Published on October 6, 2020 by Holly Porter

What’s been happening in the commercial world in the past week? Read on to find out!

Cineworld to Go Into Hibernation

This week, Cineworld announced that it will be shutting down its UK screens for the foreseeable future, putting 5,500 jobs at risk. The move comes after film productions announced new delays to releases, notably ‘No Time to Die’, the new Bond movie. In response, Cineworld wrote to PM Boris Johnson and Culture Secretary Oliver Dowden, noting that the industry has become ‘unviable’.

Cineworld is the world’s second-largest cinema operator, beaten only by China’s AMC group. The British cinema company also has 546 theatres in the US, which are reportedly under review for similar closure. In the first six months of the year, Cineworld lost $1.6bn. Although the company had been optimistic as theatres opened in the summer, Nolan’s Tenet did not perform as well as hoped, which has been used as an analogy for the industry as a whole. In the US, in the three main markets: New York City, Los Angeles and San Francisco, theatres remain closed.

Talking point: Why do you think the government’s £500m pledge to save the film and theatre industry in June has failed to be effective? 

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Brothers Buy Asda

Walmart has finally sold its majority stake in Asda. The American retail co-operation bought Asda in 1999 for £6.7bn in an attempt to muscle into European markets. However, this vision was never realised. In 2019, Walmart sought to merge Asda with Sainsbury’s. This was blocked by the Competition and Markets Authority (CMA) on the grounds that combining Britain’s second and third largest supermarkets would have created a business bigger than Tesco and would unfairly raise prices for consumers.

Brothers Zuber and Mohsin Issa alongside private equity group TDR Capital have now taken a majority stake in Asda for £6.8bn. The new arrangement will see the brothers holding equal stakes in the supermarket, with Walmart retaining a minority shareholding. Existing management will remain the same but the duo has committed to investing £1bn in the business and to increase the number of UK-produced food offered in store.

What type of deal have the brothers made? The purchase will be financed through a £4n debt package. This comprises high-yield bonds and leveraged loans.

Read an article announcing the proposed details of the Asda-Sainsbury merger

Talking point: What are the commercial advantages of financing the deal in this way? 

H&M to Close 250 Stores

The world’s second largest retailer H&M has announced 250 store closures, meaning the closure of 5% of its global estate. The Swedish clothing company has more than 5,000 stores worldwide but reserves a contractual right to renegotiate or end leases on approximately one quarter of its venues every year. It is unclear how many of the 250 closures will be in the UK.

Despite a minor recovery to sales later in the summer and performance better than analysts had expected, sales remained 5% lower in September 2020 than September 2019 and failed to address some of the setbacks of the last six months. Instead, the retailer will focus on ‘enhancing its digital channels’.

How Has COVID-19 Affected the Retail Clothing Industry?

Talking point: Do you think H&M will be forced to close more stores in the coming months? 

Uber Rival Banned in London

Only one week after Uber was granted ‘fit and proper’ to operate its ride-hailing services in London for another 18 months, rival Ola has been placed under review for the same threat to public safety. Indian taxi app Ola has been banned by Transport for London (TfL) after it was found that, since operating in February, more than 1,000 trips have been made by unlicensed drivers.

Ola has the right to appeal for the next 21 days and can continue to operate pending the outcome of any appeal process.

Talking point: What can TfL do to prevent similar accusations befalling future rivals?

Words by: Holly Porter

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