(Exane) Iliad : Upgrade from Neutral to Outperform, TP EUR210



From: LAURENT CHEKROUN () At: Oct 10 2014 09:07:55
Subject: (Exane) Iliad : Upgrade from Neutral to Outperform, TP EUR210
* Iliad : Upgrade from Neutral to Outperform, TP EUR210
Iliad shares have shed 25% since the group announced its bid on T-Mobile US. However, in our view, the odds are now that the attempt will fail. This would bring instant relief on the stock and demonstrate that the group is financially disciplined. Conversely, if Iliad gets T-Mobile, the shares would fall in the short term and the equity story would be radically altered (becoming highly geared to US wireless) – but for us, a deal around USD34/share would not destroy value. In France, Iliad would benefit from an SFR-Bouygues tie-up (+EUR37/share). In the meantime, operational performance should not be amazing but not be bad either. Large risk but larger upside.

(Exane) Iliad : Upgrade from Neutral to Outperform, TP EUR210

* Iliad : Upgrade from Neutral to Outperform, TP EUR210
Iliad shares have shed 25% since the group announced its bid on T-Mobile US. However, in our view, the odds are now that the attempt will fail. This would bring instant relief on the stock and demonstrate that the group is financially disciplined. Conversely, if Iliad gets T-Mobile, the shares would fall in the short term and the equity story would be radically altered (becoming highly geared to US wireless) – but for us, a deal around USD34/share would not destroy value. In France, Iliad would benefit from an SFR-Bouygues tie-up (+EUR37/share). In the meantime, operational performance should not be amazing but not be bad either. Large risk but larger upside.

>>> FSI could acquire control of Metroweb Italia to aid Telecom Italia takeover

FSI could acquire control of Metroweb Italia to aid Telecom Italia takeover of Metroweb 

FSI could take full control of Metroweb Italia, the holding that controls 90% of Metroweb, the fibre optic network for the city of Milan, Italian-language daily Il Corriere della Sera reported.

The unsourced report said that FSI, which is controlled by state-owned holding CdP, could acquired the 55% stake in Metroweb Italia held by Italian infrastructure fund F2i to facilitate a sale of Metroweb to Telecom Italia (TI).

A previous report valued F2i's stake in Metroweb at EUR 300m. The remaining 10% of Metroweb is owned by Italian telco, Fastweb.

Il Corriere della Sera

(BArcap) Monthly Flow Monitor : Aug-14: Summer slowdown

* August UK net flows £695m lowest since Jan-13: UK net Retail flows decelerated to
£695m in Aug-14 from £1.9bn in July, the lowest since Jan-13. Mixed Assets was the
best selling asset class with £232m net flows. Equity flows declined to £168m whilst
Bond flows remained minimal at only £36m. Overall, this is a significant slowdown
compared to recent months, but given seasonality and only one month of data, it is too
early to judge whether this represents a change in the trend of strong sales. Retail
investors have been very engaged with the market Apr-July, due to raised ISA limits and
the Woodford fund launch, so a pause would not be abnormal. We would remain
cautious on a September flow recovery given the equity market selloff, but we remain
more optimistic on Q4, especially if some of the IPO pipeline is deployed.

* UK Equity Income best selling sector once more: UK Equity Income retained top spot
as the most popular sector with £275m flows. Interestingly, we see Asian and GEM
Equity return to the top 10 best selling sectors table, which just 6mths ago were sitting
unloved in the top 10 worst selling list. The worst selling sector in Aug-14 was UK All
Companies, with -£258m net outflows. The rotation out of Midcaps seen since May
continued, with -£242m out of UK/European Smaller Companies in Aug.

* $28.8bn net flows in Europe: European mutual fund flows ex Money Markets was also
disappointing, down from $63bn in July to just $28.8bn in Aug. Equity flows were
minimal at just $365m, while Bond flows also declined from $25bn to $15bn. The top
seller was Asset Allocation; the worst selling theme was Bonds USD Corp High Yield.

* Individual fund manager data still shows net inflows: Lipper data showed most of
the Asset Managers still saw net inflows in Aug, with Schroders appearing most
resilient with inflows across a range of sectors. All our listed Asset Managers have sold
off in Q3 and appear to be trading cheaply at ~12x on avg, below historical avg 14-15x.
We are Overweight SDR and ADN (12.5x and 11x cal. 2015 PE respectively).

