TheChek News Flow

After Hours Summary: VMEM +9.5%, DY +5.7%, NUAN +3.9%, GOMO -8.6%, WDAY -7.7%, PANW -1.8%, BRCD -1.6%, QIHU -0.5% following earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: VMEM +9.5%, DY +5.7%, NUAN +3.9%, ANW +0.2%

Companies trading higher in after hours in reaction to news: ROYT +5.1% (announced a cash distribution to the holders of its units of beneficial interest of $0.07291 per unit, payable on December 12, 2014; 17% lower than the previous month), CCIH +1.9% (announced that it has formed a strategic partnership with Aspera, an IBM company, to provide high-speed data transmission services for large files), LXU +1.7% (Starboard Value discloses 7.2% active stake in 13D filing), HTZ +1.0% (New President/CEO John Tague disclosed purchase of 84,200 shares of common stock at $24.11 per share; holds 1 mln of options with $22.75 exercise price)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: GOMO -8.6%, WDAY -7.7%, ANFI -6.9%, POST -5.9%, PANW -1.8%, BRCD -1.6%, QIHU -0.5%

Companies trading lower in after hours in reaction to news: WTSL -7.9% (announced that it has assembled a team to identify and analyze potential strategic and financial alternatives), CASY -1.2% (co announced it will revise financial results due to error in ethanol excise tax reporting; aggregate impact of the unrecorded excise taxes for the period from Jan 1, 2012 through Jul 31, 2014 fully diluted EPS is ~4.5 cents in each of the affected quarters), 

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BT’s Wireless Castoff Is Now Target of Its Ambitions: Real M&A 2014-11-24 23:07:56.663 GMT

(For a Real M&A column news alert: {SALT REALMNA <GO>}.)

By Amy Thomson and Brooke Sutherland Nov. 25 (Bloomberg) -- Thirteen years ago, BT Group Plc moved away from the wireless market. Now, it needs to get back in, and it could take more than $15 billion to do it. The $50 billion phone company said it’s in very preliminary talks with two mobile carriers, including Telefonica SA’s O2 -- the wireless business that BT spun off in 2001 -- about an acquisition. EE, the joint venture owned by Deutsche Telekom AG and Orange SA, is the other provider, a person familiar with the talks said. Either company would give BT the customer base and network of one of the top two U.K. wireless providers. Phone carriers across the U.K. and Europe are turning to bundled packages, which combine TV, Internet, mobile and wireline service, to increase revenue and discourage customers from defecting. Almost two-thirds of U.K. households buy at least some of their telecommunications services together, up from 29 percent in 2005, when Telefonica agreed to buy O2, according to data from regulator Ofcom. While BT already struck a mobile partnership with EE, buying a network would give it more flexibility on pricing and make it a more formidable competitor. BT is “the market leader in broadband. Strengthening that with mobile can really give them a competitive edge,” Erhan Gurses, an analyst at Bloomberg Intelligence, said in a phone interview. Bundling is “increasingly becoming the case across Europe so they don’t want to miss the train.” EE and O2 are each valued at more than $15 billion by Macquarie Group Ltd.

Wireless Slowdown

When BT spun off O2 in 2001, the industry was in the process of spending billions for the rights to newer, faster third-generation wireless networks. Rather than bear that burden itself, BT decided to separate from the wireless unit and let it finance its expansion with its own stock. In the years that followed, the industry was hit by competition that held down prices for those faster networks, regulation that limited cash sources like roaming charges and the emergence of cheaper new services, such as the WhatsApp Inc. messaging application. “We used to make reasonably good revenue growth each year, and that’s why Telefonica bought us, and the market has just slowed to a crawl,” said Charlotte Patrick, a former O2 manager who now works for researcher Gartner Inc. “Revenues have just gone out of the market.”

Combining Services

The emphasis has since shifted to retaining customers. One way to do that is by bundling phone, Internet and TV into one package, and that means providers need to buy whichever of the three they don’t have. Deals for European telecommunications and cable-TV companies have already totaled more than $95 billion this year. That’s the most since 2005, when Telefonica’s purchase of O2 was the industry’s top announced transaction of the year. BT will need to join in if it wants to remain competitive. Mobile partnerships, such as its deal with EE, will only get it so far. Owning its own mobile network will give BT access to stores, branding, and deals with phone makers such as Apple Inc. and Samsung Electronics Co. to sell the most popular devices. “You need the networks to actually deliver,” said Steven Hartley, an analyst at London-based Ovum research. “It makes sense that between fixed and mobile you’ll start to see more of these things coming together.” Investors like the idea of an acquisition. BT jumped 3.7 percent in London trading after the company said it was in “highly preliminary” talks about buying a wireless operator. That’s the biggest gain in more than 14 months. The question is whether BT will take back O2 or strike a deal for EE. Strategically, EE may offer better assets.

EE Appeal

EE, the U.K.’s biggest mobile operator by customers, was the first to roll out high-speed fourth-generation networks in the country and RootMetrics says it has the highest quality service. EE also has large spectrum holdings and is already transitioning to a converged model on its own. “EE is bigger from a customer perspective and has more spectrum,” Guy Peddy, an analyst at Macquarie in London, said. “Spectrum is your long-term determinate” of success in mobile as demand for data continues to rise. On the other hand, O2 still offers scale as the No. 2 mobile carrier by customers in the U.K. and is probably cheaper. EE’s shareholders are discussing selling the company, which may be valued at as much as $19 billion, people familiar with the matter have said. Peddy valued EE closer to $17 billion, and said O2 could command about $16 billion. Citigroup Inc. analyst Simon Weeden estimated O2 had an enterprise value of 9.4 billion pounds, or $15 billion. “In terms of which acquisition would be better for BT, I think the primary factor is price,” Michael Knott, a managing director at FTI Consulting Inc., said in a note. “Essentially, this is a good thing for BT, the market and, ultimately, customers.”

