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Mishcon de Reya set for £750m London listing

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Mishcon de Reya is set to become the most highly valued law firm on the London stock market after partners voted in favour of taking the 83-year- old firm public later this year.

The blue-chip firm said on Wednesday it had appointed JPMorgan to explore a possible listing as early as the fourth quarter, depending on market conditions. The firm could be valued at about £750m, according to two people familiar with the plans.

The firm has a pugnacious reputation in litigation and defamation law, and also has large practices in real estate and employment. It also represented Diana, Princess of Wales, during her divorce in 1996 and recently acted on the UK Supreme Court challenge to the government’s decision to prorogue parliament last year. 

The firm said that it wanted funds to accelerate its expansion overseas and to invest in growth opportunities in the technology sector, as well as to recruit more lawyers around its hubs in the UK and Asia.

Partners voted to explore a listing at a meeting at the end of last week ahead of a board meeting on Monday, making it the latest legal services firm to do so.

All employees will receive shares as part of the plans, in a move designed to foster loyalty among younger workers who would not normally receive a stake.

The scheme will also include a salary sacrifice system for partners who take shares, and the firm will set up a super bonus pool over and above its existing one, comprising 5 per cent of Mishcon shares placed in a trust. A separate pool of shares will be set aside to fund the firm’s social projects. 

Mishcon said that it expected revenues of about £188m for the 12 months to April 9 2021 and had had revenue growth of more than 40 per cent over the past five years.

Mishcon said it would aim to float about 28 per cent of the company, leaving the majority of the firm in the hands of its partners and employees. 

The company has 178 partners, whose top echelon pocketed more than £1m each last year on average. It employs 1,000 people in offices in London and Singapore — a base it launched in 2020. 

Kevin Gold, executive chair at Mishcon, said that the listing decision had been driven by the need to “move the dial” on its growth, which would require a “huge amount more capital”. 

Law firms generally run with thin cash buffers and low levels of borrowing — unlike companies, they must ask partners to stump up cash for new investments. A listing would also allow the firm to “enfranchise” its staff — a “John Lewis” model, according to Gold.

Mishcon will become one of a growing number of law firms to list on the public markets amid pressure to boost investment in technology and global expansion. 

Rival firm Irwin Mitchell is also considering a flotation this year. Other listed law firms include Manchester-based DWF, which has a market value of about £275m, Keystone Law, valued at £210m, and Knights Group, which is worth about £350m. 

RBG Holdings, which owns Rosenblatt, floated in 2018 on Aim and is valued at about £110m. Its share price has more than doubled this year.

Mishcon’s listing comes as the firm comes under pressure to expand internationally, including into Asia and the Middle East and invest in technology and acquisitions.

In the past five years, the firm has increased revenues from £130m to £188m, having boosted turnover by 6 per cent in the 12 months to April 2020. It has also developed a series of non-law consultancy businesses such as MDR Mayfair — a private family office service — and MDR Brand Management. The firm is also seeking to establish an e-sports gaming agency.



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JD.com’s logistics arm seeks to raise up to $3.4bn in Hong Kong IPO

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JD Logistics, the delivery unit of Chinese ecommerce group JD.com, will seek to raise up to $3.4bn in what would be one of Hong Kong’s largest initial public offerings this year.

The company’s decision to list follows a boom in online shopping during the coronavirus pandemic. But a tougher regulatory environment for Chinese technology groups and a recent fall in the shares of SF Holding, one of JD Logistics’ largest competitors, pushed the company’s proposed IPO price down by about a quarter, according to a person close to the deal.

JD Logistics will sell 609.2m shares at HK$39.36-HK$43.36 ($5.07-$5.58) each. The final price will be set on Friday and the shares are expected to start trading on May 28, according to terms of the deal seen by the Financial Times.

The IPO would be the second largest in the city this year after Kuaishou, a Chinese viral video app, raised $5.4bn in February, and would be the third blockbuster listing by JD.com in Hong Kong in the past year. JD Health, which sells pharmaceutical and healthcare services online, completed a $4bn IPO in December and JD.com carried out its own secondary listing in the territory last June, which raised a similar amount.

Hong Kong has benefited from a flood of high-profile listings by Chinese technology companies in recent months and has hosted more than $20bn of IPOs this year, according to data from Bloomberg.

JD.com created its logistics and delivery arm in 2007 and spun it out into a standalone unit a decade later. The company operates more than 900 warehouses in China and provides delivery and warehousing services to third parties.

But the group is among those under pressure as China increases scrutiny of its largest internet groups. Last month, officials told 13 of the country’s biggest tech companies, including fintech subsidiaries of JD.com, Tencent and ByteDance, to “rectify prominent problems” on their platforms. The push was seen as a sign that regulatory focus on the sector was spreading beyond Jack Ma’s Ant Group, after the $37bn IPO of the fintech company was scuppered last November.

Separately, shares in SF Holding, China’s largest listed delivery company, fell sharply last month after a quarterly loss rattled investors and prompted scrutiny over the high valuations placed on Chinese companies.

“Competition in China’s logistics space is fierce, especially after [Indonesian company] J&T Express entered the market, which has had an impact on other logistics companies’ performance and will hit JD,” said Li Chengdong of Haitun, an ecommerce think-tank.

