TheChek News Flow

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Vivendi Says Board to Continue Work on SFR Over Weekend 2014-04-04 18:39:18.35 GMT

By Francois de Beaupuy and Matthew Campbell April 4 (Bloomberg) -- Vivendi spokesman spoke by telephone and declines further comment on sale process. * Note: Vivendi board meets to seek end of monthlong SFR bid dispute {NSN N3HWPG6TTDSF <GO>} * Note: Bouygues boosts SFR bid to take cash portion to $21 billion {NSN N3IAU86TTDTF <go>}

Link to Company News:{ATC NA <Equity> CN <GO>} Link to Company News:{EN FP <Equity> CN <GO>} Link to Company News:{NUM FP <Equity> CN <GO>} Link to Company News:{VIV FP <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: Francois de Beaupuy in Paris at +33-1-5365-5051 or fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Aaron Kirchfeld at +44-20-3525-8830 or akirchfeld@bloomberg.net

General Electric sees no room for deal to buy Ansaldo STS

(Reuters) - U.S. conglomerate General Electric Co does not see room for a deal to buy rail signalling firm Ansaldo STS from Italian defence group Finmeccanica, GE Europe President and CEO Nani Beccalli-Falco said on Friday.

"When things drag on for a long time it becomes difficult to conclude. The first time we looked at Ansaldo STS was ten years ago and we never concluded anything. There is no room to reach an agreement," he said on the sidelines of the Ambrosetti business gathering on the shores of Lake Como in Italy.

State-controlled Finmeccanica put up for sale its 40 percent stake in Ansaldo STS and other assets more than two years ago to cut debt and focus on its core aerospace and defence businesses. (Reporting by Gianluca Semeraro, writing by Naomi O'Leary, editing by Danilo Masoni)

AT&T's Next Plan Could Crimp Its Cash

Short-Term Boost to Earnings Could Carry Hidden Cost for Shareholders

AT&T T +0.03% may have found the next big thing, but it could come with hidden costs.

Shares of the No. 2 U.S. wireless carrier by subscribers have risen more than 11% over the past month. For a mature company with a market capitalization of $186 billion, that is no small pop, especially as rival Verizon Communications VZ -0.10% ' stock has risen less than 1%.

The rally also seems anomalous against the backdrop of intensifying competition, which should be hurting margins. Yet forecasts of AT&T's earnings have risen.

AT&T owes much of this apparent margin magic to a wireless plan called Next. This separates the cost of the phone from that of the service, letting subscribers pay off the device in installments.

AT&T accounts for those device revenues differently from those collected under its traditional plan, booking a significantly larger chunk upfront. The accounting shift adds up to a lot of extra profit, boosting earnings before interest, taxes, depreciation and amortization, or Ebitda, by $2.9 billion in 2014, equal to 80% of projected Ebitda growth in the wireless business, according to UBS.

The problem is that additional profit may actually result in lower cash flows.

Under a traditional plan, a subscriber pays perhaps $200 upfront for a top-of-the-line device like Apple's iPhone. AT&T books that as revenue. If the actual cost of the device is $650, AT&T takes a one-time hit to Ebitda of $450, which it makes back over time through the overall cost of the plan.

With Next, a subscriber puts no money down, trades in an old device, and then pays down the cost of the new one over 20 or 26 months. But now, UBS estimates, AT&T books $531 of that $650 as net revenue as soon as the customer takes the phone. That figure comes from backing out $65 for loss on the trade-in value of the device and roughly $54 for finance charges. So the hit to Ebitda is just $119 in the first year, much better than a $450 loss. Next subscribers can upgrade after 12 or 18 months, so AT&T could take another $119 hit the following year, but that is still better versus the traditional plan.

AT&T also discounts the service portion of the Next plan to account for the piece that would have gone to subsidizing devices. In that sense, the new accounting moves revenue from one box to another, and the long-term economic outcome for the two plans is roughly the same. But timing differences in when costs are accounted boost near-term earnings.

AT&T has boosted marketing efforts to push subscribers toward Next. But the income statement's gain could be cash flow's loss. Under a traditional plan, the device cuts AT&T's cash flow by $450 in the first year. With the 26-month Next plan, the cash outflow in the first year is $330 after accounting for installments paid, the trade-in value of the old device and the discount to the wireless service plan, UBS estimates. So far, Next is still winning.

If a Next subscriber upgrades after 18 months, though, AT&T could see another $330 of cash flow out in the second year, against zero for the traditional plan. So over two years, the negative cash flow impact of the device under Next could be $660. And cash matters for a company forecast to pay out roughly 86% of free cash flow in dividends this year.

Granted, all the other major carriers have adopted similar programs. But so far they seem to be having less of an effect on earnings. During Verizon's last quarterly earnings call, for example, the company said its comparable Edge program was generating less than 1% of profits.

Those focused on AT&T's upfront profit gains should ask themselves what comes after Next.

