(BFW) Smith & Nephew Buys Arthrocare for $1.7b in Cash

Smith & Nephew Buys Arthrocare for $1.7b in Cash
2014-02-03 07:08:30.85 GMT


By Sheela Sharma
     Feb. 3 (Bloomberg) -- Smith & Nephew to acquire medical
device company ArthroCare Corp. for $48.25/shr in cash, a total
consideration ~$1.7b, enterprise value of $1.5b.
Statement

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--Editor: James Ludden

To contact the reporter on this story:
Sheela Sharma in London at +44-20-7392-0395 or
ssharma145@bloomberg.net

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(BFW) Richemont Focuses on Emerging Market Middle Class: Corriere

Richemont Focuses on Emerging Market Middle Class: Corriere
2014-02-03 07:09:16.359 GMT


By Andrew Frye
     Feb. 3 (Bloomberg) -- Cie. Financiere Richemont is adapting
offerings as middle class in more developed countries shrinks,
Co-CEO Fornas tells Corriere Della Sera in an interview.
  * NOTE: Richemont Sales Growth Misses Estimates as China
    Declines NSN MZHLAF6JIJWR <GO>


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FT : United Biscuits seeks to boost McVitie’s brand

United Biscuits seeks to boost McVitie’s brand

Fluffy kittens, corgi puppies and orange-eyed tarsiers are being marshalled to help sell more Digestives and Jaffa cakes by producer United Biscuits ahead of an expected sale this year by its private equity owners. The 160-year-old McVitie’s brand will be relaunched on Monday with a £12m advertising campaign, focused on "sweet" animals that Martin Glenn, chief executive, said was aimed at "supporting our efforts to drive growth for the category". The 53-year-old, who was head of Bird’s Eye and PepsiCo UK, joined United Biscuits in April last year with a mission from its owners PAI and Blackstone to inject growth into a stagnating business and increase overseas sales. He has embarked on what the group said would be a record level of capital investment this year, of more than £50m, compared with £38m last year. The private equity companies bought United Biscuits for £1.6bn eight years ago – an investment horizon that is longer than the norm in their industry. They sold the KP snacks unit last year for an undisclosed price, thought to have been £400m. Jeff van der Eems, chief executive of the international division, said: "The sale of KP Snacks in 2012 has allowed us to focus on our core businesses of McVitie’s and Jacobs, and to expand our international operations which we hope to account for 20 per cent of sales in three years." Mr Glenn has since regrouped the group’s products into two divisions – sweet products under the McVitie’s label; and savoury biscuits, such as Mini Cheddars and Carr’s, under the Jacob’s brand of crackers. PAI and Blackstone are eyeing the exit, and the business has attracted interest from China’s Hony Capital, a 13-year-old private equity group. Chinese companies have shown a growing interest in UK food brands after the acquisition in 2012 of Weetabix, the breakfast brand by China’s Bright Food group. United Biscuits is the second-largest biscuits group in the €12bn industry, with a 7 per cent market share, which is less than half that of industry leader, Mondelez. The maker of Oreo and Tuc biscuits has 17 per cent, according to Euromonitor. In the UK, where 90 per cent of households buy its products, United Biscuits has a 40 per cent market share. But it has had a tough recession in the face of "difficult market conditions" for at least the past three years as cash-strapped consumers focused on "value", the company said. The market is fragmented, highly competitive and is having to address consumers’ increasing health concerns. Marc Kennis, analyst at Rabobank, which recently issued a report into the sector, said biscuit makers faced volatile wheat and sugar prices and hard bargaining retailers. "This creates substantial uncertainty in the variable cost base for manufacturers, who have limited room to pass on any price increase to customers due to intense competition and the sheer size of food retailers. Biscuit companies are caught between a rock and a hard place," he said. United Biscuits made operating profits of £130.8m in 2012, down from £134.6m the previous year on flat revenues of £1.05bn. Pre-tax profit rose 10 per cent to £45.7m, after paying £95.1m to service its £1.2bn of borrowings.

