'll be looking at it," the CEO said.

A quick guide to diversifying your investments

By Freddie Lait at Latitude Investment Management | Thu, 19th October 2017 - 12:21

Diversifying your investments is easier said than done, but do it you must. In order to generate sustainable long term returns investors must do more than simply ride trends or invest in the latest exciting themes.

Choosing a variety of investments will ensure a more stable and predictable source of future returns, especially when focussing on stocks which are fairly valued, have high quality business models and strong industry backdrops.

Beyond that, investors need to consider further diversification through their asset allocation. This deserves an enormous amount of thought, far more than it often receives. Various academic studies point to the fact that more than 80% of portfolio returns come from asset allocation. Below I offer a simple way to frame the thought process and some tips for specific non-equity strategies tailored to your specific portfolio.

Behaviourally we are all loss-averse, albeit to different degrees. At Latitude, we are consciously quite risk averse and aim to construct portfolios which, under normal circumstances, shouldn't suffer worse than a 10% drawdown. And by normal, we don't mean "except for the bad bits".

We invest with the permanent expectation that there is always the potential for unforeseen events in the near future which could cause stock markets to fall 30% or more. Indeed, over the last century stocks have lost more than 30% in value roughly once every decade, and we need to be prepared for that.

Without the power of diversification, this fact would imply a target allocation of c.30% in stocks and the remainder in cash, a very unsatisfying position. A portfolio with this allocation (assuming no alpha from successful stock picking) would have generated negligible real returns in the long term, assuming average returns from equities of 8-9% versus a long-term inflation rate of 3%. We need to do better and, fortunately, we can, thanks to diversification.

William Sharpe famously proved that adding a risky asset to an investment portfolio reduces your total risk exposure provided the risks of that asset and the original portfolio are sufficiently different. It is well documented that such differentiated or uncorrelated assets (such as government bonds for example) are currently overpriced and, as such, often increase risk despite, on the surface, appearing to reduce it.

This is true for most traditional Strategic Asset Allocation models, and the much-admired balanced funds of stocks and government bonds may have had their day. However, since the financial crisis we have continued to find assets that significantly reduce the risk of our equity portfolio and incrementally add to the returns we generate. The key is to think about such assets in relation to your own portfolio, and use them tactically.

If, for example, you are worried about the effect that political uncertainty will have on your companies, owning 5-10% of gold has been shown to frequently mitigate losses during uncertainty induced sell offs.

If your portfolio of highly valued consumer staples stocks has performed well, but you are not yet willing to sell the positions, perhaps including some Index Linked Gilts would makes sense. That would offset any losses you may suffer should those stocks de-rate in a highly inflationary environment

If you are worried about a broader economic slowdown or recession, then the simplest diversifying asset will likely be conventional government bonds as rates may well be cut, driving yields lower once again and the price of these bonds higher.

We believe that diversification within your stock portfolio is the most critical place to start, but that value can also be added (both in terms of risk reduction and return enhancement) through the tactical use of non-equity investments, if tailored specifically to your portfolio.

If we return to our earlier inadequate allocation of 30% stocks and 70% cash, the above principles would instead make us comfortable investing around 50-60% of our assets in stocks, provided we have the remainder invested in diversifying non-equity assets similar to those above.

The result is a portfolio with higher expected returns, despite taking similar or even lower levels of risk. A true understanding of this alchemy is what sets successful long-term investors apart from the crowd.

Freddie Lait is founder and CIO of Latitude Investment Management and Investment Manager of The Latitude Horizon Fund.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Bloomberg European Open ‘Latitude's Lait Says Fed Is Key Driver of Markets’

Freddie Lait, chief investment officer and founder of Latitude Investment Management, discusses the bounce back in European markets and the timing of the next Fed rate hike. He speaks on "Bloomberg Markets: European Open." (Source: Bloomberg)

Easy tips for creating a successful investment portfolio

Where do you start if you want to create a truly long-term portfolio? If you don't have the patience to hold a stock or fund for three to five years please turn away now. Those of you still here, you have the upper hand.