(Barcap) European Consumer Staple : Pre-empting a disappointing Q3

* Fundamentals remain challenged in Q3, but it’s still all about the macro: After a disappointing Q2, the much hoped for H2 sales recovery in Staples is failing to materialise. In recent weeks Unilever, L'Oréal and a number of other Staples companies speaking at various investor events/conferences have highlighted deteriorating trends
in both Emerging (volume) and Developed (price) markets for Q3 and into the yearend. We cut our FY1E organic sales growth (OSG) estimates by -34bps in this report and Q3 14E European Staples OSG by -84bps to +3.4%. Despite this further reduction in top-line growth, recent FX moves, particularly for euro reporting stocks, mean earnings
revisions are negligible, with FX tailwinds a 1-2% offset. With the challenging Q3 now well-flagged, we believe near-term Staples relative share price performance is likely to be driven by wider market trends rather than sector fundamentals themselves.

* Spirits, Cosmetics and mid-cap food our preferred sub-sectors: We reiterate our OW ratings on Pernod Ricard, L'Oréal, Kerry and Glanbia. Pernod Ricard is our top-pick in spirits. With de-stocking complete some signs of improvement in Cognac in China and the prospect of cost savings/Euro support underpinning F15E EPS. At L’Oréal,
disappointment around Nestlé's decision to only partially sell its stake in L'Oréal has led to a considerable de-rating of the stock, which is now at the very bottom end of its 5 year relative trading range. Although Q3 will remain tough, L'Oréal’s first class product and operating footprint bodes well for the medium/long term.

* Beverages – No respite as weather and US spirits deteriorate: In Beverages, the absence of Easter, the World Cup and a tough weather comp means beer sales growth is forecast to have slowed sequentially to +2.6% in Q3. Soft drinks sales are also suffering a weather impact, with the slowing rate of growth exacerbated by recent increased promotional intensity in Northern European markets. In spirits, destocking will be less of a drag on quarterly performance, and despite a still mixed message on China (Remy still cautious and Pernod slightly more benign) we expect sales declines to have moderated. The US spirits market is still tough and we expect cautious shipments trends ahead of the important Christmas holiday period. Moreover, with one-time issues such as beer tax changes in Kenya still impacting Diageo's beer business, we expect overall spirits organic sales growth rates to have remained lacklustre.

* Food and HPC – Deflation and EM price elasticity pressure: The deflationary environment in Europe is pressuring pricing, while rising price elasticity means incremental pricing is becoming more difficult to implement in Emerging markets. This will be an issue for those names with exposure to still-rising inputs costs, such as cocoa and coffee. In cosmetics, the North American mass market is not showing the Q3 rebound many hoped for back in July,
while Western Europe’s muted trends may be exacerbated by bad weather and lacklustre sun-care sales. We have lowered our OSG expectations for 2014 for both Food and HPC accordingly. At the EBIT level, due to the nature of their cost structures (lower gross margins/more operational gearing), we expect Food and Home Care margins to be less
resilient to pricing pressures and lower volumes growth than Cosmetics. However, self-help (SKU pruning, operational efficiencies), a favourable commodity environment, and a weaker euro may allow most to maintain FY guidance.

(Les Echos) The Zaoui brothers arrogate more than $ 100 billion merger

(Google Translation)
The Zaoui brothers arrogate more than $ 100 billion merger

The two former rivals Goldman Sachs and Morgan Stanley, Enthusiasts against Bargains hostile and complex deals, conquered the Peugeot and Bettencourt families and large groups, such as GlaxoSmithKline and Lafarge.

The most famous M & A two former brothers 'enemies' are hands on the European market for mergers and acquisitions. In one year, the brand Zaoui, launched by the two "deal makers" after leaving Morgan Stanley and Goldman Sachs, already appears prominently in the charts in the expensive M & A specialists. Their "boutique" consulting, Zaoui & Co, claims 16% of market share in mergers and acquisitions in Europe with a total of $ 111 billion of transactions advised on 721 billion of transactions reported in January by Dealogic (taking into account all of the GlaxoSmithKline / Novartis operation).
On February 11, after months of silence, Michael Zaoui, who retired six years ago co-director of mergers and acquisitions department of Morgan Stanley, and Yoel Zaoui that of global head of M & A at Goldman Sachs in 2012, have thus a comeback in the European market via France. That day, L'Oréal and Nestlé announced they untie their bonds. While all the rumors were betting on a passage from the French cosmetics group under Swiss flag, L'Oreal buys 8% stake to Nestlé. And the Bettencourt family increases its weight in the cosmetic group to over 33%. Eight days later, their name emerges in the deal that makes the most debate in France: the entrance of the Chinese Dongfeng Peugeot capital. The Zaoui brothers advise the holding family that risk dilution. This one will eventually win a weight equivalent to the capital of the state and the Chinese.
The strategy of "Pac-Man"
Since the strategy of "Pac-Man" (cons-attack, trying to redeem his predator) they initiated together to defend Elf Total face in 1999 against Sanofi and Aventis in 2004, the brothers are masters against the - hostile bids , complex and intricate deals (Gucci PPR and LVMH prey in 2004), most often in different camps (Alcan coveted by Pechiney in 2003, Arcelor Mittal to win in 2006). Their list of January so do not break the rule. Less than two months after having advised the Peugeot family, they supported Lafarge in its merger of equals with the Swiss Holcim. And a few weeks later, they curled their biggest deal by attending GlaxoSmithKline. For $ 57 billion, it unwound a triple operation with Novartis: he yielded his wallet oncology, vaccines classier him and together they created a joint venture

