(BofA-ML) European Banking...upside risks dominate

…and around we go. Upside risks dominate

* QE: capturing the imagination
Data is poor enough and inflation low enough that we now
expect further ECB innovation. We think Draghi’s Jackson
Hole speech demands he follow with action; a reversal of
the early summer ECB position. Looser TLTRO
requirements are a possible first step but the end point
could be QE on a grand scale – why not equities, or noneuro
government bonds? Key for us is we are entering a
period where the possibilities may appear endless – fertile
ground for bank stocks.

* AQR/ stress tests: likely a wash
With its other hat on, the ECB will announce its AQR and
stress test results at the end of October. We see the
uncertainty not as where potential underprovisioning lies or
where capital and funding weaknesses are. Six years on,
the market has good clarity on these; we run our own AQR,
analysing write-offs and broadly-defined problem credit to
adjust provisioning quality. The question is what the ECB is
going to ask the banks to do about their weaknesses. Our
base case remains it will ask little – a wasted opportunity.

* …but you never know
Should the ECB find the political backing to deliver a robust
stress test, we see capital risks at the Greek banks,
Popular, Sabadell and MPS. Key Buys are euro area banks
where we see low AQR tail risk but that offer attractive
valuation and QE gearing include Commerz, Intesa, BNP,
Bank of Ireland and Caixabank.

* Margins: rising before falling
Ultimately, very low rates are bad for margins. However,
the benefits of higher liability spreads from the collapse in
sovereign yields will come through quickly, while the
pressure on asset margins will be slow. We see customer
spreads benefiting in 2015 – but analyse the pressure from
fading carry trade income, especially in Spain. Euro area
banks will struggle to meet NII targets further out: low credit
demand, low rates and a flat curve are a difficult
combination. QE compresses credit spreads - and is a
response to weak GDP, not a complement to recovery

* UK offers real growth
In contrast to the central-bank dominated, low growth euro
area, we see the UK offering “normal” stocks, with
accelerating domestic revenue growth and lower-for-longer
bad debts. Capital uncertainty has fallen sharply: owners
can look forward to rapidly and sustainably rising cash
dividends. We have Buy ratings on Barclays, HSBC,
Lloyds, Paragon and StanChart

* M&A: one day
Fragmented industries with weak top line growth are classic
M&A candidates. Were the AQR to prove robust, it could
pave the way for the cross-border consolidation the ECB
desires. However, our own AQR suggests material potential
provisioning shortfalls in many M&A candidates. M&A plays
with credible provisions are Commerzbank and Erste

(Les Echos) Franck Riboud gives operational management of Danone

Franck Riboud gives operational management of Danone

Franck Riboud, Danone's boss, became chairman of the leader for dairy products. Emmanuel Faber became CEO.
Change in governance at Danone. Franck Riboud, fifty-eight, disengages from the operational management of the group to take over the presidency and thus be able to concentrate entirely on strategic thinking about the future of the company in the long term. The creation of a strategic committee, which he will chair, has also been approved by the board of directors of French food group. Major decisions should be done in the coming months, as the sale of the division of medical supply business and new acquisitions in the areas of child nutrition or water bottle.
Emmanuel Faber, fifty years, until COO, became CEO and be responsible for the operational management as of October 1. Bernard Hours, fifty-eight, also previously Chief Operating Officer, will leave the group. However, it should keep "links with Danone," said Laurent Sacchi, Managing Director at the Presidency.
Good governance
Arrived in 1997 in the group, Emmanuel Faber there was successively in charge of development and particularly in mergers and acquisitions and finance before becoming the head of Asia at a time that was particularly difficult to manage: Chinese partner, Mr Zhong, who the French group had formed a joint venture under the name of Wahaha, did not respect the agreements between the two companies. Danone could not enforce its rights against the Chinese court, although Mr. Zhong has marketed its own account of manufactured products for the joint venture with Danone. After this painful and costly for the group episode, Emmanuel Faber returned to France, where he was appointed Chief Operating Officer.
The reorganization of the group is "in no case" to any challenge to the management of Franck Riboud, says Laurent Sacchi: "On the contrary, the board confirmed in his position as Chairman and entrusted the strategic thinking on the future of Danone. "Nothing in the statutes of the group does not provide a date when Franck Riboud leave. Its mandate is voted in general meeting every three years.
Separate the roles of chairman and CEO is, for many, a sign of good governance. In France, the CAC 40, such a structure is however an exception. Until the announcement Tuesday by Danone, 35 groups with a board of directors, 27 leaders combined the two roles of chairman and CEO. Only eight had dissociated functions (this is the case at Airbus Group, AlcatelLucent, BNP Paribas, Credit Agricole SA, Gemalto, Pernod Ricard, Sanofi and Solvay). Danone joins that small group. On financial markets , investors may fear that the former CEO did not change his leadership, unless they prefer to focus on the personality of Emmanuel Faber.

