American Apparel Ripens as Target After Founder Ousted: Real M&A

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American Apparel Ripens as Target After Founder Ousted: Real M&A 2014-06-19 23:00:01.5 GMT

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

By Brooke Sutherland June 20 (Bloomberg) -- Dov Charney’s ouster at American Apparel Inc. may bring out the bargain hunters. The maker of T-shirts and neon spandex leggings climbed as much as 22 percent yesterday amid speculation the $120 million company could be sold after the board pushed out founder Charney because of misconduct. While American Apparel hasn’t had an annual profit since 2009, the brand is still attractive and its foothold in the 19- to 30-year-old demographic -- a lucrative one for retailers -- could lure suitors, said Brean Capital LLC. Even after yesterday’s gains, buyers can get it on the cheap: The company remains a penny stock and traded at the lowest sales multiple of any similar-sized retailer. American Apparel’s eclectic vibe may make it a good fit for Urban Outfitters Inc., said Jennifer Black & Associates LLC. Charney could also team up with another buyer to take the company private, Brean Capital said, estimating a deal valuation of $1.50 a share, or about $500 million including debt. “This has gone from being on no one’s radar to being something interesting,” Eric Beder, a New York-based analyst at Brean Capital, said in a phone interview. American Apparel has a “very desirable market. It’s a market that we’ve seen mainline players trying to get into and fail miserably.”

Charney Departure

American Apparel’s board said June 18 that it suspended and will fire Charney amid an investigation into unspecified misconduct. Yesterday, Allan Mayer, the company’s now co- chairman, said the ousting wasn’t in preparation for a sale or bankruptcy. “We are not pursuing any transaction,” Mayer told Bloomberg News. “We have no intention to sell the company.” A representative for Los Angeles-based American Apparel declined to comment further. Charney’s divorce from the company still could put his 27 percent stake, as well as the rest of the company, in play, said Beder of Brean Capital. Shares of the retailer closed 6.7 percent higher yesterday. The company’s strong brand may appeal to buyers, said Craig Johnson, president of Customer Growth Partners LLC, a New Canaan, Connecticut-based consulting firm. American Apparel, which promotes its products as “Made in USA,” has almost 250 stores across 20 countries, including France and Japan. It had about $634 million in sales last year. “The brand itself and the kind of style viewpoint it represents, we think has value beyond the company’s current either financial or CEO-level challenges,” Johnson said in a phone interview. “There’s no tarnishing of the brand generally in consumer land. The company can be rebuilt and re-energized. It may take a little bit of time.”

Hip, Trendy

American Apparel has a strong international presence, particularly in Asia, and it counts “hip, urban” young adults as its core customers, said Beder of Brean Capital. “That 19- to 30-year-old customer wants something authentic that they can make their own and that’s tough for a lot of retailers,” Beder said. A larger company could buy it for access to “a customer that they don’t really get.” With a price-sales multiple of 0.12, American Apparel is cheaper than any specialty apparel retailer valued at more than $100 million, according to data compiled by Bloomberg.

Buyer List

One retailer that may find American Apparel appealing is Urban Outfitters, said Beder and Jennifer Black of Jennifer Black & Associates. The $4.7 billion company operates the Anthropologie and Free People stores, as well as its namesake retail operations. “That customer is kind of trendy, yet buys a lot of different stuff,” Black, chief executive officer of the Lake Oswego, Oregon-based firm, said in a phone interview. “That’s who would come to my mind.” A representative for Philadelphia-based Urban Outfitters, didn’t respond to requests for comment. Still, suitors may be hesitant to buy a company that’s so unstable financially, said Jaime Katz, a Chicago-based analyst at Morningstar Inc. “You’re not turning a profit, and you haven’t turned a profit for an extended period of time, and the space is getting increasingly competitive,” Katz said. “It would be hard to think about who a strategic buyer for that sort of business would be.” American Apparel’s stock has been plummeting since 2007, as sales growth slowed and a costly new distribution center didn’t perform as expected.

