TheChek News Flow

In reaction to strong earnings/guidance: PERY +14.9%, PERY +14.9%, PLCE+9.9%, EGHT +7.4%, SMTC +6.5%, WSM +5.5%, RENN +5%, DLTR +5%, KIRK+5%, AKBA +2.8%, SMRT +1.5%, LB +1%, NTAP +0.9%.

Select India related names showing strength: SSLT +2.5%, SIFY +2.3%, IBN+0.5%.

Select metals/mining stocks trading higher: SLV +1.7%, RIO +1.3%, GOLD+1.1%, BHP +1%, GLD +0.8%.

Select solar related names showing strength: YGE +3.5%, SOL +3.1%, JKS+1.8%, CSIQ +0.8%.

Other news: ROYL +20.3% (large drillable target identified on Alaskan 3D seismic),SN +9.1% (doubles proved reserves and production with $639 mln acquisition of 106k contiguous net acres in the Eagle Ford trend of South Texas; immediately accretive to earnings and cash flow per share ), NIHD +8.8% (cont strength), ZLCS+8.6% (reports successful results from a phase 1 clinical study to evaluate multiple modified-release formulations of Z944), DNDN +6% (cont strength), LOV +5.8% (co issues open letter; cautions stockholders not to be misled by Osmium's inaccurate statements and deceptive practices), ISIS +4.7% (reports positive phase 2 data for ISIS-FXI Rx in the prevention of venous thrombosis in patients undergoing total knee replacement surgery), GOGO +3.2% (still checking), LINE +3.2% (co and LinnCo (LNCO) announced agreement to trade a portion of its Permian Basin properties to Exxon Mobil (XOM) and its wholly owned subsidiary XTO Energy for operating interests in the Hugoton Basin) IDCC +2.5% (China's NDRC accepts co's commitments and suspends Its investigation), SNE +2.3% (Japan mkts +2% overnight; co does not plan to sell TV business, CEO says, according to reports),HES +1.9% (proceeds from sale of its retail business to Marathon Petroleum (MPC) will be used for additional share repurchases), POST +1.7% (increases offering by 1 mln shares and prices 5.5 mln shares of common stock at $47.70 per share), VRTX+1.3% (may be attributed to positive Adam Feuerstein mention), GBX +0.9% (announces alliance with Mitsubishi UFJ Lease & Finance (MTU); MUL plans to acquire ~ $1 billion in leased railcars over multi-year period).

Analyst comments: CTIC +4.3% (initiated with a Buy at Ladenburg Thalmann),HCLP +2.1% (initiated with a Outperform at Cowen), NBR +1.3% (upgraded to Buy from Hold at Jefferies), RDY +1.3% (upgraded to Overweight from Equal Weight at Barclays), FB +0.9% (upgraded to Overweight from Equal Weight at Evercore), BA+0.7% (upgraded to Buy from Hold at Drexel Hamilton )

Gaillon’s takeover bid at EUR17.5 (8% below current stock price) will expire on Friday and cannot

be sweetened by law. Gaillon Investment (which should gather around 38% of the capital with its

partners) could launch a totally new bid but we doubt it will (it could have sweetened it last week)

and we doubt there will be counterbids. Funds that have declared they will not tender (B&G,

Strategic, Moneta, Benetton) represent 22% of the capital, on top of which we think a further 10%

at least will not tender either. Either the bid is successful (and the stock price falls back towards

EUR17.5) or it fails to reach the 50% threshold (condition set for the success of the bid) by Friday

raising more doubts on the future of Club Med.

* Uncertain outlook if the bid fails

Were the bid to fail, management would be significantly destabilized. Development might suffer,

especially in China were Fosun to exit at some stage (even if its contribution has not been obvious

so far). Strategic Holdings may have a hidden plan in Italy/Spain for the group (together with the

Benetton family which used to be involved in the sector), visibility will remain quite poor and would

not offset a worse outlook in China. With summer bookings down heavily (-3%), and new troubles

(Thailand, possibly Egypt, Chinese boycott of Malaysia) we think consensus should revise down

quite sharply. We have lowered our estimates for Village operating income in 2014e to EUR51m

from EUR64m. We think the company is unlikely to hit its 10% EBITDA margin in the next two

years.

* SOTP lowered from EUR20 to EUR17

We have revised down our valuation to EUR17 from EUR20 to reflect our new forecasts. A bull

case would point to EUR22 under more flattering assumptions on asset management, but seems

unlikely on a two-year horizon. A scenario of a sale & leaseback of 40% of the assets portfolio

based on 2015e earnings gives a fair value of EUR17, and would value the group at 15.7x reported

EBIT 15e and 23x P/E 15e. The challenges facing the group (achieving profits in the low season,

raising prices in a deflationist sector, 45% clients from France/Belgium) are unchanged.

UK Takeover Panel: code game

M&A supervisor is secretive, anachronistic and effective

Bidder and target issue clarifications; opacity increases. This week’s statements from Pfizer and AstraZeneca should have damped expectations of a higher offer; they have had the opposite effect. The confusion raises familiar questions about the UK Takeover Panel.

Critics see the UK’s gentlemanly M&A supervisor as an anachronism, a self-regulatory body in an industry crowded with statutory bodies. A publicity-shy staff of mostly ex-bankers and secondees from investment banks dispense in-game advice. Their Bible is the Takeover Code, whose every rule appears to have Jesuitical exceptions.

Complexity was the root cause of the bewilderment sown by Pfizer and AstraZeneca, whose statements were probably prompted by the panel. On Sunday night, the US drugs group announced a “final proposal” to buy AstraZeneca at £55 per share. It was rejected as too low the next morning. Get-out clauses appeared to leave the door ajar for a higher “firm offer”.

Another wordy missive from Pfizer on Tuesday strengthened hopes that a loophole remained open. A blunt riposte from AstraZeneca quashed them. Many investors had believed what they wanted to: that a deal could be cut between £55 and the £59 mentioned by AstraZeneca. Instead, the code precludes – with caveats – a higher offer before the autumn.

Surely muddles are inevitable when clubbable City bankers supervise their peers? Wrong. UK takeovers tend to run smoothly. The code is complex but its principles are simple: fairness to investors and the keeping of promises. The panel saves businesses fortunes by preventing disputes ending in court, as they often do in the US.

But if the panel is going to use bid participants as mouthpieces, it must ensure their “clarifications” merit that name. Otherwise, it will have to intervene under full public scrutiny. And that would be most unBritish.