(Jefferies) Glencore - NExt Big Deal...

* Key Takeaway
Now that the Xstrata acquisition has been fully integrated and Glencore is
entering a period of strong FCF, a Glencore bid for Anglo American could
be coming, as we have long expected (see our report from Feb 2013 here).
GLEN shares should outperform AAL shares in the medium term, but we see an
increasing possibility of Glencore buying Anglo next year. GLEN continues to be
one of our top picks in the sector.

* The strategic rationale for Glencore to bid for Anglo: When it acquired Xstrata
last year, Glencore 1) upgraded the quality of its asset portfolio and thereby reduced the
cyclicality of its earnings, 2) increased the amount of control it has over the supply of
commodities, 3) provided more feed to grow its trading business, and 4) unlocked value
from synergies. We would expect the same benefits to result from a Glencore acquisition of
Anglo American. Media reports have speculated about a potential combination of these two
companies for the past two years. Anglo's CEO, Mark Cutifani, commented in a WSJ story
just yesterday that Anglo is open to a takeover if the price is right. Our analysis indicates that
Glencore will be best positioned to do this deal if Glencore shares outperform Anglo shares
over the next 6-12 months, as we expect.

* Big synergy potential: We estimate that a Glencore acquisition of Anglo would create
at least $1.5bn of operational and revenue synergies per year. Our analysis indicates that
an offer of 5.3 GLEN shares for each AAL share (we would not expect Glencore to offer any
cash) would be about 12% EPS accretive for Glencore by year 3. This merger ratio would
imply a 25% premium to Anglo's current share price. If Glencore shares outperform, the
required ratio to get to a 25% premium would decline, and a deal could get done at a ratio
closer to 5.0.

* Antitrust risk is manageable but not immaterial: As we discuss in detail herein,
antitrust risk relating to a Glencore acquisition of Anglo could be an issue in platinum,
copper, and South African coal. However, structural remedies could overcome these hurdles.

* White knights unlikely to emerge: Our analysis indicates that a white knight for Anglo
will not emerge, although Rio cannot be totally ruled out. The lower the probability of a
white knight emerging, the more likely it is that Glencore acquires Anglo.

* Valuation/Risks
Glencore is one of our top picks in the sector. The main risks for the company are operational,
financial and macro (China). GLEN trades at a 2015E P/E of 13.3x and EV/EBITDA of 8.1x.

(BFW) *ARNAULT WILL HOLD ABOUT 8.5% OF CAPITAL OF HERMÈS


BFW 09/03 06:50 *ARNAULT WILL HOLD ABOUT 8.5% OF CAPITAL OF HERMÈS
BN 09/03 06:50 *CORRECT: LVMH, DIOR, ARNAULT WON'T BUY HERMÈS SHRS FOR 5 YRS
BN 09/03 06:50 *LVMH DISTRIBUTION OF HERMES STOCK TO BE COMPLETED BY DEC 20
BN 09/03 06:50 *ARNAULT WILL HOLD ABOUT 8.5% OF CAPITAL OF HERMÈS
BN 09/03 06:49 *LVMH, DIOR, GROUPE ARNAULT WON'T BUY HERMES SHARES FOR 5 YEARS
BFW 09/03 06:48 *LVMH TO DISTRIBUTE HERMÈS STOCK TO ITS SHAREHOLDERS
BN 09/03 06:48 *LVMH TO DISTRIBUTE HERMÈS STOCK TO ITS SHAREHOLDERS
BN 09/03 06:47 *LVMH, HERMÈS END CONFLICT
BN 09/03 06:47 *LVMH AND HERMÈS HAVE BROUGHT TO END CONFLICT
BN 09/03 06:47 *LVMH: LVMH AND HERMÈS MEND RELATIONS

LVMH: LVMH and Hermès mend relations
2014-09-03 06:47:25.443 GMT

LVMH: LVMH and Hermès mend relations

PRESS RELEASE

Paris, September 3^rd 2014

The President of the Commercial Court of Paris, Mr. Franck Gentin, proposed to
LVMH and Hermès a conciliation in order to bring to an end the conflicts
between the two groups and restore a climate of positive relations between
them.