>>> What to look at today - 03/02/2014

US Market Closed lower January finished on weak note, Dow -5,30% S&P-3,56% Nasdaq-1,74% on the month, US Market continue to trade in line with JPY, Technology was the only sector to close in Positive territory...volume were well above average with 937mil shares traded...VIX @ 18,41 +6,48%...Hong Kong, China markets closed for holiday (Golden Week)...Japanese shares fell, with the Topix index headed for an 11-week low, as investors weighed corporate earnings and slowing Chinese manufacturing growth increased concern the global economic recovery is faltering.

Eur$ 1,3486 S&P Fut +0,15% European Fut -0,2%

Macro :
- China Jan. Manufacturing PMI 50.5; Est. 50.5
- Schaeuble Plans EU10b-EU20b Additional Greek Aid, Spiegel Says
- Iran to Transfer Government-Owned Shares to Private Sector
- Japan in danger of missing 2020 budget target according
- Turkey Fin Min Simsek denies plans to limit capital flows
- Former senior economist at Fitch, Charlene Chu, warns about the rising danger of shadow banking in China

Keep an eye on :
- ALU FP : Barrons +ve on ALU on boost this year of increase capex in China to build 4G infrastructure
- ALO FP : Ex-Alstom Executives Accused in Bribery Probe, Estado Reports (Brazil)
- AAPL US : Apple Inc Reported to have met with FDA on medical app
- AREVA FP : Areva Resumes production at two uranium mines in Niger previously shut down for maintenance amid negotiations with govt on the tax rate
- ATC NA : Altice looking at a lot of possible acquisitions in existing and new markets (SFR, Group Voo)
- SPR GY : Axel Springer in Talks to Buy Immowelt, Focus Reports
- AZA IM : Etihad, Alitalia Enter Final Phase of Due Diligence Process
- BELG BB : Belgacom SA Unit Proximus to roll out 4G over the next 6-months
- BMPS IM : Paschi Must Raise Cash by End of Year, Almunia Tells Repubblica
- BMPS IM : BMPS controlling shareholder has two consortia bidding for 33.5% stake
- BMW GY : BMW Weighs Cutting Number of Mini Brand Models to 4-5, WiWo
- EN FP : Bouygues, Vivendi’s SFR to Share Part of Mobile Networks
- BT/ LN : BT Group pension shortfall rises to £7.3bn (31/12) from £6.7bn (30/09)
- CBK GY : Commerzbank nearing sale of >Eu4b spanish mortgages - Wiwo
- DBK GY : Deutsche Bank Doesn’t Plan Capital Increase, FAZ Reports
- DEP GY : Depfa receives binding offers of up to EUR 300m
- DFS : U.K. Retailer DFS Plans GBP1b IPO This Yr, Sky Reports
- DTE GY : Antitrust officials deliver blow to Sprint/T-Mobile deal hopes
- DTE GY : EE & Three have struck a network-sharing deal for next rollout of superfast mobile broadband
- ENG SM : Enagas Agrees to Buy 22.4% of Peru’s TGP for $491 Million
- ERICB SS : BArrons +ve on Ericsson, agreement with Samsung, see 25% in next 12 months
- F IM : Fiat to Present Small Jeep SUV at Geneva Car Show: Reuters
- FORMULA ONE : Liberty, Discovery May Buy 49% of Formula One From CVC: N.Y.Post
- OGZD LI : Ukraine Owes $3.35 Billion to Gazprom in Gas Payments: Vedomosti
- GSK LN : Expected to announce up to 10 new drugs to move into late-stage trials
- ISP IM : Intesa Sanpaolo Said to be working on plans to set up an internal "bad bank" that would contain €55B in non-performing loans ahead of the ECB stress tests
- MRK US : Merck Gets Buyout Interest for Consumer Health Unit: Reuters
- OERL SW : Oerlikon has finance for more buys following Sulzer Metco acquisition
- OERL SW : Oerlikon could soon consider textiles machinery unit sale (CHF1.1b sale)
- ORA FP : Orange SA Discloses that on Jan 16th 800K customers had their personal data accessed by hackers
- PAH3 GY : Porsche, Piech Sued for EU1.8b by Hedge Funds Over Volkswagen
- RBS LN : RBS Said to Be Queried by BOE About Capital Position: Telegraph
- RDSA NA : Shell’s Australian Assets Draw Bids Over A$3b: AFR
- RNO FP : CEO Ghosn: Renault and Nissan will stay separate but continue to benefit from synergies
- RWE GY : RWE Seeks AGM Approval for Option to Raise Capital, DLF Reports
- SAGA : Goldman, Citi Said Working on Saga Group Ltd. IPO: LBO Wire Link
- SCHP VX : Schindler Considering Selling Hyundai Elevator Shrs, opposed to hyundai new shares sale plan
- SIE GY : Nine Delayed Siemens ICE Trains to Start Operating in 2016: Welt
- SNE US : Sony Corp Sony, Lenovo said to be in consider JV opportunities abroad , denied deal on Vaio unit
- GLE FP : to expand bond trading business in US & Asia, to add 150 people to this business
- TKA AV : Austria paves way for Slim Telekom Austria takeover
- TIT IM : Telecom Italia Shouldn’t Sell Tim Brazil, Fossati Tells MF
- UBIS LN : United Biscuits seeks to revitalise McVitie’s brand ahead of IPO (PAI & Blackstone sellers)
- UBSN VX : UBS to Cut Pension Plans for U.S. Citizens in Switzerland: NZZ
- VIE FP : Veolia Wins EU925M Contract From Novartis, Le Figaro Says ( water, waste & energy)
- VIV FP : Bouygues, Vivendi’s SFR to Share Part of Mobile Networks