Cash Burn

The company’s missteps have translated into negative free cash flow in four of the last five quarters. At this rate, it will burn through its cash in less than eight months, according to data compiled by Bloomberg. Charney’s dismissal may trigger a notice of default under its credit agreements, the company said. In February, Intercontinental Exchange Inc.’s NYSE MKT threatened to delist American Apparel’s stock, citing the chain’s financial state and its inability to meet obligations. Charney had been working to create some breathing room for the troubled company, attracting an investment from Johannes Minho Roth of FiveT Capital AG earlier this year to help pay its bills. If a strategic buyer is too wary to pursue a transaction, Beder of Brean Capital said Charney could find a partner to help him take the company private. “Could Dov come back and try to be the white knight to save his old company? Maybe.” Beder said. Still, a strategic buyer “could do the same thing too.”

For Related News and Information: American Apparel Chairman Says There’s No Plan to Sell Company NSN N7FJGH6TTDSH <GO> American Apparel Investor Expects CEO to Fight Termination NSN N7FDRW6TTDTD <GO> American Apparel Finds Latest Believer in Form of Swiss Firm NSN N3S67G6KLVR5 <GO> NSN M2A5FF6VDKIT <GO> American Apparel’s deal news: APP US <equity> TCNI MNA <GO> Top deal news: DTOP<GO> Real M&A columns: NI REALMNA <GO>

--With assistance from Lindsey Rupp and Matt Townsend in New York.

To contact the reporter on this story: 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 Whitney Kisling

>>> Asian Update

Asian Market Update: Precious metals spike as investors question Fed's inflation tolerance; China mixed ahead of Sunday's flash PMI

***Economic Data*** - (US) NORTH AMERICA MAY SEMI BOOK/BILL RATIO: 1.00 V 1.03 PRIOR - (NZ) NEW ZEALAND MAY ANZ JOB ADS: -5.2% (first decline in 5 months) V 2.1% PRIOR - (NZ) NEW ZEALAND JUN ANZ CONSUMER CONFIDENCE INDEX: 131.9 V 127.6 PRIOR; M/M: +3.4% V -4.4% PRIOR

Market Snapshot (as of 03:30 GMT): - Nikkei225 +0.4%, S&P/ASX -0.5%, Kospi -1.0%, Shanghai Composite -0.2%, Hang Seng +0.2%, Sept S&P500 flat at 1,950, Aug gold -0.1% at $1,312, Jul crude oil +0.3% at $106.70/brl

***Highlights/Observations/Insights*** - Gold prices saw the largest margin of increase in nearly a year today as investors expressed much more confidence in the Yellen Fed tolerating inflationary pressures to the benefit of reducing unemployment. Recall Yellen dismissed the latest CPI data as noisy and saw inflation being contained, as yesterday's FOMC statement disappointed those looking for greater acknowledgement of rising prices. Metals markets appear to be increasingly more critical of the Fed's inflation-curbing credentials however, piling into the "store of value" trade that is further justified by continued geopolitical turmoil in Ukraine/Iraq and overextended bearish positioning. Goldminers in US, Australia, and China were also up in high single digits.

- China indices are mixed going into Sunday's flash PMI release. The most recent figure of 49.4 was a 5-month high, albeit the 5th consecutive month in contraction. Among notable local press reports, PBoC official actually suggested the China property market correction is "necessary", "reasonable", and "beneficial" in the wake of this week's troublesome price data for May. Recall the all-70 new home prices saw their first m/m drop in 2 years, while y/y rate of increase slowed by 1.3pts to 5.4%.

- In US tech, shares of Oracle were down 5% afterhours following a miss on top/bottom lines for Q4, while Q1 guidance was in line with consensus. Apple also rallied modestly into the close following reports of the iWatch production starting next month and retail release coming in October.