The two parties having reacted favorably to this proposal, signed an agreement
under which the LVMH Group will distribute all its Hermès shares to its
shareholders, on the understanding that LVMH's largest shareholder, Christian
Dior will in turn distribute the Hermès shares it receives to its own
shareholders. LVMH, Dior and Groupe Arnault have undertaken not to acquire any
shares in Hermès for the next five years. The distribution of Hermès shares,
approved by the boards of LVMH and Dior, will be completed no later than 20^th
December 2014. Following this distribution, Groupe Arnault will hold around
8.5% of the capital of Hermès International.

By virtue of the agreement reached today, LVMH and Hermès have brought to an
end the conflict, and all related actions, between them.

Mr. Axel Dumas and Mr. Bernard Arnault both express their satisfaction that
relations between the two groups, representatives of France's savoir-faire,
have now been restored.

LVMH
LVMH Moët Hennessy Louis Vuitton is represented in Wines and Spirits by a
portfolio of brands that includes Moët & Chandon, Dom Pérignon, Veuve Clicquot
Ponsardin, Krug, Ruinart, Mercier, Château d'Yquem, Domaine du Clos des
Lambrays, Château Cheval Blanc, Hennessy, Glenmorangie, Ardbeg, Wen Jun,
Belvedere, 10 Cane, Chandon, Cloudy Bay, Terrazas de los Andes, Cheval des
Andes, Cape Mentelle, Newton et Numanthia. Its Fashion and Leather Goods
division includes Louis Vuitton, Céline, Loewe, Kenzo, Givenchy, Thomas Pink,
Fendi, Emilio Pucci, Donna Karan, Marc Jacobs, Berluti, Nicholas Kirkwood and
Loro Piana. LVMH is present in the Perfumes and Cosmetics sector with Parfums
Christian Dior, Guerlain, Parfums Givenchy, Parfums Kenzo, Perfumes Loewe as
well as other promising cosmetic companies (BeneFit Cosmetics, Make Up For
Ever, Acqua di Parma and Fresh). LVMH is also active in selective retailing as
well as in other activities through DFS, Sephora, Le Bon Marché, la
Samaritaine and Royal Van Lent. LVMH's Watches and Jewelry division comprises
Bulgari, TAG Heuer, Chaumet, Dior Watches, Zenith, Fred, Hublot and De Beers
Diamond Jewellers Ltd, a joint venture created with the world's leading
diamond group.

Contacts:
Analysts and investors: Chris Hollis + 33 1.4413.2122
LVMH
Media:
France : Michel Calzaroni/Olivier Labesse/ + 33 1.4070.1189
Sonia Fellmann/Hugues Schmitt
DGM Conseil
Steele & Holt - Sylvain Fort +33 6. 21.89.11.05
UK: Hugh Morrison + 44.773.965 5492
Italy: Michele Calcaterra/Mateo Steinbach +39 02.8905.5101
Carlo Bruno&Associati
US: James Fingeroth/Molly Morse/ +1 212.521.4800
Anntal Silver
Kekst & Company

LVMH Press Release

WWD : Kering to Assume Control of Eyewear Business

PARIS — Are brand stewards starting to look beyond the classic eyewear license?

Spying “significant” growth potential for frames and sunglasses in the luxury and sport segments, Kering plans to take back control of its eyewear business, allowing it to squeeze extra margin in a promising product universe.

The French group said Tuesday it would “evolve” its 20-year partnership with Italian manufacturer Safilo Group SpA, terminating the current license for the cash-cow Gucci brand at the end of 2016, two years earlier than planned, in exchange for compensation of 90 million euros, or $118.2 million at current exchange, to be paid in three installments.

