WSJ : Don't Blink at Japan's Dreadful GDP

Japan's economic report card is going to be downright ugly. Investors needn't worry: Extra tutoring sessions are available in case this student really falters.

A 7.1% annualized decline is what economists polled by The Wall Street Journal expect when government GDP figures come out Wednesday for the quarter ended June. That would be the worst performance since the aftermath of the global financial crisis in 2009, and a challenge to Prime Minister Shinzo Abe's economic reboot.

The culprit is Japan's consumption tax, which was raised to 8% from 5% on April 1. A decline in spending following the increase is no surprise. More important is whether the economy is on track to bounce back from the shock.

Investors could be forgiven for losing some faith in Japan's renaissance. Consumer spending is recovering slowly. After plummeting 8.2% from the previous month in April, a key government measure of total private consumption inched up 1.5% and 0.7% in May and June. Indicators of supply-side activity have been more worrisome. Core machinery orders, a leading indicator for investment activity, fell 19.5% from a month earlier in May, and industrial production fell 3.3% in June.

The good news for investors: If the data keeps disappointing, the specter of further monetary easing by the Bank of Japan will rise again. The central bank is focused on reaching its 2% inflation target, not on growth, but it is hard to see how it can get there if the economy falters. The pace of inflation slowed in both May and June, when the core consumer-price index was up 1.3% from a year earlier after stripping out the effect of the consumption-tax increase.

And importantly for investors, stock-market valuations are undemanding, with the broad Topix index trading at just 13.8 times forward earnings, according to Nomura, a discount to the S&P 500 in the U.S. at 15.2 times. On earnings, Japan has historically traded at a premium to the U.S.

There's no rush to jump ship at prices like that, especially when help from the BOJ may be on the way.

NYT : Treasury Wine Says Buyout Firm Matches K.K.R.’s $3.2 Billion Bid

HONG KONG — Two of the world’s biggest buyout firms appear to share a taste for Australian wine.

Treasury Wine Estates, the owner of Penfolds, Beringer Vineyards and other popular wines, said on Monday that it had received a bid competing with the $3.2 billion buyout offer it received last week from Kohlberg Kravis Roberts.

Treasury Wine did not identify the new bidder, which matched K.K.R.’s offer, referring to the company only as “another global private equity investor.” But several news reports on Monday, citing unnamed sources, identified the rival suitor as TPG, another leading American private equity group.

A spokeswoman for TPG in Melbourne, Australia, declined to comment Monday, as did a spokesman for Treasury Wine.

Although TPG only matched K.K.R.’s offer of 5.20 Australian dollars, or $4.82, per share, the emergence of a rival bid suggests a takeover battle for Treasury Wine and raises the possibility that one or both of the private equity groups will have to raise their bids. Investors are betting that will happen, and in trading on Monday in Sydney, Australia, they pushed shares in Treasury Wine to a closing price of 5.33 dollars apiece, a 2.5 percent premium to the buyout offers on the table.

K.K.R. offered $2.8 billion for Treasury Wine in April, but that offer was rejected by the winemaker’s board of directors in May as undervaluing the company. Rhône Capital, a New York private equity firm, joined K.K.R. in making the revised bid last week.

Clearly, private equity sees an opportunity to engineer a turnaround at Treasury Wine, which is based in Melbourne and also owns the Lindeman’s, Rosemount Estate and Wolf Blass labels, among more than 80 wine brands. In an effort to help reverse a decline in sales and profits in Australia and the United States, the winemaker in March hired Michael Clarke, a former senior executive in Europe at Kraft Foods and Coca-Cola, as its chief executive. In June, it said it would book an impairment charge of 260 million dollars in the value of its wine brands this year.

K.K.R.’s interest in Treasury Wine arises as it seeks to deploy some of the $6 billion it raised in July of last year for a new Asia-Pacific fund, a record amount for private equity in the region. For TPG, a successful takeover of the winemaker would be a sizable deal, coming at a time when it has been making minority investments as it seeks to recover from giant bets that went sour during the financial crisis of 2008.

FT : EDF shuts down four UK nuclear reactors

EDF Energy said on Monday that it had shut down four of its UK nuclear reactors for eight weeks, or roughly a quarter of its total nuclear generating capacity, after discovering a fault in a boiler unit during a routine inspection.
The UK subsidiary of French state-owned utility EDF owns and operates eight nuclear power stations in the country with a combined electricity generation capacity of around 8.8m kilowatts – just over 10 per cent of the UK total.