***Speakers/Political/In the Papers*** - (CN) China may announce more minor stimulus measures; Tunes of micro-stimulus has not been changed - Chinese press - (CN) PBoC official: Current correction in China housing price is "necessary and inevitable"; Reasonable correction beneficial for economic reform and development of reasonable price structure - Chinese press - (CN) China iron ore traders see drop in bank credit; May force small traders to sell their stocks - financial press - (CN) China Ministry of Industry and Information Technology (MIIT): May telecom industry total Rev CNY150.2B, +15.8% y/y; Top 3 telecom companies Rev CNY105.2B, +9% y/y - (JP) Japan Defense Min Onodera to travel to US in early July to update Defense Sec Hagel on govt plans regarding collective self-defense constitution changes - Nikkei - (JP) Japan's GPIF and other pension funds sold a net of about ¥1.8T in Jan-Mar; Suggesting GPIF may be rebalancing portfolio sooner than expected - Nikkei - (IQ) President Obama: Could take targeted military action against ISIS if and when it is needed, to consult with Congressional leaders

***Fixed Income/Commodities/Currencies*** - (AU) Australia MoF (AOFM) sells A$700M in 5.25% 2019 Bonds; avg yield: 3.0436%; bid-to-cover: 4.35x - (CN) PBoC sets yuan mid point at 6.1524 v 6.1531 prior setting (strongest Yuan setting since June 13th) - (US) Weekly Fed Balance Sheet Total Assets Week ending June 18th: $4.37T v $4.34T prior; Reserve Bank Credit: $4.33T v $4.30T prior; M1: +$3.3B v +$59.1B prior; M2: -$9.3B (first decline in 7 weeks) v +$10.9B prior; M1 y/y change: 10.3% v 10.4% w/w; M2 y/y change: 6.3% v 6.3% w/w

***Equities*** US markets: - FDO: Icahn discloses amended stake and new letter to the company, urges immediate sale of the company, asks for 3 board seats; +2.6% afterhours - TMUS: Sprint said to have lined up as many as 8 banks for over $40B debt financing in proposed acquisition of T-Mobile - financial press; +0.5% afterhours - AKS: Guides Q2 adj loss -$0.06 to -$0.02 v +$0.09e; -2.6% afterhours - ORCL: Reports Q4 $0.92 v $0.95e, R$11.3B v $11.5Be; -5.0% afterhours - TRGP: Responds to press rumors and trading activity regarding acquisition by ETE; previously engaged discussions on potential business combination were terminated; -10.2% afterhours - SWHC: Reports Q4 $0.44 v $0.40e, R$170.4M v $163Me; Guides initial FY15 GAAP $1.30-1.40 v $1.42e, Rev $585-600M v $618Me; -11.2% afterhours

Notable movers by sector: - Consumer Discretionary: Isetan Mitsukoshi 3099.JP +0.1% (speculation on Op profit) - Materials: Zhongjin Gold 600489.CN +2.8%, Shandong Gold Mining 600547.CN +2.9% (gold futures traded higher by over 3% during US session); Sandfire Resources SFR.AU +0.8% (drilling plans) - Healthcare: Takeda Pharmaceutical 4052.JP -0.4% (investors oppose appointment of president) - Telecom: China Unicom 762.HK -1.7% (May subscriber data) - Financials: Fosun International 656.HK +2.8% (investment in Greece) - Industrials: Austin Engineering ANG.AU +6.8% (awarded contracts)

(BFW) Weir Group Could Be Forced to Relocate HQ If Yes Vote: Scotsman

 BN 06/19 15:19 *SCOTSMAN REPORTS COCHRANE'S COMMENTS FROM MEETING OF ICAS TODAY
 BN 06/19 15:19 *WEIR GROUP COULD BE FORCED TO RELOCATE HQ IF YES VOTE: SCOTSMAN
 BN 06/19 15:19 *COCHRANE: SCOTLAND `YES' WOULD FACE DELAY IN INVESTMENT: SCOTS
 BN 06/19 15:19 *WEIR GROUP CHAIR COCHRANE WARNS ON SCOTLAND YES VOTE: SCOTSMAN
Weir Group Could Be Forced to Relocate HQ If Yes Vote: Scotsman
2014-06-19 15:26:36.580 GMT