Kering said it plans to take advantage of Safilo’s “expertise and production capabilities” for Gucci via a product partnership for four years starting in 2017, renewable after that.

This “new business model” is to allow Kering to “fully control the eyewear value chain, from design to product development and supply chain, and from branding and marketing to sales,” the company said.

The development turns on its head the usual practice of licensing eyewear to a manufacturing and distribution specialist, and comes against a backdrop of turbulence in the segment in Italy, with a changing of the guard earlier this week at Luxottica Group SpA.

Kering hinted at a big project in the eyewear space in November 2013 when it tapped Roberto Vedovotto, formerly chief executive officer at Safilo, to review the luxury group’s eyewear strategy across all brands. On Tuesday, the company said Vedovotto would become ceo of Kering Eyewear, and that he and his team would become co-shareholders of this new entity.

Financial terms and the size of Kering’s stake in the new business were not disclosed.

Vedovotto characterized eyewear as a “strategic” category for Kering brands, and this “innovative project” would help them “fulfill their full growth potential.”

Kering said the new setup would give it full control over external manufacturers, while ramping up distribution in its own store network.

The French conglomerate controlled by the Pinault family joins a select cache of luxury brands that operate eyewear in-house, with Louis Vuitton and Cartier among the few to control production, and Vuitton limiting distribution to within its own store network.

At Kering, design, product development and sales are to be handled internally, with the design process controlled by each brand’s respective creative director, the company noted.

At present, its Saint Laurent, Bottega Veneta, Alexander McQueen and McQ brands have licensing pacts with Safilo. Eleven of the group’s brands are active in the eyewear category, nine via licensing agreements with five different partners, generating royalty revenues of about 50 million euros, or $65.6 million.

Kering bills itself as one of the top five players in the premium high-end segment, with business of about 350 million euros, or $459.6 million, suggesting it currently receives royalties, and contributions for advertising, of about 14.3 percent of sales.

The French group pegs global growth in the segment at double digits.

The company hinted that it would gradually bring all brands under the Kering Eyewear umbrella, but did not elaborate on plans for individual labels. Its stable of names includes Puma, Volcom, Boucheron, Stella McCartney, Christopher Kane and Volcom.

It is understood Kering also holds eyewear agreements with Marcolin, Luxottica, Gold & Wood and Charmant.

Safilo was sanguine about the new twist in its business relationship.

“We are satisfied with furthering our partnership in a way that leverages the heart of Safilo’s strengths in eyewear product excellence,” said Luisa Delgado, ceo of Safilo Group, which celebrates its 80th anniversary this year. “We have a unique tradition in the market as strategic partner for those brands that consider eyewear a strategic category. Through this agreement we confirm our capabilities as trusted partner.”

A Safilo spokeswoman said the deal further accents the Italian company’s expertise and specific know-how, which is “what makes the difference in the path from a design to a product.”

A well-placed source said Safilo’s management feels covered from an economic point of view: “The [90 million euro] compensation and the combination of sales in addition to the reduction of costs contribute to a sense of protection for the future, also in light of an agreement that will last until 2020, and that can be further extended.”

Asked if Kering’s strategy could be replicated by other groups and affect the eyewear market, a Safilo spokeswoman said there is an increasing market demand for the company’s “fully integrated capabilities of unique quality and trust in eyewear design and product creation, manufacturing and logistics, as well as worldwide distribution in 130 countries across all channels. The brand builders who seek us out consider eyewear as a strategic category of sophisticated craftsmanship and commercial channel breadth.

“What we see is changing is perhaps the type of brands that are looking for an expansion in eyewear. They tend to represent new consumer segments, and also new geographies, with new growth potential,” she added.

Safilo did not break out sales derived by the brands under the Kering group.

The company, which produces prescription and sunglass frames for licensed brands including Fendi, Dior, Jimmy Choo and Marc Jacobs, as well as for own brands including Safilo, Carrera and Polaroid, in July reported that adjusted net profit in the first half of the year jumped 23 percent to 31.5 million euros, or $43.2 million, on the back of strong sales, especially in the second quarter, and a big drop in net financial expenses. In the period, the firm recorded an increase of 1.3 percent in sales to 606.3 million euros, or $830.6 million, boosted by consumer demand in the company’s leading European market, where turnover increased by 5.8 percent. Europe represented almost 43 percent of group net sales in the January to June period.

