(Barclays) European Beverages - Diageo / SAB is a alternative to ABI /SAB

Pressure is building for corporate activity in Beverages: The press has widely speculated that a bid from ABI for SABMiller is imminent. However, as highlighted by the formation of Diageo, deals can emerge both quickly and from the most unlikely of places. Although its relatively open shareholder register and attractive positioning means SABMiller is the common denominator in many M&A scenarios, after its recent substantial share price under-performance, the strain on Diageo management to do something proactive may also be increasing. An ABI/SABMiller deal may not be the only option if the Dance of the Beverage Industry Elephants begins.

--> We believe a potential merger between
Diageo and SABMiller is a credible alternative to a ABI/SABMiller deal. Diageo has long
highlighted the attractions of a Total Beverage Alcohol (TBA) strategy while integrating
Guinness into SABMiller’s global beer footprint could yield over £400m of cost saving
and additional revenue synergies in our view. Although the benefit of combining spirits
and beer is less evident in some markets, overall value creation could still be attractive.

M&A optionality exists in beer and spirits: We caution investors against taking heavy
underweight stock positions across either the beer or spirits space. We re-iterate our
Neutral Beverage and Tobacco sector view.

(BFW) Diageo/SABMiller Deal May Be Alternative to AB InBev: Barclays


Diageo/SABMiller Deal May Be Alternative to AB InBev: Barclays
2014-06-27 09:12:57.971 GMT


By Heather Burke
     June 27 (Bloomberg) -- Diageo/SABMiller merger is a
“credible alternative” to a AB InBev/SABMiller deal, Barclays
says in note.
  * Barclays: Pressure mounting for corporate activity in
    beverages, focus on AB InBev/SABMiller
    * May be increasing pressure on Diageo to be proactive
      after shrs have lagged significantly
    * Diageo has long focused on attractiveness of a Total
      Beverage Alcohol (TBA) strategy, putting Guinness with
      SABMiller’s global distribution may save >GBP400m,
      additional rev. synergies
    * Cautions mkt against above being heavily underweight in
      either beer or liquor, keeps neutral view of beer and
      tobacco sector
    * Reiterates overweight on Diageo, equalweight on
      SABMiller, equalweight on AB InBev (raises PT to EU84 vs
      EU80)

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

To contact the reporter on this story:
Heather Burke in London at +44-20-7673-2044 or
hburke2@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

FT : Pimco runs risks in turning up the ‘vol’

Pimco runs risks in turning up the ‘vol’

It was a tantalising introduction. Bill Gross, Pimco’s “Bond King” and founder of the world’s largest fixed income fund, promised to impart the secrets of his extraordinary success to an audience of financial advisers in Chicago. “I’ll be handing you the keys to the Pimco Mercedes,” he told them.
Unlike smaller fixed income funds that might just buy and sell bonds, the $230bn Pimco Total Return fund is a clever user of derivatives trading strategies, Mr Gross went on to explain, and Pimco is one of the biggest sellers of insurance against market volatility.

