TheChek News Flow

* WLT May 8 calls are seeing interest with 1810 contracts trading vs. open int of 5050, pushing implied vol up around 5 points to ~76% -- we noted bullish activity in the May 9 calls on Apr 17 (see 4/17 10:30 OPTNX). Co is confirmed to report earnings May 1 before the open

Elizabeth Arden, which has a market value of $845 million, has seen its sales hit by a much weaker-than-expected North American retail market as well as deep industry discounting in key European markets that have eroded profit margins. Its shares have fallen 20 percent so far this year.

LG Household, keen to expand its product lines and reach, has completed 12 acquisitions since 2007, though the biggest of these has been a relatively small $375 million purchase of a local retailer.

Four of its five latest deals were overseas acquisitions, including Japanese cosmetics firm Everlife and Canadian retailer Fruits & Passion.

"LG Household has grown so far based on M&A. We are looking at several potential deals at the moment for the same reasons, and Elizabeth Arden is one potential option," said a company spokesman, responding to a report in the Maeil Business Newspaper about the potential bid.

"We are considering both local and overseas deals," he added.

Representatives for Elizabeth Arden could not be immediately reached for comment outside of regular U.S. business hours.

LG Household, No.2 in the South Korean cosmetics market with brands such as Whoo and O Hui, saw its shares climb 3 percent in a flat market on hopes that Elizabeth Arden would provide it with a new growth engine.

"Should the deal materialise, the key will be how much synergy (LG Household) can generate by acquiring new product lines and selling them in Asia," said Meritz Securities analyst Song Kwang-soo.

"Elizabeth Arden's margins are also lower than LG Household's, so there is also potential for increased value through restructuring."

Elizabeth Arden trades at a 12-month forward price-to-earnings multiple of 16.8, compared with its U.S.-listed peers forward P/E of 22.1, according to Thomson Reuters data. LG Household trades at a forward P/E of 20.8.

In addition to its namesake brand, Elizabeth Arden is known for celebrity brand perfumes such as those of Taylor Swift and Justin Bieber, as well as skin care brands like Ceramide and Prevage.

Elizabeth Arden's net income attributable to shareholders fell to $34.95 million for the fiscal quarter than ended Dec. 31, down from $44.81 million a year earlier. It has said it is working on a fundamental reexamination of how it executes its business, particularly internationally.

Taxi licensing illustrates how regulation intended to serve the public is hijacked

They are taking to the streets in Paris. They have secured a ban in Brussels. They have gone to court in Berlin. Taxi drivers across Europe are united against Uber – a Silicon Valley start-up, backed by Google and Goldman Sachs, whose app-based car service is being rolled out internationally.

The regulation of taxi services arouses emotions. My local French driver asked recently: “What do London cabbies do when they retire?” He explained that his colleagues rely on the onward sale of taxi licences to fund their pensions. In New York, the value of a taxi medallion now exceeds $1m. London, however, issues licences freely to anyone who passes “The Knowledge”, the demanding test of London’s geography required of drivers of the distinctive black cabs.

Some regulation of taxis is necessary. The nature of the service they provide means that many of its users are vulnerable. They are disabled, or women who need a safe trip home late at night, or foreign tourists who have no idea what is a reasonable fare from the airport to the city. Beware Oslo, where even the metered fare will max out your credit card.

Taxi licensing illustrates regulatory capture, the phenomenon by which regulation intended to serve the public is hijacked by industry interests. As every passenger knows, drivers are voluble, and enjoy a certain solidarity; their clients, however, are diffuse and diverse. In 1978 a protest by cab drivers brought central Dublin to a halt. The Irish government responded by agreeing to freeze the number of taxis on the streets of the city. Over the next two decades the Irish economy grew strongly and Dublin became notorious for taxi queues. There was even a serious proposal to erect taxi shelters across the city, so that waiting citizens could shelter from the Irish rain.

The regular Christmas chaos – taxis were effectively unavailable at times of peak demand – became a political issue. But Prime Minister Bertie Ahern stood firm in defence of the status quo. It was left to the Irish courts to declare the restrictions on numbers unlawful. Within two years, the number of cab licences in Dublin had increased more than threefold.