Patience is the golden rule of investing. If you can master longer-term thinking then you gain a number of advantages and avoid a number of pitfalls. Time horizon is the crux of the difference between long-term fundamental investors and financial speculators. It relies on determination of future value, not just future price, and on analysis of business models and process, not sentiment or short-term distractions.

So, why is it important?

Everyone (and that includes you and me) is hard wired to make bad decisions. These common mistakes are called behavioural biases and in no other field do they present themselves more frequently than investing.

It is not essential that investors study all of these biases but, in the same way that a few simple principles help sportsmen improve their swing, it is essential that you know what you might be doing wrong, and how to correct it.

So, what are the common mistakes and how does long-termism help?

The first point to make is that everyone believes they are better than average. Once a common pitfall is explained, the majority of investors believe awareness leads to sufficient prevention. It does not.

Take for example a fact of which I am certain - most investors are no better than average at predicting the future, and most admit as much. A logical conclusion is that most investors should never predict the future. It's futile. Yet almost everyone, to a greater or lesser degree continues to attempt the impossible. This is, quite plainly, referred to as "overconfidence bias".

Making investment decisions which play out over many years without making predictions about the future may sound like a contradiction, but it is far from it. Wise investors accept that they can't see the future and restrict themselves to doing things that are within their power. Principally this includes:

  • Analysis of business and industries (or funds and fund managers)
  • Avoiding emotional biases
  • Behaving countercyclically

Paradoxically, thinking long term means predicting less about the future and focusing on where we are. This way we gain insights about what, in a highly unpredictable world, really matters.

The first implication of long-term investments is that we should buy better businesses, which we believe will survive and thrive into the future. Analysis should focus on whether a company operates in an industry in which I would like to run a business.

Excessively precise estimations of the future ignore the huge role that randomness plays. Critically the fact that the future is highly random means what matters most is having the right initial conditions to succeed. As a result, analysis should focus on process, and people.

A second implication of long-term thinking is that if we are agreed that few of us can predict the future with any accuracy then the greatest risk to investors is not what lies ahead, it's what lies within.

Portfolios often become thematic or style-biased in the hope that this high conviction differentiation will lead to long-term out performance. The result is essentially a concentration of risk; a dangerous build-up of latent downside potential should those high conviction ideas turn sour.

This is true also for portfolios which only invest in one "type" of company such as consumer staples. This not only leaves them susceptible to sharp draw-downs, but it also seriously impacts future expected returns as your opportunity set is dramatically reduced.

At Latitude, for example, our process is explicitly designed to construct a portfolio which is style-agnostic and not exposed too heavily to any one theme or macro outcome. We focus on companies' business models, what it takes to succeed in the long-term, and the current and likely future outlook for the industry in which they operate.

The result? A portfolio that is better balanced to deal with any random and uncertain future, and better positioned to avoid falling foul of over trading or excessive reliance on forecasts.

We have all heard the phrase to "think like a business owner" when choosing stocks, and this sage advice applies just as much to overall portfolio construction. Constructing an investment portfolio is like building a business, it takes time, patience and disciplined application of a sound process.

Consider your portfolio as a conglomerate business - like Warren Buffett's Berkshire Hathaway (BRK.A). It's helpful to have multiple sources of return, and we suggest a few key areas of focus below:

  • some high cash flow mature businesses (dividend focus, staples etc)
  • some high growth disruptive businesses (technology, possibly biotech etc)
  • some cyclical businesses (ensure you purchase countercyclically, perhaps oil and gas and mining; we have US banks)
  • some defensive businesses (because you always need some portion to do well through a recession, and you will not successfully time the recession)

Moreover, it's ill-advised solely to focus on stocks. Well-timed investments in bonds, index-linked bonds, gold and currencies can hugely improve the risk and return profile of your portfolio, often allowing you more flexibility to hold stock positions for longer than otherwise may have been the case.