The shutdowns highlight how reliant the UK has become on a fleet of nuclear plants that is nearing the end of its service life. All but one of EDF’s plants are scheduled to close by the end of 2023, and the company has been seeking life extensions for many of them.
It is also planning to build a new multibillion pound power station at Hinkley Point C in Somerset, and last year signed an investment contract for the plant with the government guaranteeing it a price for the electricity generated of £92.50 per megawatt hour – roughly twice the current power price.
The reactors that are to be shut down – at Heysham 1 in Lancashire and Hartlepool – represent about a quarter of EDF Energy’s nuclear generating capacity.
EDF said that during a planned outage at one of its two Heysham 1 reactors, an “unexpected result” was found during a routine inspection of a boiler unit. The reactor was returned to service early this year on a reduced load, with the affected part of the boiler isolated pending further tests.
More detailed inspections during an outage that started in June confirmed a defect and the reactor remains shut down.
But EDF Energy said it had taken the ”conservative decision” to also shut down three other reactors that are of similar design to the affected plant – a second at Heysham and two at Hartlepool. The shutdowns will allow the company “to carry out further inspections in order to satisfy itself and the regulator that the reactors can be safely returned to service”, it said.
It added that until the results of further inspections are known, it was not possible to say when the four reactors would return to service: however, an initial estimate suggested the investigations would take around eight weeks. It said its other nuclear power stations were not affected by this issue as they are of a different design.
The defect at Heysham 1 affected what is known as a boiler spine, a central forged metal tube which supports the weight of the boiler tubes around them.
Heysham 1 and Hartlepool were both commissioned in 1983 and are due to come out of service in 2019.
Centrica, the owner of British Gas, which has a 20 per cent stake in EDF Energy’s existing nuclear operations, said the reduction in output from the affected nuclear power stations would reduce the company’s 2014 earnings by around 0.3 pence per share.
EDF Energy’s nuclear plants are at Torness, in Dunbar and Hunterston B in West Kilbride, Scotland; Sizewell B in Suffolk; Hinkley Point B in Somerset, Heysham 1 and 2 in Lancashire; Hartlepool and Dungeness in Kent.
A spokesperson for National Grid said the closures should not affect the UK’s energy supply. “Generally demand is low at this time of year, and a lot of wind power is being generated right now,” she said.

>>> Vivendi - Oddo Analyst comment

VIVENDI (BUY, TP E24) WE PRESS ON A POTENTIAL TIT/VIV DEAL: Acc to Il Sole
24 Ore, as part of a potential deal between TIT and VIV, Tim Brazil could have
a capital increase that would see TIT’s 67% stake diluted to 50% in the new
company that would be born from a merger of GVT and Tim Brazil. This would then
be followed by a TIT's capital increase reserved to VIV which would allowed the
latter to become a shareholder in the Italian historical telecom operator. The
newspaper also reports VIV will make a decision on TEF's offer for GVT on its
Aug 28th board meeting, while La Stampa mentions a TIT's board meeting on Aug
25th to formally consider an offer on GVT
==> We believe VIV could consider selling GVT, as the TEF's offer could be
attractive enough (E6.7bn valuation + VIV holding a stake in the new Vivo/GVT
company, benefiting from synergies before probably exiting) and as a potential
takeover battle could start. BUT we have a hard time believing VIV could accept
being paid in TIT's shares in case TIT enters the battle

(Challenges) Prot forced to leave the head of BNP Paribas?

Prot forced to leave the head of BNP Paribas?

The chairman of BNP Paribas plan to sell its place in the coming months, following the legal troubles of the French bank in the United States.

The chairman of BNP Paribas, Baudouin Prot, plans to leave his post in the coming months, a decision related to the legal troubles of the French bank in the United States, says the JDD Sunday, August 10.

"This is what is envisaged by the bank and by itself but it is not yet decided," said a source close to the Journal du Dimanche.

Baudouin Prot was general manager of the group from 2003 to 2011, a period during which the bank had violated American law by making payments in dollars to countries under embargo .

These offenses have earned BNP Paribas tough sanctions on the United States, including a record fine of EUR 6.6 billion.

While responsibility for Baudouin Prot has not been committed by the American authorities, "his entourage described very affected by the sanction" which bailed the bank writes the JDD, adding that output "smooth" would be expected to the end of the year for the household.

"Logic dictates that parte"

"Baldwin saw very little personally. It will make its decision in September, but logic dictates he left," he told an executive of the bank in the weekly.

