FT : VW’s takeover bid for Scania suffers further blow

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.

(GS) Randstad - Ipgraded to conviction Buy List

Favorable setup; up to Buy and add to the Conviction Buy List

* Source of opportunity
The risk reward for Randstad’s share price, ahead of 1Q results on April 30,
is favourable, in our view, and as such we upgrade to Buy (Neutral) and add
it to the European Conviction List. 1) The shares are the worst performing of
the staffers year to date, down 13% vs. Adecco up 2%. 2) The valuation
multiple has compressed this year from 11.5x 2014 EV/EBITDA to 9.3x (IBES
consensus). 3) Labour market data points and employment surveys are
supportive of improving growth in Randstad’s end markets; moreover, the
GS Global Lead Indicator (GLI) recently moved into an expansion phase,
historically this has correlated with positive share price performance.

* Catalyst
We forecast €128 mn of EBITA in 1Q, 11% above company compiled
consensus of €115 mn. Largely due to our gross margin being 20 bp higher
than consensus at 18.2%, reflecting further benefits from the French low
wage subsidy and a positive mix impact from improving permanent staffing
growth. A 10 basis point change in gross margin has a 3% to 4% impact on
our EBITA. Our FY14 and FY15 EPS forecasts are 10% and 12% above
consensus. A beat at 1Q would contrast the miss at 4Q which led, in our
view to the weak share price performance.

* Valuation
Our 12 month price target of €56 (was €53) is derived from a target
EV/EBITDA multiple of 10x applied to our 2015 forecasts. There is no change
in our methodology, though we change our estimates to reflect our more
positive view on gross margins, which drives the increase to our price
target. The shares trade on 14.3x and 11.4x FY14 and FY15 P/E for 26% EPS
CAGR (2013-2016).

* Key risks
Risks include overestimating the positive impacts on the gross margin, SGA
cost increases outstripping top line growth.

>>> US Gapping up

Gapping up

In reaction to strong earnings/guidance: SMCI +17.2%, SKX +13.9%, SGOC +13.5% (thinly traded), XOOM +12.9%, FDML +9%, (light volume), ILMN +8.8%, NEO +8.7%, (light volume, also extends/amends Strategic Laboratory Services Agreement with Florida Cancer Specialists), SWKS +8.4%, ETH +8%, (light volume), SANM +7.9%, MANH +5.7%, SVU +5.8% (ticking higher), DPS +4.9%, GILD +3.9%, MAN +3.5%, (light volume), HERO +3.4%, (light volume), JAKK +3.1%, BA +2.5%, DAL +2.3%, YUM +2%, NSC +1.6%, PKG +1.5% (light volume), CVA +1.4% (light volume), DOW +1.2%, WRB +1.1% (light volume), HTS +1%.

Select metals/mining stocks trading higher: GOLD +0.7%, GDX +0.5%, NEM +0.4% (ongoing ABX merger speculation), GLD +0.2%.

European pharma/drug names trading higher: AZN +1.7% , NVS +1.6%, GSK +0.7% (upgraded to Buy from Hold at Argus)

Other news: ATRM +21.5% (Aetrium announces value-enhancing transaction for its test handler business), SPPI +11% (Spectrum Pharma's Pivotal Trial of Captisol-Enabled (Propylene Glycol-Free) Melphalan Meets Primary Endpoint; co expects to file an NDA in Q3 and plans to launch this drug with its existing hematology/oncology sales force next year pending approval), BIOD +4.4% (announces collaboration agreement with HEC Pharm for development of Ultra-Rapid-Acting Insulin Aspart Formulation), UNIS +3.4% (UNS Energy responds to Blog article), UQM +2.5% (UQM Technologies and Kinetics Drive Solutions Collaborate on Electric Drive Systems for All-Electric Commercial Vehicles), YELP +2.5% (positive MadMoney mention), ALU +2% (still checking), YNDX+1.9% (still checking), TQNT +0.9% (following SWKS results), CHFN +0.8% ( completed its initial stock buyback program and initiated a new repurchase program under which co may repurchase up to 2,250,000 shares of its common stock), AGN +0.8% (Allergan adopts one-year Stockholder Rights Plan; upgraded to Overweight from Neutral at JPMorgan), HAL +0.5% (positive MadMoney mention), SUNE +0.4% (Closes CAD115 Million In Financing To Build 33 MW Of Utility Solar Projects In Ontario, Canada).