Finally, don't be afraid to hold cash when opportunities do not present themselves, allowing yourself to act countercyclically when there is panic in the market and stocks are trading at discounted prices.

So, the ideal portfolio is one which balances its sources of return across stocks with different business models, uses funds and stocks to achieve investment aims.

In conclusion, investors often need to take a deep breath and step away from the bustle of the market in order to make sensible decisions about their future.

We have narrowed down some simple tips that any investor needs in their pursuit of investment success, whether you invest yourself or prefer to choose other fund managers to do it for you. All of them stem from the key principle of taking a long-term view, so if you keep one thing in mind, let it be that and the others should follow.

Stop focusing on forecasting the future or timing the market and focus on achieving a well-balanced long-term portfolio. Having a set of principles which help avoid common behavioural pitfalls helps you achieve this goal.

Simply focusing on these points will dramatically improve your chances of success. If you decided to choose other funds to invest your savings for you, then use these principles as a yardstick against which all good managers investing on your behalf should conform.

Never focus on outcomes alone, because long-term performance, without a consistent and sound process, is genuinely not a guide to future returns.

Freddie Lait is founder and CIO of Latitude Investment Management and Investment Manager of The Latitude Horizon Fund.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

FE Trustnet - Busting the five big myths around absolute return frameworks

Former Odey fund manager Freddie Lait, who heads up the Latitude Horizon fund, breaks the misconceptions many investors have about how risk-adjusted return funds should operate.

By Lauren Mason, Senior reporter, FE Trustnet

Bottom-up stock selection, double-digit cash weightings and the avoidance of any short positions or derivatives are not strategies commonly associated with funds that have absolute return frameworks. But, for Latitude Investment Management’s Freddie Lait, these ideas are key components of his Irish-domiciled DMS Latitude Horizon fund.

The manager, who ran money at Odey Asset Management for several years before launching his own boutique business, focuses on portfolio diversification as opposed to leveraging or shorting in a bid to achieve the highest possible risk-adjusted returns for investors.

This is in stark contrast to many well-known absolute return mandates – such as the behemoth Standard Life GARS fund – which tend to use a combination of traditional assets, advanced derivative techniques, pair trading and short positions to minimise volatility for their clients.

Performance of sector vs index over 5yrs

Source: FE Analytics

In the below article, the manager busts some of the assumptions many investors have about funds with absolute return frameworks and how they should minimise risk for investors.

Funds with absolute return frameworks shouldn’t have concentrated portfolios

Many absolute return, total return and diversified growth mandates run hundreds of positions across numerous asset classes at any one time to ensure their clients are covered on all grounds. 

Lait’s fund adopts a far more concentrated approach, however, with its equity allocation (which currently stands at 43 per cent of the portfolio), consisting of around 20 stocks. In fact, the fund’s top 10 equity holdings account for more than 28 per cent of the overall portfolio.

“We only own 20 stocks so it’s a very high conviction portfolio, but they are very diverse. We don’t follow thematic investing, which has become a bit of a buzzword,” the manager (pictured) said.

“A majority of people that I’ve found who are trying to defend active management defend it by taking bolder bets within active management, so they may take a large bet on one particular outcome or theme such as reflation.

“They tend to work as much as they don’t – the industry is full of people who are right once in a row. You can get those big calls right with your stocks, but then all you need to do is get one or two wrong and you have permanently impaired your shareholder’s capital in quite a meaningful way.”

Alongside equities, the fund has allocated capital to gold, emerging market debt, inflation-linked bonds, emerging market currency and cash.

Concentrated absolute return-framework funds aren’t diversified enough

While DMS Latitude Horizon has only 20 equities accounting for more than a quarter of the overall portfolio, Lait said it is still diversified enough to achieve strong risk-adjusted returns.

For instance, he will never hold a style bias within the portfolio in a bid to minimise drawdowns when they fall in and out of fashion.

“It’s about diversifying using across as many axes as you can think of,” the manager said. “We hold some things which are doing really well and some things which are not, and we don’t mind that.