Another Italian eyewear powerhouse, Marcolin Group, which produces for brands including Tom Ford and Roberto Cavalli, has been investing in an international expansion, especially targeting the American market and developing the middle segment of the market through the acquisition of Viva International, and the production and distribution of some of the most popular eyewear labels in the American market, including Gant, Timberland, Cover Girl, Skechers and Guess.

Analysts were intrigued by Tuesday’s development.

Luca Solca, head of luxury goods at Exane BNP Paribas, said if Kering’s gamble pays off, it could spell trouble for other eyewear manufacturers down the road.

“But I have serious doubt this will in the end work for Kering to produce an overall higher amount of profit in absolute euro terms,” he said. “The challenge for Kering is to service a customer base that has no overlap with its own. Sales, marketing, after-sales service — all of these would be new areas for Kering to be familiar with, and without the know-how and scale of a specialist eyewear manufacturer.”

Antoine Belge, analyst at HSBC in Paris, agreed that “building a sales force able to visit hundreds of points of sale from scratch will be costly.”

He predicted some brands would try to emulate Kering, “but not all as Luxottica is doing a very good job.” He noted that the licensed business accounts for less than 15 percent of Luxottica’s total earnings before interest and taxes, Oakley being twice as profitable as Prada for Luxottica due to the absence of royalties.

Luxottica produces under license for firms including the Giorgio Armani Group, Bulgari, Burberry, Chanel, Coach, Prada and Versace, and controls its own brands including Ray-Ban and Persol.

>>> Tesco and Sainsbury see talk of GBP 26bn merger

Tesco and Sainsbury see talk of GBP 26bn merger 

The listed British supermarket chains Tesco and Sainsbury were linked yesterday by merger rumours, The Daily Mail reported. The market report described the deal chatter as “very vague”, and was skeptical of any truth in the rumoured GBP 26bn (USD 43bn) merger.

The report noted that both retailers are facing increasingly strong competition from the German-owned bargain supermarkets Lidl and Aldi.

Sainsbury is 26% owned by Qatar, which is believed to be more likely to attempt its own buyout of the chain than back a deal with Tesco, the item stated. It also noted that Tesco has a newly appointed chief executive, Dave Lewis, who is reportedly anxious to prove himself.


Source Daily Mail

>>> Foot Locker rumoured to be in line for USD 70-per-share cash bid from PE gro

Foot Locker rumoured to be in line for USD 70-per-share cash bid from PE group

Foot Locker, the New York-based listed sportswear retailer, is rumoured to be in the sights of a private-equity consortium, The Daily Mail reported. The market report said unattributed chatter suggested a cash bid of USD 70 per share is being prepared.

A new management team would then kickstart a plan for significant expansion in Europe, especially in the UK, where Foot Locker’s current 23 sites would be doubled, as per the unattributed chatter, the report said.

The report noted that such a deal might threaten the dominance of the UK-based listed sporting-goods retailer Sports Direct International.

The Times also noted the rumours of a PE approach for Foot Locker but said traders were skeptical of the gossip.


Source Daily Mail

>>> GVT sale to Telefonica only likely to be cleared once Telefonica exits Telec

GVT sale to Telefonica only likely to be cleared once Telefonica exits Telecom Italia 

Telefonica, the Spanish telco, is only likely to be given clearance from antitrust regulators to acquire Brazilian fixed line telco GVT from French media group Vivendi once it exits Telecom Italia (TI). A report in Italian language daily Il Sole 24 Ore cited well informed local sources as saying that Cade, the Brazilian antitrust regulator, will only consider allowing the sale of GVT to Telefonica once the Spanish telco has fully exited from TI.

The report noted that Telefonica is presently TI's largest shareholder. TI owns TIM Brasil, the Brazilian mobile phone company, the report added.

The report added that Telefonica could find itself in the position of having to take over GVT when exclusive negotiations end in three months without having received approval from Cade. The item said that it is unlikely that Cade will have given clearance in that time, as it has not even given notice that it is examining the offer and will have up to a year from the announcement that it is looking at the dossier before it has to make any decision.

The report said that Telefonica will also need approval from Anatel, Brazil's telecom regulator.


