The Nuclear Option

Private equity still loves Hollywood ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

July 7, 2022

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Good morning.

Starting today, posting "online insults" could be punishable by up to a year in prison and a $2,200 fine in Japan amid a government crackdown on cyberbullying.

"There needs to be a guideline that makes a distinction on what qualifies as an insult," criminal lawyer Seiho Cho told CNN. "For example, at the moment, even if someone calls the leader of Japan an idiot, then maybe under the revised law that could be classed as an insult."

Thankfully, there have never in history been any idiot politicians.

Morning Brief

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Amazon is lending food delivery service Grubhub its Midas touch in the form of a small investment.

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Nuclear energy is officially "green" in the European Union.

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Peter Chernin grows his media empire.

Food Delivery

Amazon Takes Stake in Grubhub, Extends it to Prime Members

True to its name, Amazon's business empire is a sprawling jungle, touching on everything from groceries to movie production to e-commerce to cloud services.

The tech giant's latest venture, announced Wednesday, is a stake in struggling food delivery service Grubhub. For the beleaguered courier app, Amazon's intervention could be a guiding light out of the wilderness.

The Bezos Bump

Grubhub, which operates in the US, was acquired in 2021 by Netherlands-based Just Eat Takeaway (JET) for $7.3 billion in a deal that created the largest food delivery company outside China. But JET shareholders quickly found the financial implications hard to swallow.

Activist investor Cat Rock Capital Management alleged "JET's management and supervisory boards torpedoed the company's share price by providing a misleading outlook on the company's profitability." Even against a backdrop of surging at-home delivery during the pandemic, Cat Rock cited a "catastrophic destruction of equity value in the past two years." And they weren't wrong — JET's stock has fallen over 80% since its June acquisition of Grubhub. With its board chair resigning earlier this year, shareholders now hope Amazon's stake in the US subsidiary offers a Midas touch:

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The agreement gives Amazon the option (in the form of warrants) to acquire 2% of Grubhub, which could rise to 15% depending on how many new customers Amazon brings to Grubhub.

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Amazon will offer members of its Prime service in the US a one-year membership to Grubhub, a deal that will continue on an annual basis until either partner cancels it. There were 153 million US Prime members as of the second quarter of 2021, according to research firm Consumer Intelligence Research Partners, and news of the massive customer injection sent JET shares up 16% on Wednesday for their biggest gain since 2018.

"Grubhub has secured not just a very powerful partner, but also a very efficient acquisition channel," Giles Thorne, an analyst at Jefferies, wrote in an investor note. "For a hitherto stranded asset and dead-weight to the JET equity, this is positive news." For Amazon, it's just the latest flirtation with restaurant delivery. In 2019, the company piloted and quickly abandoned a Grubhub competitor service of its own. It also owns about a 10% stake in UK-based restaurant delivery app Deliveroo, with Prime members there receiving similar perks.

Divorce, Proceeding: JET CEO Jitse Groen has acknowledged the company is exploring selling Grubhub, with private equity giant Apollo Global among the interested parties. But offer prices are likely to be fractions of what JET paid just two years ago, well past Prime's 30-day money-back guarantee.

energy

Nuclear is Officially "Green" in Europe, Draws Billions in US

(Perry Nuclear Energy Plant in Perry, Ohio; Photo by FirstEnergy Corp.)

Nuclear energy is officially "green," the European Union said Wednesday.

Lawmakers in Brussels voted to label the controversial power source, and natural gas, as green investments, opening them up to billions in new investments. US policymakers are sending billions to glowing rods as well.

A Cat with Nine Half-Lives

Nuclear energy has been in a slow but steady decline ever since its peak in 1996 — falling from 17.5% of global energy to just 10% by 2020. But even some of its staunchest critics — who worry about waste disposal, the prohibitive cost of maintaining aging plants, and expensive new projects — are taking a second look following Russia's destabilizing invasion of Ukraine.

California Senator Dianne Feinstein, for example, now supports keeping the state's Diablo Canyon plant open, which Stanford and MIT researchers estimate would trim the state power industry's carbon footprint by over 10% from 2017 levels and save $2.6 billion in electricity costs over the next decade. Even as Germany remains committed to closing all of its plants, nuclear is also suddenly on the up in the EU:

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Wednesday's vote means nuclear plants and projects can access money from environmental, social, and governance investors. Global ESG assets could top $41 trillion this year and $50 trillion by 2025, according to Bloomberg Intelligence estimates.

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In the US, where there are 55 plants in 28 states, the government this week closed applications for a $6 billion fund to support struggling nuclear plants. An additional $2.5 billion is being allocated to two projects focused on new nuclear technology in Washington State and Wyoming.

Not Out of the Woods: "It's completely clear that both nuclear energy, and fossil gas have nothing to do with sustainability," Leonore Gewessler, the Austrian energy minister, said Wednesday. Along with Luxembourg, Austria plans to challenge the EU decision, though that could take years of appeals.

Paris is Yearning: France sources about 70% of its energy from nuclear, and is among the boldest advocates for the zero-emissions power source as a tool to meet global climate targets. On Wednesday, the French government announced plans to nationalize the struggling nuclear titan Electricite de France to help deal with the energy crisis.

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Media

Peter Chernin Scores $800 Million to Launch Media Studio

In the world of Hollywood, bigger is always better. Former Fox Group CEO and serial media investor Peter Chernin made that much clear with his latest venture, which raised $800 million from two leading private equity shops.

Chernin Out Content

The North Road Company, officially unveiled on Wednesday, will combine film and TV production company Chernin Entertainment, founded by the former Fox CEO, with documentary house Words + Pictures and assets from documentary and reality company Red Arrow Studios. The resulting single, multi-format, content-producing mega-studio is a business-sized blockbuster.

Chernin's firm produced Oscar-nominated Ford v Ferrari, the successful Planet of the Apes revival, and bingeable sitcom New Girl. Last year, the company co-founded non-fiction-focused Words + Pictures with Connor Schell, a co-creator of ESPN's award-winning 30 for 30 documentary series. The Red Arrow assets, acquired recently for $180 million according to sources who spoke to The Hollywood Reporter, include Netflix reality show Love is Blind and Showtime political docuseries The Circus.

With all of that under one roof, the plan is to sell content with two key verticals in focus:

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First, international productions, "because if you look at the big streaming players, Netflix, Disney Amazon, there is not that much growth for them in the US, so they are really focused internationally," Chernin told THR.

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Second, non-fiction, "because it is the best way to have some impact on their cost escalations. High-quality documentaries and reality is so much more cost-effective," he added.

Coming Attractions: With $500 million of equity support from Providence Equity Partners and $300 million of debt financing from Apollo, North Road is valued north of $1 billion, sources told THR. "We are looking to buy best in class companies both from a growth potential perspective, and a quality perspective," Chernin said, hinting at acquisitions to come. It may be safe to expect more blockbuster deals soon.

Extra Upside

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Fed Governor Pikachu: the Pokemon company printed 9 billion cards last year to stop speculative traders.

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You can still Juul: the FDA has temporarily suspended its controversial order to pull the e-cigarettes from the market.

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How do you know when a stock is great? When it's made over 300 families millionaires… in Portland, Oregon alone. And according to The Motley Fool – which just tagged it with a rare Triple-Buy Alert – they don't think it's finished yet. Check out the full run-down on this millionaire-maker stock right here.