Les Echos : Les frères Zaoui s'arrogent plus de 100 milliards de dollars de fusi

Les deux ex-rivaux de Goldman Sachs et Morgan Stanley, adeptes des contre-offres hostiles et des deals complexes, ont conquis les familles Peugeot et Bettencourt, ainsi que les grands groupes, comme GlaxoSmithKline ou Lafarge.
Les deux ex-frères « ennemis » les plus célèbres du M&A font main basse sur le marché européen des fusions-acquisitions. En un an, la griffe Zaoui, lancée par les deux « deal makers » après leur départ de Morgan Stanley et de Goldman Sachs, apparaît déjà en bonne position dans les palmarès chers aux spécialistes des M&A. Leur « boutique » de conseil, Zaoui & Co, revendique 16 % de part de marché dans les fusions-acquisitions en Europe avec un cumul de 111 milliards de dollars de transactions conseillées, sur les 721 milliards de dollars d'opérations recensées depuis janvier par Dealogic (compte tenu de la totalité de l'opération GlaxoSmithKline/Novartis).
Le 11 février dernier, après des mois de silence, Michael Zaoui, qui a quitté six ans plus tôt la codirection des fusions-acquisitions de Morgan Stanley, et Yoël Zaoui celle de la tête mondiale du M&A de Goldman Sachs en 2012, ont ainsi fait un retour fracassant sur le marché européen, via la France. Ce jour-là, L'Oréal et Nestlé annoncent qu'ils dénouent leurs liens. Alors que toutes les rumeurs misaient sur un passage du groupe de cosmétique français sous pavillon suisse, L'Oréal rachète 8 % de son capital à Nestlé. Et la famille Bettencourt augmente son poids dans le groupe de cosmétique à plus de 33 %. Huit jours plus tard, leur nom émerge dans le deal qui fait le plus débat en France : l'entrée du chinois Dongfeng au capital de Peugeot. Les frères Zaoui conseillent le holding familial, qui risque la dilution. Celui-ci va finalement gagner un poids au capital équivalant à celui de l'Etat et du chinois.
La stratégie du « Pac-Man »
Depuis la stratégie du « Pac-Man » (contre-attaquer en tentant de racheter son prédateur) qu'ils ont déclenchée ensemble pour défendre Elf face à Total en 1999 et Aventis contre Sanofi en 2004, les deux frères sont passés maîtres dans les contre-offres hostiles, les deals complexes et inextricables (Gucci proie de PPR et LVMH en 2004), le plus souvent dans des camps différents (Alcan convoité par Pechiney en 2003, Mittal pour emporter Arcelor en 2006). Leur tableau de chasse depuis janvier ne déroge donc pas à la règle. Moins de deux mois après avoir conseillé la famille Peugeot, ils supportaient Lafarge dans sa fusion entre égaux avec le suisse Holcim. Et quelques semaines plus tard, ils bouclaient leur plus gros deal en assistant le britannique GlaxoSmithKline. Pour 57 milliards de dollars, celui-ci a débouclé une triple opération avec Novartis : il lui cédait son portefeuille d'oncologie, lui rachetait ses vaccins et ensemble ils créaient un joint-venture

>>> Eniro could be taken over by Triton

Eniro could be taken over by Triton 

Triton, the European PE firm, is trying to take over the troubled Swedish directory services company, Eniro, according to Dagens Industri. This comes after yesterday's report in Swedish media that Eniro's creditors are considering bankruptcy for the company which Eniro later denied via a stock exchange announcement.

The Swedish business daily reported, citing sources, that Triton has approached several of Eniro's creditors recently looking to take over some of the Swedish company's loans. One source said that Triton wants a 30-40% discount for the debts but some of the banks may agree on this if they are in a hurry to exit the debt situation. The paper speculated that Triton could possibly then push Eniro into bankruptcy or to conduct a new share issue and this way gain control of the company.

The item noted that Eniro has debts of SEK 2.2bn (EUR 241m) and some of its creditors include Handelsbanken, Nordea, SEB and Swedbank. The paper wrote that some of the company's creditors are concerned that Eniro may not be able to pay off all of its loans.
 