For investors who don’t want the value of their bond portfolio to move around too much, his fund is on hand to provide insurance that will pay out if there is a market shock – in return for a premium of course.
“Sounds dangerous, and is sometimes,” Mr Gross said. “Obviously, the volatility has to be underwritten properly and priced appropriately. It doesn’t pay to write flood insurance before a flood, but over time it has been a very respectable structural template alpha generator.”
In fact, so many different kinds of investors are now “selling volatility” that BlackRock’s Dennis Stattman worried at the same conference that it had become a “crowded trade”. Sceptics worry these new players might be selling flood insurance on the cheap, just before a deluge.
Meanwhile, Mr Gross is putting a focus on the Total Return fund’s use of derivatives at a time when regulators around the world are considering systemic risks that might be posed by large mutual fund managers. Former Federal Reserve governor Jeremy Stein warned last year that insurance sales by asset managers might be introducing unobserved risk into the financial system.
Raymond Nolte, managing partner at SkyBridge Capital, a fund of hedge funds, says he has never been a big fan of selling volatility. “It’s like writing hurricane insurance because we haven’t seen one for a while. If you want to sell premium you should do so when volatility is high, not near historic lows.”
Mihir Worah, a deputy chief investment officer at Pimco, says the firm was selling ahead of this year’s decline in volatility. “Obviously at these levels we are not selling volatility aggressively,” he told the Financial Times.
Vol, as the traders call it, has effectively become an asset class unto itself, although trading it is more complicated than buying or selling stocks and bonds. It is more complicated, too, than buying and selling insurance as generally understood by anyone with a fire or flood or car insurance policy.
Selling volatility typically involves selling options, which would pay out if a particular market moved by more than a pre-agreed amount. The Vix index, sometimes referred to as the stock market’s “fear gauge”, is based on the price of a combination of options on the S&P 500. The more investors are paying to protect themselves from big swings, the higher it goes. The fixed income market has a similar gauge called the Move index.
Both are close to historic lows, and traders are in the midst of a vigorous debate about why. The economic recovery and central bank support for markets suggest big swings may be unlikely. But some traders think vol may be priced too low for technical reasons, too, such as the retrenchment of bank trading desks and resulting illiquidity, or an imbalance between supply and demand.
According to Maneesh Deshpande, head of equity derivatives strategy at Barclays, the demand for protection from volatility has soared, but the supply from people selling insurance has soared even more.
“Premium has declined to the levels prevalent in the 2004-2006 period, so we call it the ‘old normal’ – but with a twist,” Mr Deshpande said.
The twist is that a host of new players are in the market, trading a host of new volatility products. More than a half-dozen exchange-traded products allow hedge funds and retail investors to short the Vix. Trading in options is buoyant, with open interest near a record level.
The attraction of selling vol is that, over several decades, payouts have been less than the money investors have taken in through premiums. The volatility implied by the price of options has never been fully realised in the actual, subsequent movement of the stock or bond markets.
Howard Tai, analyst at Aite Group says in a world of low returns, it is an attractive strategy for some investors. Pension funds have joined the sellers, attracted to the premium income at a time when bonds are yielding a pittance. The question is how many will be carried out if vol spikes and their losses are more than they can afford.
“If there is a flare up that causes volatility to jump, you will have a scramble at that point as sellers will need to buy it back,” says Mr Tai.
Mr Gross told his audience that such flare-ups can lead to bouts of underperformance for his fund, but it is a short-term price worth paying.
“Why are people willing to pay for insurance?” he said. “They want to sleep at night. And so at Pimco, we’re willing to sell that insurance. We’re willing to sleep less, but perform better.”

FT : US drones risk continual war, says report

The routine use of drones by the US to kill alleged terrorists offshore may be creating “a slippery slope leading to continual or wider wars” and is increasingly inconsistent with the rule of law, according to a major new report.
The report, produced by the Stimson Centre, a think-tank in Washington, also says that America’s enemies which are far less discerning about the use of lethal unmanned aircraft could be emboldened to use drones against the US as the technology spreads.

“We are concerned that the Obama administration’s heavy reliance on targeted killings as a pillar of US counterterrorism strategy rests on questionable assumptions, and risks increasing instability and escalating conflicts,” the report says.
US drone policy has come under heavy criticism largely from civil libertarians and left-of-centre groups but this report was produced with the help of an array of figures with lengthy experience in the US military and diplomatic establishment.
The primary authors of the report are a retired general, John Abizaid, a former US Central Command commander, and Rosa Brooks, a law professor and former Pentagon official under President Barack Obama.
Far from ending the threat of anti-US terror groups, the report notes that Sunni and Shia Islamist extremist groups have grown in scope, lethalness and influence in their areas of operation in the Middle East, Africa and South Asia.
“Furthermore, US strikes also create new strategic risks,” it says, including the erosion of sovereignty norms and the threat of “blowback” against the US.
According to the London-based Bureau of Investigative Journalism, the US carried out 376 drone attacks in Pakistan between 2004 and 2013, with the death toll between 2,500 and 3,600 individuals.
Reports in the Pakistan media have said up to one-third of those killed were civilians. Of all the “non-battlefield” targeted killings carried out by the US since 2002, 98 per cent have involved drones.