FT : EE and Three cost-sharing spurs 4G drive

EE and Three cost-sharing spurs 4G drive

EE and Three have struck a network-sharing deal for the next stage of the rollout of superfast mobile broadband, with the British groups together set to invest a further £1bn to complete their telecoms infrastructure investment.
The deal will accelerate the rollout of 4G networks in the UK, as well as bringing down the cost for the two groups, and revises the terms of a prior agreement on existing network infrastructure. Three originally shared networks with T-Mobile, which continued after the company was merged with Orange in 2010 to form EE.

EE and Three, the largest and smallest mobile operators in the UK respectively, have agreed to build the next part of their basic 4G networks together, including sharing mast infrastructure and transmission costs between the masts and the main national networks.
However, the new deal allows greater flexibility for the two groups to create differences in the quality and coverage of 4G, with EE in particular keen to build on an advantage in its ultra fast mobile services having reached the market first with 4G last year. People close to EE said it was seen by the group as creating a greater separation between the two networks, which have been linked more closely together with similar coverage.
The two companies have different 4G plans, unlike under the previous agreement which linked the pace of network investment. The antennas, spectrum and the core network will also be different for the two groups.
EE’s total investment in building a 4G network will amount to about £1.4bn. It has already upgraded large parts of the network using its own money, but the costs will now be shared with Three, which has committed £500m to network investment in the next three years.
The deal marks the beginning of Three’s main 4G investment, although EE is far along its own plans.
EE will offer 4G services to close to 70 per cent of the British population this month, while Three wants to reach 50 cities by the end of 2014 and 98 per cent coverage by the end of 2015. All customers of Three will be transferred to a 4G contract by the end of the quarter, even if they do not live in areas yet covered with the necessary infrastructure.
Rapid network coverage of 4G has not so far been prioritised by Three, which has committed to giving the services away for free as part of its mobile tariffs. EE, however, is charging a premium for additional 4G services.
David Dyson, chief executive of Three, said the company could afford to wait until more customers wanted superfast mobile broadband.
Mr Dyson said: “Beyond two years, apps and services will develop to make 4G more relevant. Right now, a 3G network can provide most of the service for most customers.”

WSJ : Rate Decision to Drive Yellen's Early Agenda (Hilsenrath)

Rate Decision to Drive Yellen's Early Agenda
Understanding Falling Unemployment Will Drive Yellen' s Early Agenda

In three years as second-in-command at the Federal Reserve, Janet Yellen worried continuously about high U.S. unemployment and pushed for policies to bring it down. After she is sworn in as Fed chairwoman Monday a new question will almost immediately crowd her agenda: Why is unemployment falling so fast and what, if anything, should the central bank do about it?