Source Dagens Industri

>>> ES Saude/Fosun offer raised to EUR 5.01 per share

ES Saude/Fosun offer raised to EUR 5.01 per share 

Espirito Santo Saude's Chinese suitor Fosun has raised its bid for the company to EUR 5.01 per share from the previous EUR 4.82 per share, according to a newswire report.

UnitedHealth's rival EUR 5-per-share offer is illegal, according to Fosun, since it was made directly to Rioforte, the Espirito Santo family's holding company, in exchange for its 51% stake in the Portuguese hospital business, the Reuters item said. Fosun lodged its bid through its local insurance arm, Fidelidade, the report added.

Fidelidade has asked Portugal’s securities regulator (CMVM) to review the legality of UnitedHealth’s offer, which it also says was submitted after the expiration of a 3 October offer deadline.

The report noted a CMVM press release issued earlier extended the deadline for ES Saude to accept Fosun’s offer to 14 October from 10 October.

The Espirito Santo family is under pressure to sell assets after requesting creditor protection in July, as reported.
Newswire Round-up

>>> What to look at today - 10th of October 2014

US MArket closed lower after yesterday rebound, S&P is back below its 100d MA...WTI slide to $85.22 -2.4%, -6.8% MTD...VIX @ 18.76 +24.16%, highest level since Feb., The growth concerns weighed on economically-sensitive sectors like consumer discretionary (-2.3%), industrials (-2.3%), and materials (-2.5%), while financials (-2.1%) ended in-line with the S&P, technology sector (-1.7%) ended ahead of the other cyclical groups helped by Apple(AAPL 101.02, +0.22) after activist investor Carl Icahn argued for a larger repurchase program in a letter sent to Chief Executive Officer Tim Cook., consumer staples sector (-0.9%) was the only group to register a loss smaller than 1.6%...Volume @ 874mil shares...US After Hours : HELE +3.0%, CUDA +0.4%, PKT -18.7%, SZMK -13.9%, VOXX -12.5% JNPR -3.9% following earnings/guidance...TSLA unveiled new D Model +0.7% After Hours...Asian indices are tracking the outsized US selloff with moderate declines of their own. Coal names in China were down across the board after overnight announcement the finance ministry is planning to levy a 3-6% coal import tariff on certain types of coal effective Oct 15th. Of note in the property sector, Housing Ministry researchers speculated Beijing is unlikely to ease home purchase limits...Nikkei -1.47% Hang Seng -1.87% Shanghai -0.63%

Eur$ 1.2708 S&P -0.23% EuroStoxx -1.32% FTSE -1.23% DAX -1.15% SMI -0.93%

Macro
- Schaeuble Says German Government Will Review Growth Forecast
- Draghi Says EU Governments Must Take Steps Or Face Disappearance
- Caspian Sea Oil Project’s Leaky Pipes Cost May Rise to $4b: FT
- Zaoui Brothers See Merger Cycle Just Beginning, Les Echos Says
- Weidmann Says ECB Balance-Sheet Target May Lead to Risk Transfer


Keep an eye on :
- BLT LN : Former Xstrata CEO Sought to Buy BHP Billiton Mines: FT
- CLN VX : *CLARIANT COULD ATTRACT INTEREST IN M&A ENVIRONMENT: JPMORGAN
- DAI GY : Mercedes-Benz to recall 10K 2014 C-Class in the US due to steering issues - NYT
- EMSN SW : EMS-Chemie 9-Month Net Sales Rise 7.5% in Local FX to CHF1.49b
- ENRO SS : Eniro could be taken over by Triton
- ESS PL : ES Saude/Fosun offer raised to EUR 5.01 per share
- GIVN VX : Givaudan 3Q Sales CHF1.12b vs Est. CHF1.11b, Repeats M/T Outlook
- GLEN LN : Glencore Falls After Said to Have Explored Australian Listing --> 321.8 in HK -3.36%, flat vs Ldn close
- LEG GY : LEG Immobilien Raises 2015 Outlook, Will Sell New Shrs, LEG Immobilien Places 4.1m Shrs at EU50/Shr
- MS IM : Mediaset may sell Mediaset Premium in exchange for stake in Telecom Italia - Il Sole 24 Ore
- KN FP : Natixis New Overweight on Possible M&A Upside: Morgan Stanley
- OML LN : Old Mutual Said Near Pact to Buy Quilter Cheviot: Sky
- PTC PL : Oi Says Committed to Portugal Telecom Merger: Reuters Link
- TRYG DC : Tryg 3Q Net Beats Estimates as Cost Cut Program Progresses
- UCG IM : UniCredit May Strengthen Presence in Middle East, Asia: CEO
- UL FP : Unibail Mandates Goldman to Sell EU1B Portfolio, Le Figaro Says
- VOW3 GY : Volkswagen Said to Deepen Research Cooperation With China’s FAW