So long as regulation ensures that vehicles are safe and drivers honest, it is difficult to see how the public interest could ever be served by restrictions on numbers. Britain’s Office of Fair Trading reached this conclusion in 2003 (although there are no such restrictions in London, many other local authorities impose limits). But the lobbyists prevailed; the parliamentary transport committee issued an extraordinary attack on the OFT report, and the government decided to do nothing. The Law Commission reiterated the OFT’s finding in 2012, but by the following year had modified its advice and suggested that there might be a case for restricting supply, although it gave little guidance as to what that case was.

In Paris, cab numbers are tightly controlled and there are virtually no private hire vehicles. Taxis are mainly used by business people and journeys per head are less than a third of what they are in London or New York. Lower socioeconomic groups rarely use cabs in France – in London and New York they do, extensively – and there are large areas of Paris where a taxi service is in effect unavailable. That elitist outcome is strikingly similar to the experience of another regulated industry, civil aviation, where service was confined for many years to business travellers and the affluent, until deregulation and the internet made the emergence of low-cost airlines first possible and then inevitable. The parallels with the development of Uber are clear.

But the problem of the French driver’s pension remains. The American economist Gordon Tullock described “the transitional gains trap”: the policy of restricting numbers is foolish but cannot be abandoned without wiping out the hard-earned savings of drivers. One might have less sympathy for investors; most New York cabbies rent rather than own licences. In Dublin, the Irish government established a hardship fund to help compensate drivers who had been counting on the value of the licence to supplement their retirement income, or had recently taken out a loan to purchase a licence. Politicians should beware of policies that are easy to implement and costly to reverse.

Russia Govt confirms military exercises are being conducted near Ukraine in the Russian Rostov area - financial press

Volkswagen’s bid to acquire the remainder of Scania that it does not already received a further blow when the truckmaker’s third-biggest shareholder rejected the offer, setting up a tense conclusion to the offer period.

Alecta, the Swedish pension manager, which held 2 per cent of Scania’s capital at the end of March, rejected VW’s Skr200 per share offer, because it believes it is too low. The offer period ends on Friday.

VW, which currently controls 62.6 per cent of Scania’s share capital, needs 90 per cent to squeeze out minority shareholders and force a deeper co-operation among its truck assets to better challenge rivals Daimler and Volvo.

A 10 per cent rejection level would therefore be enough to sink VW’s offer. So far four Swedish pension funds which together hold more than 4 per cent of the share capital have publicly said no. Investor, the holding company of the Wallenberg family, which holds about 0.4 per cent of Scania, has also rejected the offer.

A rejection would represent a rare setback for VW patriarch and chairman Ferdinand Piëch, who has built a mighty stable of 13 automotive brands and is used to getting his own way.

Scania’s independent board members recommended last month that shareholders reject the offer but VW has refused to improve it.

VW has instead tried to woo Swedish shareholders by promising to preserve jobs, plants and Scania’s headquarters.

The Swedish shareholder association (SSA) has recommended shareholders should accept the bid. Nordea, Didner & Gerge and GAMCO Asset Management have come out in favour.

Scania’s shared soared to within touching distance of the offer price when it was first tabled in February. But since then the stock has drifted lower as opposition to the bid has mounted. On Wednesday Scania’s shares tumbled a further 4.4 per cent to Skr175. Analysts expect the shares to fall further if the bid fails.

“Achieving the 90 per cent acceptance threshold for VW is not a given,” Alexander Whight, analyst at JPMorgan Casenove, told clients.

Before Alecta’s rejection JPMorgan had estimated that roughly 8 per cent of shareholders were unlikely to accept the bid; its estimate included rejection as well as “hard to get” shareholders, such as index funds.

Churchill Capital, an investment advisory firm, told clients that “there is an increased risk that the 90 per cent condition may not be met, thus leading to deal failure. Moreover, VW’s current offer is now final, removing the option for a bump.”

Although VW could in theory still raise its bid, analysts see this as unlikely as this would create reputational risks for VW and potentially open it up to sanctions or lawsuits, because it had previously ruled out doing so.

If the deal fails, VW would be prohibited from launching another offer for 12 months unless Scania’s board recommends it.