According to the JDD, Jean Lemierre, adviser to current and former boss Baudouin Prot Treasury could succeed him.

"Former Director General of the Treasury and the European Bank for Reconstruction and Development (EBRD), its international stature gives it a significant advantage to run for president," said the newspaper.

Contacted by AFP, BNP Paribas declined to comment.

After the announcement of sanctions, Baudouin Prot was supported by the board of directors of the bank as well as the director general, Jean Bonnafé.

"Baudouin Prot is the chairman of BNP Paribas. Its purpose is to stay and help us every day. Even if the shock is as hard for him as for the rest of the group, "stated Jean-Laurent Bonnafé in an interview Echos early July.

A dozen bankers, including five executive officers, related to transactions at issue left the bank in recent months.

(BFW) Carillion Says Will Give Further Consideration to Its Position

BN 08/11 08:02 *CARILLION ANNOUNCEMENT ISN'T BEING MADE W/ CONSENT OF BALFOUR
BN 08/11 08:02 *CARILLION WILL MAKE A FURTHER ANNOUNCEMENT IN DUE COURSE
BN 08/11 08:02 *CARILLION: TAKEOVER PANEL DEADLINE AUG. 21
BN 08/11 08:01 *CARILLION: NO CERTAINTY ANY OFFER WILL BE MADE BY CARILLION
BN 08/11 08:01 *CARILLION: NOTES THIS MORNING'S ANNOUNCEMENT BY BALFOUR BEATTY
BN 08/11 08:01 *CARILLION: WILL GIVE FURTHER CONSIDERATION TO POSITION
BN 08/11 08:00 *CARILLION CLLN STATEMENT BY BOARD OF CARILLION
Carillion Says Will Give Further Consideration to Its Position
2014-08-11 08:03:48.643 GMT


By Cormac Mullen
Aug. 11 (Bloomberg) -- Carillion says notes this morning’s
announcement by Balfour Beatty, will give further consideration
to its position, make a further announcement in due course.
* Says in meantime there can be no certainty any offer will be
made by Carillion
* NOTE: Balfour Beatty Rises After Rejecting Revised Carillion
Proposal {NSN NA4SHT6TTDST <go>}
* NOTE: Balfour-Carillion Deal Now Looks Less Likely, Liberum
Says {NSN NA4TD96TTDSL <go>}

Link to Statement:{NSN NA4U9K3HBS3K <GO>}
Link to Company News:{BBY LN <Equity> CN <GO>}
Link to Company News:{CLLN LN <Equity> CN <GO>}

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First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story:
Cormac Mullen at +353-1-523-9526 or
cmullen9@bloomberg.net

(BFW) Any AB InBev Acquisition of Heineken Is Workable, RBC Says

Any AB InBev Acquisition of Heineken Is Workable, RBC Says
2014-08-11 07:56:38.86 GMT


By Gaurav Panchal
Aug. 11 (Bloomberg) -- If the Heineken family could be
convinced to sell, acquisition of Heineken by AB InBev would
work at several levels, RBC analyst James Edwardes Jones says in
a note today.
* Market’s conventional wisdom is that Heineken’s independence
is underwritten by Heineken family and non-negotiable;
thesis not supported by numbers: RBC
* Over last 10 yrs Heineken delivered total shareholder
return (in euros) of 240%, vs 630% for ABI, 490% for
SABMiller: RBC
* If the “independence” obstacle disappeared, acquisition of
Heineken by ABI would make sense: RBC
* Assuming takeover at EU68, 30% premium to Heineken’s shares,
50/50 debt/equity financing ratio, deal would earn ROIC of
8.5%, EPS enhancement of 17%: RBC
* Raises Heineken to outperform vs sector perform, PT raised
to EU62 vs EU59

For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

--With assistance from Francesca Cinelli in Milan.