Analyst comments: ATHN +4.3% (upgraded to Overweight from Equal Weight at Morgan Stanley), SPWR +2.8% (upgraded to Buy from Underperform at BofA/Merrill), VSI +1.3% (Vitamin Shoppe upgraded to Buy from Neutral at Sterne Agee), MDSO +0.7% ( upgraded to Buy from Neutral at B. Riley), ETFC +0.5% (upgraded to Outperform from Market Perform at Wells Fargo), SSYS +0.4% (3D printing mentioned positively in Citigroup Q1 preview; continues to view SSYS as top pick)

>>> US Gapping down

Gapping down

In reaction to disappointing earnings/guidance: ZHNE -19.5%, CREE -10.5%, ISRG -9.1%, UIS -5.2%, VMW -4.9%, CBST -4.7%, (light volume), ARMH -4.2%, EMC -4.1%, TSS -4.1%, (light volume), ERIC -3.8%, ZIXI -3.4%, (light volume), IRBT -2.9%, HLIT -2.9% (light volume), CNI -2.7%, IGT -2.6%, AMGN -2.3%, T -2.2%, DFS -1.7%, JNPR -1.1%, RAI -1%, PG -1.0%.

Battery names lower following PLUG offering news: PLUG -7.9% (intends to offer and sell common stock in an underwritten public offering; files mixed securities shelf offering ), FCEL -3.5%, BLDP -2.5%, TSLA -1.2%.

Select oil/gas related names showing early modest weakness: E -0.8%, BP -0.7% (agreed to sell interests in four BP-operated oilfields on the North Slope of Alaska to Hilcorp ), RIG -0.5% .

Other news: SRPT -3.8% (announces proposed $100 mln public offering of common stock ), ICLD -3% (files for ~1.71 mln share common stock offering by selling stockholders), MCC -2.9% (announces offering of 6 mln shares of common stock, CHL -2.2% (still checking), HASI -1.9% (commencing a public offering of 5 mln shares of common stock), BBRY -1.4% and NOK -1.2% (following T / ERIC results), DEO -1.2% (still checking).

>>> Praxair reports EPS in-line, misses on revs; guides Q2 EPS below consensus;

Praxair reports EPS in-line, misses on revs; guides Q2 EPS below consensus; raises FY14 EPS slightly, raises low end of FY14 rev

Reports Q1 (Mar) earnings of $1.51 per share, in-line with the Capital IQ Consensus Estimate consensus of $1.51; revenues rose 4.8% year/year to $3.03 bln vs the $3.06 bln consensus.
  • Organic sales grew 6% driven by higher on-site volumes from new project start-ups primarily in North America and Asia. By end-market, sales growth was strongest for energy, chemicals, and food and beverage customers, as compared to the prior-year quarter. Acquisitions contributed 2% growth in the quarter.
Co issues downside guidance for Q2, sees EPS of $1.55-1.60 vs. $1.62 Capital IQ Consensus Estimate.

Co issues in-line guidance for FY14, narrows EPS to $6.30-6.50 from $6.25-6.55 vs. $6.46 Capital IQ Consensus Estimate; sees FY14 revs of $12.4-12.8 bln (from $12.3-12.8 bln) vs. $12.62 bln Capital IQ Consensus Estimate.

"Praxair delivered solid results in the first quarter with sales growth of 9% and operating profit growth of 12%, excluding the impact of currency headwinds. Organic growth of 6% reflected contributions from new projects in North America and Asia, as well as modest volume growth in our South America, Europe and Surface Technologies operating segments. Praxair's relentless focus on achieving productivity benefits and higher price to offset cost inflation produced strong operating leverage and an operating margin of 22.3%. We expect base volumes for the remainder of 2014 to continue to reflect modest growth in-line with the current macro-economic environment. Through continued operational excellence, project execution and financial discipline, we expect to continue to deliver increasing cash flow and earnings per share. We expect contribution from new projects and acquisitions to increase return on capital in the second half of the year."