Memo #20: Is it time for Pinault to ...

A lot to cover at the moment without even commenting on geopolitics:

• UMG has partnered with Patrick Whitesell and his Silverlake-backed firm WTSL to form a new joint venture. Whitesell was previously Executive Chair of WME/Endeavour, the talent agency slash WWE owner slash NY Fashion Week owner (it’s a lot, and probably explains why Silver Lake took the previously listed firm private — the market never really “got” it as a listed company¹). Our read from this is that UMG intends to take artist management in-house, at least via a JV. “Vertical integration”, innit?

• Wise, the fintech firm that facilitates cross border payments, is looking into moving its primary listing to the US (it’s currently listed on the LSE). We’ve often looked at Wise and thought it’s an exceptional company: they’re a lot cheaper than PayPal and other competitors and have a built-in “moat” (once you use them, you’re in the system — and it’s a pain to change — especially if you’re traveling). Wise’s performance as a LSE stock has been disappointing — sitting at about +9.00% over five years. This is emblematic of the bigger issue the UK faces, we think — they build some great businesses, but their capital markets just don’t support fast growing tech like the US does and nor does NZ (little England in so many ways)…see Xero, which left the NZX some time ago, and Rocket Lab, which never listed here in the first place).

• Finally, had to laugh at Russia’s Fake McDonald’s (Vkusno & tochka (translates to “tasty and that’s in” in a typically pithy Russian way) lobbying Putin to prevent the return of real McDonald’s back to Russia. Back when the Ukraine war broke out western firms rushed to sell their investments in Russia — Alexander Govor bought all the existing McDonald’s outlets and McDonald’s recorded a $1.2bn non-cash charge related to the divestiture (allegedly Arsen Kanokov was the real buyer, and Govor the strawman given Kanokov’s sanctions). But it’s a funny thing, right? “Hey McDonald’s, we’re fake (old) McDonald’s, we don’t want you back!”

On a more serious note, many western companies sold their Russian operations for a song — Heineken sold theirs for $1, while Moscow demanded a 50% discount on all deals². It reminds us of the unregulated 90s in Russia, where assets (after the fall of the USSR) went for sometimes ridiculously cheap prices (NZ’s own Chandler brothers profited off this³). Of course, this time around, it’s many of the same oligarchs who profited in the 90s who bought those western assets at dirt-cheap prices⁴. Now onto our main piece…

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Pinault retirement rumours

François-Henri Pinault (FPH) was never going to live up to other luxury CEOs, like LVMH’s Arnault. Perhaps it’s because he’s the son of the actual founder, so he didn’t have the same skills as Bernard Arnault (the actual creator/founder of LVMH). Or perhaps it’s because Arnault is simply sui generis — a unique beast who reshaped luxury as we know it. Regardless, Pinault’s group, Kering, is having a tough time. First there was the ill-fated appointment of Sabato at Gucci, and before that there was the whole scandal at Balenciaga with Demna. More recently the group has reportedly engaged in talks to sell their $1bn stake in 715-717 5th Ave, in New York, a property it only purchased a year ago. What gives?