“It is always going to be the case that stocks, even when the underlying business is doing fantastically, will have a couple of years where they can underperform quite substantially or lose a lot of money in the share price.

“We think about it more by business model as opposed to sector or region, because if you buy Unilever for example it’s not a UK or Dutch stock, so region is difficult.”

In terms of diversifying by sector, Lait said it is also possible to find a highly-defensive stock within a cyclical industry, which means it is therefore more important to focus on a company’s fundamentals first and foremost.

“We look at cyclicals and defensives, we look at turnarounds as well where businesses have been misunderstood or are undergoing corporate change because we can take that longer-term view,” he reasoned.

Examples of the fund’s largest equity holdings include Unilever, Alphabet, Nokia and Tesco.

Performance of UK stocks over 5yrs

  Source: FE Analytics

Absolute return frameworks should always be fully invested

Many investors believe absolute and total return funds shouldn’t need to hold cash, as their chosen strategies should protect them from any downside. However, DMS Latitude Horizon currently has a hefty 22 per cent cash weighting.

While the track record on the named fund only dates back to November last year, its high cash level isn’t simply because its capital hasn’t been fully deployed yet (the mandate was carried over from Odey, when it was named CF Odey Atlas).

“That is a true reflection of where I stand today. That’s a sign of there being less than we want to buy,” Lait said. “If I could, I would probably want to put 10 per cent of that into equities but we can’t find anything at the moment and I am patient and will wait.

“To invest countercyclically is one of the key things for a long-term investor as well. You have to wait for those prices to come and that can take years. We will run with levels of cash at times, although this is probably as high as it will get to at any point.”

The manager described cash as a “great asset” because it allows him to utilise any market opportunities when they do present themselves. He also pointed out that it is better to hold cash than buy into assets he doesn’t truly believe will benefit investors over the long term.

“Patience is very important and our current cash level is a sign of that. Investors would need to be patient with that but I think it’s a great asset. For funds which can’t leverage, using cash as a tactical asset class is very relevant,” he added.

Absolute return frameworks need to use derivatives and long/shorts to minimise risk

Holding short positions allows managers to diversify their portfolios and make positive returns during falling markets. The use of other common absolute return strategies, such as pair trading, can also offer a portfolio market neutrality.

However, Lait has chosen to run a long-only mandate and argued there are several advantages to this.

“Firstly, additional fees and costs such as roll costs and option premium costs go into some of these more complex derivative strategies,” he explained.

“I have structured funds using them in the past so I really do understand them quite well. There’s a lot more money in those types of trades for the house than for the client.

“I think the overall fee for a more complex fund is going to be higher, so even if I’m just a similar level of ability to that manager, I think my return will be higher by virtue of not taking so much out.”

Lait added that a long-only strategy allows him to focus more on the individual components of the portfolio and trade less frequently.

“We can take that long-term time horizon and have that focus and patience to invest for the long term,” he continued. “We can say the only driver of price is value in the long term, whereas other funds could be focused on what is going to drive prices over the next quarter or so, whether it’s earnings revisions, sentiment or momentum.

“The only thing we’re going to be spending our time focusing on every month is value. If we see prices substantially below value we will invest, otherwise we won’t.”

Funds with absolute return frameworks shouldn’t hold too much in equities

Equities are traditionally renowned for being one of the highest-risk asset classes and, as such, many investors can be sceptical about funds with absolute return frameworks that have large equity weightings in their portfolios.

“As far as I’m aware, there’s never been a 20-year period where you’ve lost money on equities,” Lait said. “People say that the fact there’s no other alternative is not a fundamental reason to hold equities, but it’s actually a pretty good fundamental reason to think about allocating for the long term.

“You do not want to own bonds for a long period of time most probably and, if you do, that implies that bond yields are going down further not higher, so almost certainly back to zero.

Performance of index over 5yrs

  Source: FE Analytics

“In a scenario where you do want to own bonds, you should want to own equities more because, even if they’re trading expensively today on – for instance - 16x earnings, that’s a 6.6 per cent earnings yield and it’s growing, it’s inflation-protected and, if you’re buying global companies, you are not at the mercy of one government regime or any targeted regional risks.