JD Logistics was initially the delivery arm of JD.com’s ecommerce site but an increasing portion of its business comes from ferrying packages on behalf of third parties.

Cornerstone investors in the JD Logistics IPO, including technology group SoftBank’s Vision Fund, Temasek Holdings, Singapore’s state-backed investment company, and investment firms Tiger Global and Blackstone have subscribed to about $1.5bn of the shares, according to the terms of the deal.

Bank of America, Goldman Sachs and Haitong International are the joint sponsors for the listing.

Additional reporting by Ryan McMorrow in Beijing

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Volvo Cars: race to net zero marks revival of IPO plan

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Volvo Cars has been waiting at the lights for years. The Swedish carmaker’s journey back to the stock market was halted in 2018 when Chinese owner Geely scrapped flotation. A subsequent plan to merge and float the two businesses was dropped in February. Now the company is considering an initial public offering. Getting a green signal will require a sensible price.

The last IPO plan stalled when investors baulked at the $30bn sought by Geely. Volvo has advanced since then, particularly on electrification. Shares in peers such as Daimler, BMW, Stellantis and VW trade on an average trailing enterprise value-to-ebitda multiple of 9. If Volvo achieved the same, it would have an enterprise value of almost $20bn, using figures from S&P Capital IQ. The company is likely to argue that its success in China merits a higher valuation. But its operating profit margins are about half those of peers. 

Profitability should improve, as battery advances cut the cost of making electric cars. But Volvo has already benefited from a supportive owner. Geely, which paid $1.8bn in 2010 to buy Volvo from Ford, has given it access to funds and shared the capital costs of developing new platforms. That helped the return on capital shoot up to an average of 9 per cent over the past six years, well above that of BMW and VW. 

A lot depends on continued collaboration with Geely. An outright merger was deemed too complicated because the complexity of the ownership structure made it difficult to agree a price acceptable to Geely’s minority shareholders. But the Chinese company will retain a big stake. The two businesses will jointly own the legacy internal combustion engine business and each owns half of Polestar, the premium electric brand. 

Polestar aims to produce the first genuinely net zero car by 2030. That, and other goals, means that Volvo has some of the most ambitious climate plans in the car industry. Those green credentials could add some extra oomph. Even so, too racy a valuation will impede its chances of a successful float.

Lex recommends the FT’s Due Diligence newsletter, a curated briefing on the world of mergers and acquisitions. Click here to sign up



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Commodities broker Marex looks to list on London Stock Exchange

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One of the brokers with rights to trade on the historic trading floor London Metal Exchange is heading for an initial public offering as commodity markets enjoy the biggest boom since the early 2000s.

Marex, a brokerage controlled by two former Lehman Brothers investment bankers, said on Friday it was considering listing on the main market of the London Stock Exchange.

Should it proceed, Marex said the offer would consist of a sale of shares by existing investors and that it was aiming for a free float of at least 25 per cent, meaning it would be eligible for inclusion in widely followed FTSE indices.

London-based Marex employs about 1,000 people and is one of nine members of the Ring, the LME’s historic open outcry trading floor that is now threatened with closure after more than 140 years. It has a 16 per cent market share on the LME.

The company is controlled by JRJ Group, a private equity firm founded by Jeremy Isaacs, the former head of Lehman’s European operations, and Roger Nagioff, the bank’s ex-head of global fixed income.

JRJ has a 41 per cent indirect economic interest in Marex. It is expected to reduce that stake through the London IPO although it will remain a large shareholder.

People familiar with the plans said Marex was seeking a valuation of $650m-$800m. The company is about half the size of US rival Stonex Group, which has a market capitalisation of almost $1.4bn. The IPO could come as soon as June.

The company, which has been expanding aggressively through acquisitions, made pre-tax profits of $55m in the year to December, up from $46.6m a year earlier, on net revenue of $414.7m.

However, in 2018 pre-tax profits were just $13.4m after Marex took $31.9m of legal provisions related to a warehouse receipts fraud.

Marex makes more than half its revenue from commodity hedging services that help big commodity producers, consumers and traders manage price risk. Commissions from the group’s top 10 clients increased by 17 per cent to $49m in 2020.

“The attractiveness and resilience of our business model is demonstrated by our latest set of results, which showcase continued strong performance despite the obvious macro headwinds,” said Marex chief executive Ian Lowitt, who was paid $4m last year. His basic salary is almost twice that of the LSE’s CEO David Schwimmer.

JRJ Group and its partners Trilantic Capital Partners and BXR Group acquired a majority stake in Marex in 2010. A year later it bought Spectron to create one of the biggest commodity brokers in the world. The company has been up for sale for several years as JRJ has sought an exit from its investment.

It emerged in November that Marex had appointed Goldman Sachs and JPMorgan to help advise on a possible stock market listing. One of its no- executive directors is Stanley Fink, former CEO of hedge fund Man Group.

Marex said on Friday that acquisitions and expanding into “adjacent products” would continue to form a “central pillar of its strategy”. In November, Marex acquired Chicago-based equity derivatives firm XFA.

Commodity markets have boomed over the past year on the back strong demand from China, a post-pandemic pick up in other big economies and bets on the “greening” of the world economy.



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