By Angelina Rascouet
     June 19 (Bloomberg) -- http://bit.ly/1pmRHLJ

Link to Company News:{WEIR LN <Equity> CN <GO>}

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

To contact the editor responsible for this story:
Angelina Rascouet at +44-20-7392-0424 or
arascouet1@bloomberg.net

WSJ : ‘Wall of Liquidity’ Headed to Emerging Markets

The fear that emerging markets will lack liquidity has been overstated, partly because the “wall of liquidity” beginning to come out of Japan has been ignored by the market, Franklin Templeton Investments fund manager Michael Hasenstab says.

The Bank of Japan is embarking on its largest ever quantitative easing effort and is on a path to start printing $1 trillion a year, which will be “quite meaningful” to emerging markets, Mr. Hasenstab told nearly 2,000 attendees at Wednesday’s opening session of the 2014 Morningstar Investment Conference in Chicago.

Japan’s huge pool of savings has begun to shrink as its population ages and the only entity big enough to fund its debt is the government, he said. That gives him confidence that Japan is going to be “massively expanding” its quantitative easing for some time, he said.

“We think that global liquidity is going to be fairly abundant for many emerging markets,” Mr. Hasenstab said.

As for the impact of interest-rate increases by the U.S. Federal Reserve, there are big differences between now and the mid-1990s, when the Fed raised rates and emerging markets had a lot of trouble, he said.

Pretty much across the board, these markets have doubled or tripled their international reserves, a cushion they didn’t have in the 1990s, he said.

In addition, many emerging-market nations have delevered massively their government balance sheets through decades of prudent fiscal policy, Mr. Hasenstab said. Korea, for example, has around 30% debt-to-GDP, and the Ukraine has only 40% debt-to-GDP, he said.

“We can no longer be universal about emerging-market economies,” but there is adequate liquidity and China will be a source of stability, he said. “We want to be very selective country-by-country.”

As for the bond markets, they will face losses and his concern now is how to deliver positive returns. He’s shifted his portfolio almost entirely into very short duration assets and is “selectively adding short duration assets in countries of good quality globally,” he said.

He now has long-dollar positions against the yen and the euro. When the Fed ends its tapering and begins raising rates, Japan and Europe will still be printing money, which is bullish for the dollar, he said.

“We think the dollar will decline in value over time against place” like Korea and Mexico, he said.

“There are opportunities, but it’s a smaller pool and you have to be very careful,” Mr. Hasenstab said of emerging markets.

>>> COH -5.5% - guiding down...

Coach Inc Guides initial FY15 Rev down double digits, gross margin 69-70%, capex ~$400M; guides initial FY16 Rev up low single digits, expect to return to sustainable growth in FY16-17 - analyst day
- Pledges to maintain the dividend

>>> Nikkei - Quick chart - Next few days will be interesting...

It will be very interesting to watch Nikkei on the next few days to see if it manages to break strong resistance aropund these levels.

Comments form Abe & news on part of Equities in Pension Fund will be key to boost Nikkei on Higher Levels, I think we can break these levels.

Watch quick chart attached.

See a lot of investors re investing in Asia & Emerging...positive momentum for next few months

WSJ : Why Are Some Mega Deals More Likely to Default?

The average default rate for the past six years of some of the largest buyouts in the U.S. is nearly three times as high as similarly rated non-buyout backed companies, according to new data from Moody’s Investors Services.

The average default rate represents the incidents of default among Moody’s sample sets during a given period.

Five of 10 megadeals analyzed by Moody’s, each with more than $10 billion of debt, have defaulted. That includes two that have filed for bankruptcy protection: Energy Future Holdings Corp. and Chrysler LLC , which filed in 2009, two years after being bought out by Cerberus Capital Management.