Source Il Sole 24 Ore

>>> What to look at today - 03/09/2014

US Market closed on a mixed note, The financial (+0.3%), industrial (+0.2%), and consumer discretionary (+0.2%) sectors all exhibited relative strength and helped keep losses in check, information technology sector (+0.1%) also outperformed helped by Apple, Losses in Chevron and Exxon weighed heavily on the energy sector (-1.3%), which was the worst-performing sector in the S&P 500. It was followed by the utilities sector (-1.0%), which traded lower as Treasury yields moved higher. volum were still light @ 578mil shares, VIX @ 12,25 +2,25%...US after Hours : TERP +4.7%, HELE -9.1%, GWRE -4.5%, AVNW -3.9% following earnings/guidance...PMI prints out of the far east has also been mixed, HSBC chief economist warned the "economy still faces downside risks to growth in the second half of the year from the property sector slowdown. We think policy makers should use further easing measures to help support the recovery." In Japan, LDP Sec Gen reiterated PM Aso may look to raise sales tax to 10% in principle, despite more cautiously oriented urging by his economic advisor. JPY
remains under pressure, with USD/JPY topping 105.20...Nikkei +0.65% Hang Seng +1.58% Shanghai +0.80%

Eur$ 1.3132 S&P +0.13% EuroStoxx +0.19% FTSE +0.23% DAX +0.14% SMI +0.32%

Macro
- HSBC India Aug. Composite PMI 51.6 vs 53 in July
- HSBC China Aug. Services PMI 54.1 vs 50 in July
- Renzi Won't Drop EU80 Rebate, Eyes EU20b in Cuts: Sole Interview

Keep an eye on :
- AAL LN : Glencore May Bid for Anglo American in 2015, Jefferies Says
- BN FP : Danone to Separate Chairman/CEO Roles, Names Faber CEO
- BIM FP : BioMerieux 1H Rev. Up 3.6%; Net Down 34%; Confirms 2015 Forecast
- BOSS GY : Permira’s Red & Black to Sell 7.9m Shrs of Hugo Boss
- BSLN SW : Basilea niche antifungal focus hurts sale prospects 
- CSGN VX : Credit Suisse Probes Alleged Misconduct on Trading Desk: WSJ
- AM FP : Dassault Aviation May Buy 10% of Its Shares From Airbus: Echos
- ENEL IM : Italy PM Renzi: Not a priority to sell govt stakes in Eni and Enel
- ENI IM : Italy PM Renzi: Not a priority to sell govt stakes in Eni and Enel
- GBBT FP : Bourbon Swings to 1H Loss on Project Delays, Cost Cuts
- GBT FP : Guerbet's Lipiodol Approved by French Medicine Agency
- GLEN LN : Glencore, Vale Break Off Talks on Combining Nickel Assets: Rtrs
- GLEN LN : Glencore Makes Formal Offer for BHP Nickel West Unit, West Says
- ICAP LN : ICAP Said to Seek Buyer for Brazil Brokerage for Individuals
- INGA NA : Voya Financial Enters Buyback Pact With ING for $300m
- ITX SM/ HMB SS : Fast Retailing(9983 JP) +2.9% on Uniqlo Aug SSS
- KER FP : Kering Plans to Take Back Control of Eyewear Ops Value Chain --> -ve for Safilo & LUX
- MEO GY : Metro AG to Sell 156.6m Shrs in Booker (BOK GY), Raises About GBP196m Gross
- NATN SW : Nationale Suisse 1H Profit, Gross Premiums Rise
- NOVN VX : Novartis Says Gilenya Data Shows Redefining MS Treatment Goals
- ORA FP : Orange’s Richard Says French Market Doesn’t Justify 4 Operators
- PUB FP : Advertising Tech M&A Likely, CRTO Top Target: Goldman
- SAN FP : Sanofi Dengue Vaccine Works on All Four Types in Clinical Trial
- SBRY LN : Rumors of Qatari interest again
- TEF SM : Telefonica Plans Capital Increase in Spain, Valente Says
- TSCO LN : potential target for Walmrt
- TUNG LN : Tungsten to Raise ~GBP12m W/New Shrs Offer
- VOD LN : could be a target for Softbank after they walked away from Tmobilw
- VTW GY : United Internet to Buy 74.9% of Versatel Shrs for EU586m