“You’re just in a much more sensible asset class which, on a relative basis, is looking increasingly attractive.”

While the fund has existed for more than six years, Lait significantly restructured the portfolio in November last year. As such, our data from FE Analytics only shows performance data stretching over the last few months.



Bloomberg Podcast: Latitude’s Lait: Stock Investors Still Climbing A Wall of Worry

Freddie Lait, chief investment officer and founder of Latitude Investment Management, speaks to Bloomberg Daybreak’s Mark Barton and Anna Edwards about the performance of the Stoxx 600, the Trump administration’s impact on equities and the likelihood of the Fed raising rates next month.

City A.M - Will Tesco need to sell off stores to win Booker deal approval?

Pressure is building on Tesco and Booker after it was suggested that the former might be forced to sell off hundreds of small stores as they face an “uphill battle” to win competition approval.

Concerns around whether the deal can win Competition and Markets Authority (CMA) backing has emerged after two of Tesco’s biggest shareholders, Schroders and Artisan Partners, last week spoke out against its £3.7bn takeover of Booker.

Matt Evans, a competition partner at law firm Jones Day, said that in order to convince the CMA to allow the deal past a phase one investigation Tesco might have to sell a number of stores, probably Tesco Express outlets.

One challenge facing the firms will be convincing the CMA that Booker does not control its “symbol stores”, which are run by independent shopkeepers under the company’s brands, including Londis and Budgens, Evans told City A.M.

He added: “My hunch is that divestments will be needed, but Tesco has a shot at avoiding it come the end of a phase two review.”

“If the CMA clears the deal outright, assuming that it agrees with the Tesco-Booker stance, I think there would be a degree of uproar,” Shore Capital retail analyst Clive Black told City A.M.

“Given how the CMA has got into the very narrow details of the retail industry in recent years, it would be almost unthinkable that they could wave this through [without concessions].”

He added: “I don’t think it’s fanciful to suggest that the combined entities may have to dispose of quite a lot of space. And that would then cause a rethink of the whole merits of the deal.”

Senior industry sources told the Telegraph they thought the deal will give the combined group too much influence over the UK’s food supply. The Sunday Times reported over the weekend that Lansdowne Partners, Axa and Jupiter have strongly reduced their stakes in Booker since the Tesco deal was agreed at the end of January.

After it emerged that Schroders and Artisan were unhappy with the deal last week, Freddie Lait, the founder and chief investment officer of Latitude Investment Management, which holds a stake in Tesco, told City A.M.: “The timing of the merger is difficult for current Tesco shareholders to digest as it is a clear distraction for management, and will result in inevitable integration costs and other frictional issues.

Therefore, it is likely that the underlying turnaround story which was making solid progress will be masked or delayed to some extent.

However, there is certainly strategic merit in the deal that positions Tesco in front of a new customer base which is growing faster and appears to be far more resilient than their underlying big box retail business.

At this mature stage in the supermarket sector’s life cycle, consolidation and vertical integration are essential, and will add benefits in the longer term through further cost cutting, increased scale and greater diversity of customers.

Tesco and Booker declined to comment.

Bloomberg European Open - Freddie Lait discusses his outlook for the US dollar

Lattitude Investment CIO Says Dollar May Soften From Here. Freddie Lait, chief investment officer and co-founder of Latitude Investment Manager, discusses his outlook for the U.S. dollar, his take on the failed U.S. healthcare bill and the impact of a border tax on markets. He speaks to Bloomberg's Guy Johnson and Matt Miller on Bloomberg Markets European Open.

Bloomberg European Open - Oil Outlook, How Should Investors Play the Sector

Freddie Lait, founder and chief investment officer at Latitude Investment Management, discusses the price of oil and how it impacts his investment decision. He speaks to Bloomberg's Guy Johnson and Matt Miller on "Bloomberg Markets: European Open."