Mr Obama, in a major speech on US policy last year, said drone strikes “had saved US lives” by taking al-Qaeda commanders off the battlefield, and the attacks had been proportional, in self-defence and legal.
But the report is perhaps most critical of the evolving legal doctrine cited by both the George W Bush and Obama administrations to justify their strikes against “combatants” in the “war on terror.”
“The legal norms governing armed conflicts and the use of force look clear on paper, but the changing nature of modern conflicts and security threats has rendered them almost incoherent in practice,” the report says.
“Basic categories such as ‘battlefield’, ‘combatant’ and ‘hostilities’ no longer have clear or stable meaning. When this happens, the rule of law is threatened.”
The report recommends that the US conduct a rigorous cost-benefit review of the use of drone strikes and also increase the transparency surrounding them.
Drone technology is already spreading rapidly around the world. In recent days, US officials have noted how Iran has been using drones to gather intelligence on the militant groups threatening the government in Baghdad.
In its latest annual report on the Chinese military, the Pentagon said it was “probable” that China used a drone for a reconnaissance mission in the East China Sea in 2013 and it had revealed details of four different drones under development.
It cited another Pentagon report that claimed the China drones programme enjoyed “unlimited resources” and “might allow China to match or even outpace US spending on unmanned systems in the future”.

(BFW) Gazprom Denies Seeking Stake in OMV, IFX Says, Citing Deputy CEO

OMV lower


Gazprom Denies Seeking Stake in OMV, IFX Says, Citing Deputy CEO
2014-06-27 08:19:20.951 GMT


By Benjamin Dow
     June 27 (Bloomberg) -- Information regarding Gazprom
seeking stake in OMV is untrue, Interfax says, citing Russian
gas co.’s Deputy CEO Alexander Medvedev.
  * NOTE: Yesterday, Austria’s Kurier said Gazprom seeking stake
    in OMV held by Abu Dhabi’s IPIC (holds 24.9% of OMV), citing
    MP Peter Pilz
  * NOTE: Today, chairman of Austrian state holding co. OIAG
    Siegfried Wolf said he was not aware of Gazprom’s interest;
    OAIG holds 31.5% in OMV


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

To contact the reporter on this story:
Benjamin Dow in Moscow at +7-495-771-7735 or
bdow2@bloomberg.net
Benjamin Dow

(BFW) Aperam Launches Max $300m 7Y Convertible Bond


Aperam Launches Max $300m 7Y Convertible Bond
2014-06-27 08:14:37.122 GMT


By Tom Freke
     June 27 (Bloomberg) -- Proceeds of net share settled
convertible and/or exchangeable bonds to be used for general
corporate purposes including refinancing senior notes maturing
2016, according to a statement.
  * Initial size: $250m, which may be increased by co.
  * Expected coupon: 0.25% to 1%
  * Initial conversion premium: 30% to 35% over the volume-
    weighted average price of co. shares between launch and
    pricing
  * Issue price: par
  * Final terms due to be announced today


Link to Company News:APAM NA <Equity> CN <GO>

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

To contact the reporter on this story:
Tom Freke in London at +44-20-3525-8153 or
tfreke@bloomberg.net
To contact the editors responsible for this story:
James Holloway at +1-212-617-4454 or
jholloway8@bloomberg.net
Leo Laikola

>>> Gulf Keystone receives bid approach from Chevron – market reports

Stock is up 10% again today

Gulf Keystone receives bid approach from Chevron

Chevron, a listed, San Ramon, California-based oil company, was said to have approached the listed, Anglo-Irish exploration company Gulf Keystone Petroleum regarding a potential takeover bid, The Times reported.

The newspaper's market report section mentioned talk of a 150p per share bid approach from Chevron, but did not cite a source for the rumour.

A market report in The Daily Mail mentioned rumours that chevron was building a stake in Gulf Keystone, but did not attribute the rumour to a source.

The Independent's market report mentioned speculation that the departure of Gulf Keystone's Chairman Todd Kozel might prompt a takeover bid. The item mentioned talk that major oil and gas companies are thinking about making offers for Gulf Keystone, but did not cite a source for the speculation.

A Financial Times market report noted that Gulf Keystone shares gained 18.3% to close at 95p on the London Stock Exchange yesterday. Trading in Gulf Keystone’s shares was more than double the average volume, the item noted.

The Financial Times item noted that three of Gulf Keystone’s non-executive directors stepped down on Wednesday, and that the company’s finance director left last week.

Gulf Keystone’s market capitalisation stood at GBP 844m (EUR 1.05bn) at the close of trading yesterday.


Source The Times (London), Daily Mail, Independent