The jobless rate was 6.7% in December and the Labor Department will release the January figure on Friday. Fed officials have said since December 2012 they wouldn't consider raising short-term interest rates from near zero until joblessnes fell to at least 6.5%.

More recently, they have said they will keep rates low "well past" that point as they weigh other indicators the labor market remains weak. This suggests rate increases won't be coming soon even if joblessness were to touch 6.5% in Friday's report.

Among Ms. Yellen's most critical decisions is when to start lifting interest rates. If she and her colleagues wait too long, they could fuel high inflation or financial bubbles; if they move too soon, they could damp a recovery that is just gaining steam.

Key to that decision is making sense of the falling unemployment rate. She and other Fed officials worry it masks large pockets of stress still plaguing the labor market, including millions of people who want work but aren't looking anymore and therefore are no longer counted as unemployed.

"The U.S. labor market is incredibly complicated and trying to summarize it with one number is hard," says David Stockton, the former head of the Fed's research division. "They got themselves into a situation where they are using the unemployment rate but they see a considerable number of reasons why they believe it is not a sufficient statistic."

The fast descent in the jobless rate has caught Fed officials off guard. A year ago they didn't see it getting to 6.5% until 2015. As recently as June, they didn't see it reaching this point until sometime later this year.

A rule of thumb in economics known as Okun's Law suggests the jobless rate should fall a half percentage point for every percentage point the economy grows above its long-run trend rate. By that rule of thumb, the unemployment rate shouldn't have fallen much in an unusually anemic economic recovery. Instead it is down more than three percentage points from the recent peak.

One reason for the drop is an exodus of millions of workers from the labor force. In June 2009, when the recovery started, 81 million Americans said they weren't in the labor force, which means they weren't employed or actively looking for work, according to the government's labor force surveys. In December that number hit 92 million.

People are leaving the labor force for different reasons— they're retiring, going back to school, joining disability rolls, giving up looking for jobs or doing other things—reducing the number of people counted as unemployed.

The trend raises hard-to-answer questions for the Fed. Will some of these people come back to work when the economy improves or have they left permanently? Do these shifts mean there is less slack in labor markets—workers available to take jobs—than they realized, or is the slack still out there, hidden in these numbers?

Ms. Yellen and other Fed officials equate slack with low wages and low inflation. If it is receding more quickly than they thought, rate increases might be needed sooner than planned. But they see many signs that the job market is still weak.

Nearly eight million people have part-time jobs but want full-time work. Another 2.4 million say they want jobs but aren't looking.

When taking into account these people and other "marginally attached" workers, the jobless rate is 13.1%.

Behind the numbers are people like Mialien Mack, 40, of Atlanta, Georgia. She was laid off in May from her marketing job in the corporate office of a convenience store chain in Atlanta after nearly 11 years with the company. She recently faced the expiration of her $330 per week of unemployment benefits, which has shifted her thinking about her job search.

"It's making me think, should I consider less money?" In her previous jobs she had been making the equivalent of about $25 an hour. Now she is contemplating positions that would pay half that. "Twelve-fifty is still not a livable wage for an adult with a child," she said. "However, is it a foot in the door?"

Downward pressure on wages is one of the big factors in the Fed's thinking about the jobless rate. So far, the falling unemployment rate has not fueled stronger wage gains or high inflation.

"Wage growth has been weak or non-existent in real terms over the last several years," Ms. Yellen said in her November confirmation hearing. Total compensation of workers, including benefits and wages, in the fourth quarter was up 2% from a year earlier, about the same as through the entire recovery, the Labor Department reported Friday. The Fed's preferred measure of consumer prices was up 1.2% in December from a year earlier.