For Related News and Information: BT in Talks to Buy EE or O2 in U.K. to Add Wireless Service Orange Chief Looks for Alliance to Broaden Reach in U.K Deutsche Telekom, Orange Said to Revive Talks to Sell EE Today’s top technology news: TTOP <GO> Mergers and Acquisitions: MA <GO>

To contact the reporters on this story: Amy Thomson in London at +44-20-7392-0662 or athomson6@bloomberg.net; Brooke Sutherland in New York at +1-212-617-0448 or bsutherland7@bloomberg.net To contact the editors responsible for this story: Beth Williams at +1-212-617-2307 or bewilliams@bloomberg.net; Kenneth Wong at +49-30-70010-6215 or kwong11@bloomberg.net Elizabeth Wollman

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Smith & Nephew Still Enticing as Regulatory Risk Grows: Real M&A 2014-11-25 00:04:39.145 GMT

(For a Real M&A column news alert: {SALT REALMNA <GO>}.)

By Tara Lachapelle Nov. 25 (Bloomberg) -- A deal between Stryker Corp. and Smith & Nephew Plc makes as much sense now as it did six months ago. It just might be tougher to pull off. Stryker is considering structuring the takeover as a tax inversion, allowing the Kalamazoo, Michigan-based company to move its legal address to the U.K., where Smith & Nephew is based. The $16 billion-plus transaction would give Stryker future access to the cash it’s been accumulating overseas without being hit by repatriation taxes. Even without an inversion structure, the deal would offer benefits and may help the businesses gain back pricing power after hospital consolidation squeezed margins at orthopedic-implant makers. The challenge is that Stryker’s competitors had a similar idea and moved more quickly. Zimmer Holdings Inc. agreed in April to buy Biomet Inc. for $13.4 billion, which will reduce the orthopedic-reconstruction market to four major manufacturers from five. It will be harder for Stryker, which has been barred from making an offer since May under U.K. takeover rules, to make the case to antitrust regulators for further consolidation, according to Wells Fargo & Co. “You have a different hurdle rate now given that the industry will likely be more consolidated than it was six or 12 months ago,” Jason McGorman, an analyst for Bloomberg Intelligence, said in a phone interview. “Whether or not that means it’s a larger antitrust risk, that’s something we’re going to look at.” The rationale for a deal hasn’t changed though, he said. “Longer term, Stryker would have greater access to that cash and be able to use it more efficiently.”

Foreign Earnings

Stryker has avoided U.S. tax on about $7 billion in accumulated foreign earnings, the sixth-highest among medical- device makers in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg. It paid a 17 percent effective tax rate in 2013, according to its annual filing. A Financial Times report May 28 said Stryker was preparing a takeover offer for the maker of artificial hips and knees, sending Smith & Nephew’s stock to a then-record price of 993.50 pence. Stryker Chief Executive Officer Kevin Lobo confirmed that his company was in the early stages of evaluating a deal. Rules governing acquisitions in the U.K. required Stryker to either make an offer in the following 28 days or wait six months. It opted to wait. As the standstill period expires this week, Stryker is examining a bid for $16 billion Smith & Nephew once again, people with knowledge of the matter told Bloomberg News. The shares jumped 4.4 percent to 1,138 pence. Stryker also climbed to a record.

Deal Structure

Stryker is considering structuring the transaction as a tax inversion, though it sees strong strategic reasons to pursue a combination and an inversion wouldn’t be essential to make the deal work, three of the people said. Inversions have been heavily scrutinized by U.S. lawmakers this year, and in September the Treasury Department detailed rules designed to make inversions less attractive. A merger of Stryker and Smith & Nephew would be accretive in the first year whether or not it’s an inversion, Larry Biegelsen, a New York-based analyst at Wells Fargo, wrote in a report yesterday. In fact, given that an inversion would require more equity be distributed, a non-inversion may be more accretive, he said. The potential merger would need regulatory approval. Their competitor Zimmer is awaiting clearance from both American and European authorities for the takeover of Biomet announced in April. Zimmer may have even had an advantage in striking its deal first. “While we believe that a Smith & Nephew acquisition makes strategic sense for Stryker, we think the regulatory risk will be greater than the Zimmer-Biomet deal,” Biegelsen said. “It will be harder to move from four to three major recon players than five to four.”

For Related News and Information: Inversions Becoming Political Trip Wire as Stryker Weighs Deal Stryker Said to Weigh Smith & Nephew Bid as Standstill Ends Smith & Nephew in Play as Countermove to Zimmer Deal: Real M&A Mergers & Acquisitions Search: MA <GO> Stryker - Buyer Profile: SYK US <equity> BUYP DD <GO> Merger Calculator: MRGC <GO> Real M&A columns: NI REALMNA <GO> Top deal stories: DTOP <GO>

To contact the reporter on this story: Tara Lachapelle in New York at +1-212-617-8911 or tlachapelle@bloomberg.net To contact the editors responsible for this story: Beth Williams at +1-212-617-2307 or bewilliams@bloomberg.net Elizabeth Wollman