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Cement Deals Solidify Foundation for Building Boom: Real M&A 2014-04-04 18:13:25.944 GMT

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

By Tara Lachapelle, Thomas Black and Brendan Case April 4 (Bloomberg) -- For signs that construction is on the mend, look no further than the cement industry. Money being spent to acquire suppliers of building materials worldwide is surging to the highest level since at least May 2008, according to data compiled by Bloomberg. After $22 billion of deals in the past 12 months, Holcim Ltd. and Lafarge SA -- the world’s two biggest cement makers with a combined market value of more than $50 billion -- are in advanced merger talks. “What we’re seeing is a recognition by these companies that the bottom is in and that the recovery is happening,” Todd Vencil, a Richmond, Virginia-based analyst at Sterne Agee Group Inc., said in a phone interview. “Companies are feeling confident enough about that to have the buyers and sellers able to come together now.” A tie-up of Holcim and Lafarge would allow the cement producers to cut costs as some of the industry’s kilns run at a loss after the global recession eroded demand for building materials. The merger will likely spur even more deals as the companies are forced to sell off assets to appease regulators, according to Cantor Fitzgerald LP. Cement makers are preparing themselves to profit as construction spending accelerates. In January, Martin Marietta Materials Inc. agreed to buy Texas Industries Inc. for about $2.7 billion in the industry’s biggest North American deal in five years. “People want to get the chess pieces in order where they want to be through this next cycle,” Trey Grooms, a Little Rock, Arkansas-based analyst at Stephens Inc., said in a phone interview. “They don’t want to wait until the peak like we saw last time.”

For Related News and Information: Holcim in Talks About $40 Billion Cement Merger With Lafarge NSN N3IK6G6TTDSH <GO> Holcim Predicts Improved 2014 as Sales Miss on Currency Swings NSN N1LCG26S972J <GO> Martin Marietta to Buy Texas Industries for $2.7 Billio NSN N04CY66VDKHZ <GO> Cement deal news: TNI CEM MNA <GO> Real M&A columns: NI REALMNA <GO> Top deal stories: TOP<GO>

--With assistance from Whitney Kisling in New York.

To contact the reporters on this story: Tara Lachapelle in New York at +1-212-617-8911 or tlachapelle@bloomberg.net; Thomas Black in Dallas at +1-214-954-9458 or tblack@bloomberg.net; Brendan Case in Mexico City at +52-55-5242-9284 or bcase4@bloomberg.net To contact the editors responsible for this story: Beth Williams at +1-212-617-2307 or bewilliams@bloomberg.net; Ed Dufner at +1-214-954-9453 or edufner@bloomberg.net Ed Dufner

Special Situations: Lafarge/Holcim

trade action flash - buy Lafarge / short Holcim ratio: 0.976 (currency adj); target ratio on a deal: 1.0-1:10 April 4, 2014

Holcim and Lafarge are said to be in talk to merge in what would create a cement giant. Such a deal would face significant antitrust issues which we analyze in an upcoming RARe report. Based on relative values, we expect parities to favor Lafarge over Holcim as we calculate at least a 10% valuation gap between the two companies. Based on relative values and historical share price performance, we believe a share exchange ratio of 1.1 HOLN for 1 LG to be justified. On a 1.1 ratio, Lafarge shareholders would represent just about 50% of the combined company, more or less in line with the revenue and ebitda split. Given the current stock prices as of the close Friday night, and based on our share exchange expectations, the market is pricing a deal probability of 40%, in our view way too low.

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Hayward, Agnelli, Chapman on Shortlist for Glencore Chairman: DJ 2014-04-04 17:01:23.24 GMT

By Jim Silver April 4 (Bloomberg) -- Candidates include former BP CEO Tony Hayward, Vale ex-CEO Roger Agnelli and BG Group ex-CEO Frank Chapman, DJ says, citing unidentified people.

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

To contact the reporter on this story: Jim Silver in New York at +1-212-617-7342 or jsilver@bloomberg.net To contact the editors responsible for this story: Andrea Snyder at +1-202-624-1831 or asnyder5@bloomberg.net Steven Fromm

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Billionaires Gain as Lafarge, Holcim Enter Merger Talks 2014-04-04 16:59:24.356 GMT

By Gaurav Panchal April 4 (Bloomberg) -- At least four billionaires own shares in Holcim or Lafarge, including Egypt’s richest person Nassef Sawiris, Belgium’s Albert Frere, Switzerland’s Thomas Schmidheiny and Georgia-born Filaret Galchev, according to Bloomberg data. * Note: Holcim and Lafarge are in advanced merger talks to create world’s biggest cement company with sales of $40b * Holcim: * Schmidheiny owns 20.11% * Eurocement, controlled by Galchev, has 10.82% * Lafarge: * Groupe Bruxelles Lambert owns 20.99% * GBL is 50% owned by Pargesa Holding, jointly controlled by Frere and Paul Desmarais Jr * NNS Holding, controlled by Sawiris, has 13.94%; it also owns 23.17% of Texas Industries * Sawiris also owns almost one-third of Amsterdam- based construction contractor OCI * Sawiris also owns almost one-third of Amsterdam- based construction contractor OCI</li></ul></li></ul> * Holdings from data compiled by Bloomberg

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

To contact the reporter on this story: Gaurav Panchal in London at +44-20-7392-0511 or gpanchal2@bloomberg.net To contact the editors responsible for this story: Andrew Rummer at +44-20-7073-3722 or arummer@bloomberg.net