>>> Former senior economist at Fitch, Charlene Chu, warns about the rising dange

Former senior economist at Fitch, Charlene Chu, warns about the rising danger of shadow banking in China - SMH
- Says: "One of the reasons why the situation in China has been so stable up to this point is that, unlike many emerging markets, there is very, very little reliance on foreign funding. As that changes, it obviously increases their vulnerability to swings in foreign investor appetite... It is very hard to work out the exposures of individual banks to the Chinese financial system, but it seems to us there are some very large numbers on some of the banks balance sheets. "

FT : Europe will feel the pain of emerging markets

Europe will feel the pain of emerging markets

The last thing the global economy needs is a resurgence of the European debt crisis

So much for “crisis over”. After the US subprime meltdown and the explosion of eurozone sovereign debt yields, we are now confronting a classic emerging market currency crisis with possible repercussions in other parts of the global economy.
In Turkey, a reversal of capital flows in the second half of last year led to a gradual fall in the exchange rate against the dollar and the euro. When the Turkish lira started to collapse, the central bank responded with steep increases in various official interest rates.

After a brief rally the currency resumed its decline. Turkey, once hailed as a leading high-growth economy, now has a weak currency and high interest rates. The looming cardiac arrest of the economy comes in a year of local and presidential elections and possibly a general election as well. Fears of political instability are feeding back to the currency markets.
Currency weakness and inflation fears have also hit Argentina and South Africa. The turbulence is not – or at least not yet – of the scale of the great currency crises of the 1990s. But it is already having a global impact. As always the US is relatively robust to global shocks, up to a point – not so Europe, least of all the eurozone.
Start with the direct effect of the Turkish crisis on Greece and Cyprus. The magnitude is not that great on a global scale, but significant for the two countries. Their main industry – tourism – is competing head-on with Turkey. The Greeks and Cypriots have gone through incredible pains to improve their competitive position through wage and price cuts. The recovery in tourism is one of the few bright spots in their still depressed economies. The devaluation of the Turkish lira has put paid to all of this. Any holiday-maker headed for the eastern Mediterranean will find Turkey a lot cheaper. It is a game Greece and Cyprus cannot win.
The reason is, of course, that they are stuck with a strengthening euro. The euro’s real effective exchange rate – trade-weighted against all other currencies after taking account of inflation – rose 1.7 per cent in December, according to data from Bank for International Settlements. It probably went up further in January. For an economy on the brink of deflation, a currency crisis next door is the last thing that you want to happen. And this is not just a problem for Greece and Cyprus but for the eurozone as a whole.
For the eurozone as a whole, the main problem is not trade because it has a moderately large trade surplus. Instead, the problem is the impact on the price level. Eurostat, the EU’s statistics office, estimates that core inflation was 0.8 per cent in January.
I like to focus on core inflation because this is the measure that excludes volatile items such as energy and foods, and tends to be stable. The core rate has been fluctuating in a narrow band around the January level for the past four months. In other words, it has become unpleasantly sticky at a level that is way below the European Central Bank’s inflation target.
At 0.8 per cent we are not far from outright deflation. A single large shock may be all that is needed. What is happening in Turkey and Argentina may constitute such a shock. And I have not even begun to talk about the possible consequences of shifting economic policy in China.
Mario Draghi, president of the ECB, promised last month to ease monetary policy if inflation ended lower than expected. That condition is now fulfilled, so I would expect him and his governing council to make good on this promise.
But another smallish rate cut is not going to be enough. Monetary policy has many direct effects, for example on the stock market, but its effects on the price level takes time. A rate cut of 0.15 percentage points could never make the difference between deflation and price stability. The ECB will have to do a lot more heavy lifting to prevent deflation. I am not sure that we will see a sufficiently forceful response. And it has already left it rather late.
What is really troubling is that allowing inflation to drop and hold at its current level has already produced a type of deflation.
As the Belgian economist Paul de Grauwe recently noted, debt deflation can occur even when official inflation rates are positive. It happens when expectations of future inflation rates are lower than they were when the debt contracts were made.
This is clearly not an intuitive result. It means that when inflation expectations fall permanently, the value of existing debt rises – even if no new debt is incurred. We do not have to get to zero inflation to find ourselves in trouble.
Few lenders and borrowers ever expected core inflation to be sticky at around 0.8 per cent. Debt deflation is dangerous in a world with an unresolved debt crisis. The longer you wait, the worse it gets.
The last thing the global economy needs at the moment is a resurgence of the European debt crisis. It is true that the global economy is going through a weak cyclical recovery. However, it is also true that everybody is vulnerable to shocks elsewhere.