The companies have defaulted at an average annual rate of 17.8% since 2008, compared with 6.4% for similarly rated non-private equity-backed companies for the same period. The ratings firm defines default as a failure to make an interest or principal payment; a bankruptcy filing; or a distressed exchange whereby creditors are offered restructured debt often at steep discounts to the value of the original debt.

Other large private equity-backed companies that fit this criteria include Clear Channel Communications Inc ., Caesars Entertainment Operating Co . and Freescale Semiconductor Inc.

By contrast, the five other megadeals analyzed by Moody’s were performing better.

Alltel Communications Inc . was sold to Verizon Wireless in 2008, a few months after it was acquired by TPG Capital and GS Capital Partners , earning a reported $1.3 billion profit for the buyout firms. HCA Holdings Inc.HCA -0.14% was upgraded a few months after its 2011 initial public offering. Hertz HTZ +1.09% Corp ., First Data Corp . and Univision Communications Inc . all managed to avoid falling into distress despite their high leverage levels.

One reason for the different outcomes of the megadeals is the industries they operate in, said John Rogers, a senior vice president of Moody’s who co-authored the report. Hospital operator HCA and semiconductor company Freescale, for instance, were subject to very different sector trends.

“The cyclicality of the industries is vastly different,” said Mr. Rogers.

Some of the headwinds faced by failed companies were somewhat outside the control of their buyout sponsors, said Mr. Rogers, citing Energy Future Holdings as an example. “Not many people sitting around in 2007 were thinking about shale gas,” he said.

Nonetheless, heavy debt loads left the companies with very thin cushions.

“Private equity firms got out over their skis in terms of financing deals prior to the financial crisis,” said Mr. Rogers. As a result, “there is a very limited room for things to go wrong.”

CNBC - GE submits revised proposal to French govt for Alstom deal, creates 3 JVs

{http://www.cnbc.com/id/101762392}
General Electric Co. (GE) and Siemens AG are both circling Alstom in a bid to add turbines and other equipment for power plants and transmission networks amid rising demand in the oil and gas industries.
General Electric has presented a revised proposal for the power and grid business of France's Alstom to the French government, after French President Francois Hollande told GE and rival Siemens they need to improve their competing offers.

Under the new proposal, General Electric will form three new joint ventures with Alstom, and will sell its signaling business to the firm for an undisclosed price. Alstom's board is expected to vote on the new proposal before a June 23 deadline.
According to a person close to the situation, the new proposal does not change the economics of GE's original $17 billion dollar offer for Alstom's power business, an acquisition GE expects will be accretive to earnings once it is completed. The $19.3 billion offer from Germany's Siemens and Japan's Mitsubishi Heavy Industries would have Siemens buying Alstom's gas turbine business and Mitsubishi taking a minority stake in the company.
Read MoreSiemens and Mitsubishi finalize Alstom offer
The new offer from Fairfield, Connecticut-based GE allows for the two companies to form a 50-50 joint venture that combines their grid businesses. Like the other proposed JV's it would be based in France. Additionally, they would form a 50-50 joint venture in renewables that would contain Alstom's offshore wind and hydro businesses, but not GE's.

The last joint venture would be in the nuclear business. The French government would hold a preferred share in this business, giving it veto power over any projects or issues the government fears could compromise the security and technology of its nuclear plants.
With GE buying Alstom's power business, the last part of the revised offer aims to strengthen Alstom's remaining transportation business. A maker of high-speed trains, Alstom would buy GE's signaling business for an undisclosed price.
When GE's original offer was announced back in April, there were concerns Alstom's weaker transportation business might not survive on its own.

Read MoreGE planning to offer sweetened Alstom bid: Reports
To win what would be the biggest deal of CEO Jeff Immelt's tenure at GE, the conglomerate has already promised the French government it will create 1,000 new jobs in France.
Immelt will be holding a press briefing later today to discuss the revised offer