To contact the reporter on this story:
Gaurav Panchal in London at +44-20-7392-0511 or
gpanchal2@bloomberg.net
To contact the editors responsible for this story:
Andrew Rummer at +44-20-7073-3722 or
arummer@bloomberg.net
James Ludden

(BFW) Broadcasting M&A to Be Center-Stage for Near Term, Goldman Says

Broadcasting M&A to Be Center-Stage for Near Term, Goldman Says
2014-08-11 07:42:19.155 GMT


By Jessica Morris
Aug. 11 (Bloomberg) -- M&A in focus following Liberty
Global’s recent purchase of ITV stake, interest in Mediaset Pay
TV from Vivendi, A Jazeera, Goldman says in note.
* Goldman: medium-term probability of ITV takeover has
increased; introduces 50% weighting to M&A-based valuation
in new PT 251p
* Sees offer from Liberty Global unlikely in short-term
* Mediaset could benefit from consolidation in European
Pay TV landscape, increased convergence between media,
telecoms
* Values Mediaset Pay TV unit at EU900m
* Says cos. best able to exploit and produce content
should be structural winners in sector
* ProSiebenSat.1, ITV, RTL best positioned structurally on
leading online/content positions
* ProSiebenSat.1 is leading gainer on SXMP media index today,
up as much as 2.7%; Mediaset rises 2.1%, ITV up 1.9%

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To contact the reporter on this story:
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jmorris124@bloomberg.net
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James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net
James Cone

WWD : Permira Advisers Keeping Hugo Boss Stake

STICKING WITH IT: Private equity firm Permira Advisers LLP said it has no plans to sell its majority stake in the German men’s wear giant Hugo Boss. A Permira spokeswoman said Friday the company has “no current plans” to sell its shares, refuting media reports last week that it was in talks to sell.

Permira holds a 51 percent stake in Hugo Boss, which is listed on the DAX in Frankfurt, and the reports earlier this month said that it was looking to find a single buyer for its stake worth an estimated $5.5 billion.

In the second quarter, Hugo Boss said net income gained 18 percent to 62.8 million euros, or $86.1 million, with earnings before interest and taxes rising 10 percent to 82.9 million euros, or $113.7 million.

NYT : Burned by Losses on Portuguese Bank Bonds, Funds Ponder Next Steps

Hedge fund investors, furious at having their bond holdings in Portugal’s Banco Espírito Santo written down to zero, are weighing a legal action against Portuguese regulators.

According to bankers and lawyers involved in the effort, the funds include Daniel S. Loeb’s Third Point and GLG in London and smaller outfits that specialize in distressed bonds like Aurelius, Golden Tree and VR Global.

Among the largest investors who incurred losses in the bonds are EJF Capital, a fund based in Arlington, Va., and the London-based asset management unit of BTG Pactual, the Brazilian investment bank.

All the firms declined to comment.

The bonds in question were an especially risky variety of junior debt securities that Banco Espírito Santo issued late last year.

Holders of these high-risk bonds have been assigned to the so-called bad bank it recently set up, which houses around 4 billion euros, or $5.36 billion, of nonperforming loans that the bank made to its struggling group companies.

These toxic loans were at the root of the bank’s surprising collapse late last month.

The good bank, which the government hopes to sell off to foreign investors at some point, has taken ownership of €58 billion of loans deemed to be in better condition.

The episode highlights the extent to which rock-bottom interest rates in the United States have pushed many investors to make risky bets on high-yielding bank and government bonds in Portugal and Greece.

For more than a year, these investments have reaped rich returns. But as worries build about Europe’s ability to grow and the ability of its banks to withstand increasingly bad loans, many of these highflying stocks and bonds have reversed direction.

The investor group claims that some faulty loans made by Banco Espírito Santo’s banking subsidiary in Angola, Banco Espírito Santo Angola, have gone to the good bank and not the bad bank where they rightly belong.

They argue that this book of around €3.3 billion in questionable loans will improve in value over time because the creditors include powerful members of Angola’s political and economic elite. And they say that Portuguese regulators have steered these assets to the good bank so as to increase its value — assuming that the loans get bumped up in value.

While the group has had initial discussions with lawyers at White & Case about a legal strategy, legal experts suggest that a court challenge faces long odds. European officials have made it clear for several years now that investors who speculate in the risky junior bonds of troubled banks will receive little sympathy if the bank actually fails.

Furthermore, any court action fought in slow-moving Portuguese courts might take years to find a resolution.

Traders say that many of the junior bond investors were buying these bonds in the middle of last month, as they plunged to 80 cents on the dollar as fears mounted over the health of the large Portuguese lender.

Convinced that the bank would either be able to raise the extra funds needed or get bailed out by the government, these funds piled into the securities in the hope that they could secure a quick 20 percent on their investment.

When the bank reported larger-than-expected losses, the central bank stepped in, creating a good bank to be sold off at a future date and a bad bank holding the non performing loans.

While bank depositors and senior bondholders were protected, stock investors and junior debt owners were not.

The bonds currently trade at 14 cents on the dollar.