FT : BT Group pension shortfall rises to £7.3bn

BT Group pension shortfall rises to £7.3bn

The shortfall in BT Group’s pension scheme rose in the fourth quarter from its level three months earlier, confounding suggestions that rising Gilt yields would prove a boon to troubled companies trying to close their deficits.
BT reported last week that the pre-tax shortfall in its scheme rose to £7.3bn as of December 31, from £6.7bn at September 30, despite strong equities markets which should have boosted assets and rising bond yields. BT attributed the rising shortfall to “market inflation expectations”, a factor which increases the cost of retirement benefits.

John Ralfe, an independent pensions adviser, said that the BT Group results were likely to be mirrored in the annual accounts of other companies because accounting rules require that liabilities be discounted at the yield available on high-quality corporate bonds, not Gilts.
The rising optimism about economic recovery, which has boosted Gilt yields, has made investors feel more confident about corporate bonds, and yields on these have risen far less than those on government securities.
“The bumper asset returns for pension schemes in 2013, with the FTSE up over 20 per cent, have been largely offset by a corresponding increase in pension liabilities,” Mr Ralfe said. Relative to Gilts, bond yields have fallen by 0.5 percentage points to stand 1 per cent over government securities. Lower discount rates give rise to bigger deficits.
“Since investment returns over the year have done little to close deficits, companies must continue the hard slog of making cash contributions,” Mr Ralfe added.
However, there is also growing evidence that UK companies are trying to take advantage of rising equities markets and rising Gilt yields to reduce the risk in their pension schemes, regardless of the effects on accounting disclosures.
With risks reduced, companies are more likely to seek an insurance company willing to take on their pension assets and liabilities, removing these from company balance sheets altogether.
The average weighting of bonds in pension schemes run by FTSE 100 companies – which account for the lion’s share of retirement debts – is now 56 per cent of total assets as of September 30. A year ago, the weighting was 50 per cent, while six years ago, it was only 36 per cent, according to a report from JLT Employee Benefits and JPMorgan/Cazenove to be released on Monday.
Charles Cowling, managing director at JLT, said that one reason companies may continue to increase bond weightings is that new accounting rules this year no longer allow them to book profits from expected returns on equities that are higher than their discount rates.
But, he added, the increased weighting is particularly significant in light of the way the relative prices of equities and bonds had moved so far this year. There had been previous occasions when bonds constituted over half of pension assets, but those had been times when it was market movements, rather than conscious asset allocation decisions, were at work.

(NYPost) 6 more weeks of weakness

6 more weeks of weakness

It’s Groundhog Day, and for those checking their shadows for clues why 2014 has been such a wintry year to make money in stocks, here are a few possible omens far from the fields of Pennsylvania:
■  Too much talk. When the president of the United States touts soaring stock prices in his State of the Union address, it’s a bell-ringer if there ever was one.
■  The Amazon effect. It’s not quite as ominous as when General Electric missed its numbers in the spring of 2008, which presaged the financial crisis. But when one of the market’s most-beloved stocks disappoints, buyers beware. The fact that Amazon and its charismatic founder, Jeff Bezos, were the subject of a glowing “60 Minutes” profile late last year only adds to the broader significance of Friday’s 11 percent plunge for the stock.
■  Deflationary fears. For all the talk of interest rates in the US going up in 2014, they have actually been marching down of late, hitting three-month lows last week. It could represent a flight to quality, but it might also represent increasing concerns about deflation. Meanwhile, emerging markets are tightening their monetary policies to try to protect their currencies. Fears of a deflationary shock are shaping up to be the surprise of 2014.
■  The Fed factor. Yes, the Fed is tapering in the post-Bernanke era, but that’s been widely telegraphed for months now. The advent of a new Fed chairperson (Janet Yellen), however, is not market-friendly. As David Rosenberg of Gluskin Sheff notes in his most recent letter to clients: Three months after a new chairperson is on the job, the market is down on average by about 3 percent.
■  Freaky Fridays and bad closes. Both were the hallmark of January trading. Typically, bad closes and down Fridays are bellwethers for more selling and volatility.
Those are just a few reasons that February will be an interesting month for investors. They may provide a few more clues to the market than Punxsutawney Phil has to offer on the weather.