What’s the future of Canary Wharf?

Some big hits to luxury giants to start: Consumers are reining in their spending on lavish goods, dealing a blow to luxury giants’ stock prices. LVMH led a sell-off yesterday in global luxury stocks, while Gucci owner Kering warned that its operating income could fall dramatically in the second half of the year.

In today’s newsletter:

• Canary Wharf gears up for a revamp

• UK consumer giant Reckitt restructures

• Greensill goes head to head with the FT

Canary Wharf’s moment of upheaval

Europe’s best-known corporate office district Canary Wharf is in the midst of a historic upheaval. Hybrid work has stuck around, and companies are rewriting their strategy when it comes to offices.

As a result, the docklands are undergoing what looks like a round of musical chairs.

Big tenants like HSBC and Clifford Chance are moving back to the City after decades in Canary Wharf, while others such as Barclays and Morgan Stanley have decided to stay (but are reducing their footprints).

A team at the FT dug deep into whether Canary Wharf is ready for this new era, where workers only schlep into the office some of the time. To keep up, it will have to renovate ageing buildings fast enough to attract new, deep-pocketed tenants.

Canary Wharf Group (CWG) — the developer and manager behind the estate — isn’t the only landlord in the area.

The group has offloaded dozens of buildings over the years, leaving a portion of the office block with landlords including Blackstone, Kuwait state investment vehicle St Martins Property Group, Oaktree and Singapore’s GIC.

CWG is using the moment to update buildings that look a bit worn. With HSBC planning to relocate its headquarters in 2027, CWG has drawn up grand plans to renovate the building.

But modernising huge office towers comes at a serious cost. People familiar with the HSBC building plans told the FT the project could cost £400-800mn.

And that’s just HSBC’s building. The investment required to revamp the estate will be massive, at a time when uncertainty clouds the entire commercial real estate market.

Support from the landlord’s owners — Canadian investment group Brookfield and the Qatar Investment Authority — will be crucial.

DD is left wondering if CWG can pull off the overhaul, and how much it will all cost.

Consumer giant Reckitt to break itself up

Yesterday, embattled consumer group Reckitt announced a major restructuring.

The maker of brands like Durex condoms and Strepsils cough sweets has decided to split itself into three groups. The manoeuvre will allow it to prepare for a sale of its underperforming home care brands and to pursue “strategic options” for its beleaguered US infant formula business Mead Johnson.

What’s left, in theory, is a smaller and more nimble Reckitt.

Two top-10 shareholders — Flossbach von Storch and Causeway Capital — told the FT before the announcement that they were keen on a sale of Mead Johnson, which has only been a headache for the UK-listed group since it acquired it for £17bn in 2017.

But litigation over one of its instant formulas means Mead Johnson is a tough sell.

Reckitt previously tried to offload the business, and already sold its China arm for $2.2bn to local private equity group Primavera in 2021.

Speaking to the FT following the restructuring announcement, chief executive Kris Licht said he was focused on returning value to shareholders rather than on big deals.

Talk is rife about the potential consolidation of the consumer health sector at large.

The pharmaceutical consumer health sector seems primed for deals: GSK’s Haleon and Johnson & Johnson’s Kenvue are now operating as standalone businesses, and Sanofi’s consumer division is soon joining the group.

“I know there’s lots of talk about potential future consolidation,” said Licht. “We think our portfolio will attract a full and fair valuation over time as we execute this plan, and that is a significant source of value creation. So that’s our whole focus.”

Lex Greensill vs the Financial Times

How much would you pay to try to stop journalists from seeing serious allegations that have been made against you?

DD hopes this is a hypothetical scenario (rather than a plausible one) for our subscribers. And we understand that readers will differ in their opinions over how much to pay when it comes to tasking lawyers to see off a pesky media organisation.

But for disgraced financier Lex Greensill, the entirely non-hypothetical bill came to more than £63,000.

That’s the total amount of legal costs that Greensill attempted to make the FT pay, after we applied to London’s high court to obtain a document outlining why the UK’s Insolvency Service is seeking to disqualify the financier from acting as a company director.

Thankfully, Greensill failed in his bid to stick the FT with the hefty bill, while we successfully obtained a crucial portion of the relevant document that had been filed in court detailing the UK government agency’s allegations.

The FT had to go to the court to get access to the document after being blocked from receiving a copy via the electronic court file. Greensill opposed the paper’s open justice application.

The details are worth reading in full in this story from the FT’s Cynthia O’Murchu and DD’s Rob Smith — particularly as it involves DD favourites SoftBank and Credit Suisse (RIP).

Greensill’s barrister Gavin Millar KC argued in court that the FT should still be liable for the bill because it had made a “very wide application” that had not been successful (in effect because the FT did not obtain the entirety of the document that it sought).

The judge, however, deemed the outcome of the FT’s application an “effective score draw”.

While that may be the case — and the result was that the FT and Greensill each bore their own legal costs — DD is still chalking it up as a substantial win for both FT readers and the wider principle of open justice.

Job moves

• NYSE vice-chair John Tuttle is departing the exchange after nearly two decades. He was crucial to convincing big companies to list on it. He’s leaving for insurance broker and real estate group Acrisure.

• Bank of America has named Eddie Martin head of Emea leveraged finance. He’ll be based in London.

• Estée Lauder has appointed Akhil Shrivastava as executive vice-president and chief financial officer, replacing Tracey Travis. Shrivastava has been with the company for nearly a decade, and previously worked at Procter & Gamble.

Smart reads

King Murdoch Media tycoon Rupert Murdoch has had a monumental influence over the Republican party for decades, the FT writes. Is the 93-year-old’s influence starting to wane?

IPO man The head of Japan Exchange Group, Hiromi Yamaji, has helped usher the country’s stock market to a $2tn rally, Bloomberg reports. He says it’s just getting started.

M&A dilemma Google’s recent plans to buy Wiz collapsed shortly after word of the talks leaked. A boardroom schism underscores its dilemma when it comes to dealmaking, Lex writes.

News round-up

IAG takeover of Air Europa in peril as EU officials signal concern (FT)

Clifford Chance hands partners £2mn as profits surge (FT)

Tesla shares tumble as profits slump and Elon Musk delays ‘robotaxi’ launch (FT)

US warns tech start-ups on security threats from foreign investors (FT)

Commercial property stress forces Blackstone mortgage Reit to cut dividend (Bloomberg)

Thames Water’s credit rating slashed to ‘junk’ (FT)

BlackRock leads as ether ETFs rack up $100mn on first day of US trading (FT)

Santander’s UK profits fall as it courts mortgage customers (FT)