A round up of some of the week’s most significant corporate events and news stories.

Burberry unveils sweeping changes in the boardroom

Fashion likes springing surprises, and shareholders in Burberry were in for plenty of that this week, writes Scheherazade Daneshkhu in London.

The British luxury goods group thrust forward a new boardroom look that was almost as bold as this year’s kaleidoscope of colours and materials.

After only two years in the job, Christopher Bailey is to give up his role as chief executive in favour of an outsider, Marco Gobbetti, head of Céline, the fashion house that is part of LVMH of France.

Mr Bailey will take on the new role of president and retain his longstanding remit as chief designer.

Two years into her job as finance director, Carol Fairweather will be stepping down in favour of Julie Brown, her counterpart at Smith & Nephew, the medical devices company. Ms Brown will also take on the mantle of chief operating officer after John Smith — who has also been in post for two years — said last month he would be leaving Burberry.

The boardroom sweep comes after months of financial underperformance and unrest from investors, who took aim at Mr Bailey’s dual role.

In May the Financial Times reported that Burberry was considering appointing a senior manager to support Mr Bailey.

The end result was more radical and, while the changes were applauded initially with a share price rise of 6 per cent, there remains the question of who is in charge.

“We are both the boss,” Mr Bailey said, emphasising that he would remain involved in business decisions as an “equal partner” with Mr Gobbetti.

This week Burberry reported falling like-for-like sales in all markets and cut its outlook for wholesale revenues in a first-quarter trading update, highlighting the challenges facing Mr Gobbetti.

Comparable sales had declined 3 per cent in the three months to June 30, with underlying revenues flat at £423m.

● Related profile: Burberry’s Sir John Peace battles storms

● Related Lex note: Burberry, when it rains

Talent agency WME-IMG joins ultimate ‘cockfight’

Private equity dealmaking joined judo and Brazilian ju-jitsu as one of the mixed martial arts in the Ultimate Fighting Championship this week when WME-IMG, the talent agency, said it would pay $4bn to buy the league. Its aim would be to turn its ferocious bouts into the next big global sport, writes Joseph Cotterill in London.

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Brock Lesnar, top, fights Mark Hunt during their heavyweight mixed martial arts bout at UFC 200 on July 9 in Las Vegas

Buyout groups Silver Lake and KKR backed the acquisition — which is one of the biggest sports deals ever — and will take minority stakes, illustrating how far UFC has come as a business in the two decades since US Senator John McCain declared the sport was “human cockfighting”.

UFC says that it runs the biggest pay-per-view sporting events, reaching more than 1.1bn households globally. One of its biggest sources of income in recent years has been a seven-year, $830m deal with Fox television to broadcast bouts, which it signed in 2011.

The WME-IMG deal’s punchy valuation — revenues last year were $600m — attests to the value being given to digital distribution of events in sports deals. UFC runs its own subscription service.

As UFC has grown, so has controversy about how much it pays novice fighters to risk injury in its fights and its demands on them to wear only approved sponsor gear, such as Reebok.

As a Silver Lake investment and the product of a 2014 merger of two agencies, WME-IMG is itself the creation of private equity and has increasingly turned to sports deals, buying the Professional Bull Riders league last year.

New US shale revealed as lowest-cost oil prospect

The oil price slump that began two years ago has been described as a way to drive higher-cost production out of the market, writes Ed Crooks in New York.

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That higher-cost output has often been assumed to be North American shale oil, and US crude production has indeed been falling since April 2015.

This week, however, the energy research company Wood Mackenzie published an analysis that challenged that assumption.

Lifting costs from existing wells may indeed be higher in the US than in parts of the Middle East, including Saudi Arabia, Iraq and Iran. When production from new projects is considered, however, the picture changes. US shale oil accounts for about 60 per cent of the new oil production worldwide that would be economically viable at a Brent crude price of $60 per barrel, says Wood Mackenzie. 

New wells in the “Scoop” and “Stack” formations of Oklahoma, and the Bone Spring and Wolfcamp sections of the Permian Basin in West Texas, can break even with Brent at about $35 to $39 per barrel.

With Brent now holding steady at a little under $50 — it was about $47 on Friday — it is no surprise that oil drilling activity in US shale has started to pick up in recent weeks. 

For companies that specialise in the types of project up at the top end of the cost curve, including offshore fields in the North Sea and off the west coast of Africa, the analysis is chastening. The costs of new projects will need to be cut significantly if they are to compete.

● Related Commodities Note: No rush back to big oil projects

● Commodities Note: Is cheap oil really good for the global economy?

Airbus and Boeing vie for orders at Farnborough

The aerobatics at this week’s Farnborough air show were impressive, even if the volume of passenger jet orders was not, writes Peggy Hollinger in Farnborough.

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An Airbus A350 long-haul jet landing at the Farnborough air show

From the surreal aerial hover by Britain’s newest stealth aircraft, the F-35, to the gravity defying steep climbs of Boeing and Airbus passenger jets, there was enough to excite most of those who trekked to the global aerospace industry’s trade fair.

The value of orders was some 42 per cent lower than that notched up at the Paris air show last year at $61.8bn, with orders and commitments for just 461 aircraft against 2015’s 752.

While the deal making may have been muted, the rivalry between Airbus and Boeing was as electric as ever.

Boeing deflected attention from its order thrashing by Airbus’s best-selling A320 single aisle jet by suggesting it was well on the way to launching new variants of its equivalent, the 737.

Boeing is also advancing plans for its first entirely new aircraft in a decade. The so-called middle of the market jet would bridge the gap between the 737 and the 787 twin aisle jet.

Dennis Muilenburg, Boeing chief executive, is not in a rush, however. The big question is whether such an aircraft would stimulate orders or simply cannibalise existing ones.

The lesson of launching a multibillion-dollar aircraft programme before the business case is made was starkly illustrated at the air show when Airbus revealed it would slash production of its slow-selling A380 superjumbo, essentially keeping the programme alive until new orders can be won.

Thomson Reuters’ $3.55bn sale fuelled by PE interest

Private equity interest in the growing demand for research and data in Asian economies helped drive Thomson Reuters’ $3.55bn sale of its intellectual property and science division this week, writes David Bond in London.

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Canadian buyout group Onex and Baring Private Equity Asia announced the all cash deal on Tuesday, acquiring brands such as MarkMonitor, Web of Science, Thomson CompuMark and Thomson Innovation.

The division has been for sale since last November.

The move confirmed the trend for private equity groups to target business-to-business publishers and data research companies.

“These types of businesses are good investments for private equity groups,” said Sarah Simon, an analyst at Berenberg. “They have very high margins and have very stable subscription revenues, which means you can borrow a lot more to finance the transaction.”

The purchase of Thomson’s IP and science business was also part of a wider push by private equity into China and Asia, where there has been a sharp rise in scientific research investment.

Jean Eric Salata, Baring Asia chief executive, said: “We believe the outlook for the business is underpinned by an increasing shift towards more knowledge-driven economies and a continued emphasis on research and development.”

Thomson Reuters said it expected to use about $1bn of the proceeds to repurchase shares, as part of a $1.5bn buyback programme. The rest is expected to be used to pay down debt and reinvest in the business.