FT : Pimco’s Gross set to soften style after investor criticism

Bill Gross, the embattled head of Pimco, has promised to give his portfolio managers more freedom to express dissent, as he faces mounting questions and criticism from investors, analysts and even a member of his own board of trustees.
Morningstar, the powerful mutual fund research firm whose recommendations are widely followed by retail investors, expressed concern over management turmoil at the $1.9tn bond firm, despite meeting what it called a “contemplative” Mr Gross this week.

Institutional clients and investment consultants have added Pimco to their “watch lists” of potentially troubled managers since the sudden resignation of Mr Gross’s co-chief investment officer and heir apparent, Mohamed El-Erian, in January.
Mr El-Erian’s departure was followed by headlines about infighting between the two men and about the work culture under Mr Gross, leaving Pimco fighting to defend itself in meetings with worried clients.
Eric Jacobson, Morningstar analyst, said Mr El-Erian’s departure followed those of other Pimco “senior statesmen”, including former managing director Paul McCulley, who left in 2010, and Chris Dialynas, a portfolio manager who is taking a sabbatical, and expressed concern that a slate of six newly appointed deputy chief investment officers may not be a sufficient counterweight to Mr Gross.
“Mr Gross seems very contemplative about mistakes he may have made in shaping that atmosphere in the past,” Mr Jacobson said after meetings at Pimco.
“He has speculated there may have been a lot more silence in the room when he and Mohamed were dominating the [investment] committee, because members of the group were anxious about taking positions that might upset one of them or the other.”
The disagreements with Mr El-Erian came at the same time as the performance of Mr Gross’s flagship Total Return Fund fell behind rivals last summer. With bond prices threatening to fall, investors have withdrawn money for each of the last 10 months, reducing assets by more than $46bn to $236bn.
Adding to Mr Gross’s woes, a member of the Total Return Fund’s board of trustees, William Popejoy, used an interview with the LA Times to criticise his $200m salary, his handling of the executive turmoil and reported management style. “You just can’t treat people that way and expect things to be OK,” Mr Lovejoy said.
Mr El-Erian’s departure prompted the Florida State Board of Administration (SBA), one of the largest pension funds in the US, to put Pimco on a watch list of managers about which it had concerns. Several smaller pension funds have done the same, and investment consultants have urged trustees to monitor their relationship with the firm.
“It is quite prudent any time there is senior management change that there be heightened observation,” said Ash Williams, chief investment officer of the SBA, which has $1.7bn with Pimco. “Being on a watch list does not mean imminent severance.”
Calpers, the California state retirement fund, stopped short of adding the manager to a watch list but said: “We have tremendous respect for the staff at Pimco. That being said, we are monitoring the issue and will keep our board aware of any changes.”
Pimco did not immediately respond to a request for comment, but has said in the past that it has been in regular contact with clients since the management changes. It has also taken out large newspaper ads introducing its deputy CIOs, which it calls “a constellation of stars”.
Mr Gross, who turns 70 next month, built Pimco into one of the largest fund managers in the world and earned the nickname “the bond king” through a three-decade bull run in fixed income markets.

(Jefferies) Telecom Services : French Telcos - Government Taking Sides;

Key Takeaway
As the Government and ILD (NC) both side with BYG against NUM, we show
how NUM has some limited scope to sweeten its offer for SFR. Failure to do
so risks a bleak outlook but adding more cash rapidly erodes value upside for
NUM holders. With BYG in pole position and consolidation more probable we
argue ORA offers clearest upside potential. Sensitivity analysis suggests feasible
upside at both VIV and BYG much less now (c.10%).

* BYG-ILD agreement "addresses competitive issues". Exclusive negotiations for the
sale to Free of BYG's mobile n/w and a package of spectrum could raise "up to €1.8bn",
conditional on SFR-BYG Tel completing. ILD said this morning it is "backing BYG". BYG enters
discussions with the Competition Authority in a much stronger position, able to argue that
its offer would preserve strong infrastructure-based investment.

* Government taking sides. Last week, mobile market concentration was a potentially fatal
flaw in BYG's offer for SFR. In our 5th March report we argued there could be a public interest
in not allowing a stranded BYG Tel to wither away. It was unclear whether BYG could count
on political backing to sidestep/solve competition issues. Now it seems it can with Industry
Minister Arnaud Montebourg asserting over the weekend that "competition by destruction
will not stop unless we return to three mobile operators".

* NUM must sweeten its SFR offer to remain competitive. Last week NUM described
its offer as final and said it expires at the end of this week. But with a standalone NUM ex-
SFR facing a challenging outlook, those tactics need to shift. NUM’s best chance is to make
its offer so much more amenable to VIV than the (still complicated) BYG alternative that it
is difficult for the authorities to stand in the way of the seller’s preference. To outflank BYG,
we argue NUM would need to raise the cash component of its offer from €11bn to c.€13bn,
while still offering VIV a 32% equity stake in the merged SFR-NUM. But room for manoeuvre
is tight. €13bn cash still with a €3bn NUM rights issue takes value upside for NUM s/holders
down from c.60% to 20% while post-merger leverage climbs from 3.4x to 4.4x. Increase
right issue to €4.5bn to keep leverage as before, and value upside falls close to zero.

* SFR-BYG Tel merger maths/sensitivities. BYG values SFR at a headline €19bn with
€15/ upside for BYG s/holders. With 45% of consideration in equity, the actual amount
VIV crystallises could vary materially. We illustrate sensitivity to key variables (IPO size,
divestments, remedies). With €4bn remedies, VIV consideration drops to €17.2bn (still with
the merged entity trading on a sector-average 6.0x 2014 EV/EBITDA). On the same scenario,
upside for BYG holders drops back to a (still attractive) €8 per share.

* Winners and losers. ORA can look forward to 4-to-3 in mobile and 5-to-4 in fixed. ILD has
said this morning that 2014 roaming income should not be affected by its prospective BYG
deal. Pricing outlook favourable with SFR-BYG Tel will be 2.5x geared and under pressure
to pay a dividend. ILD will be under Government scrutiny to invest. At our €12 PT, ORA
trades on 5.1x 2014 EV/EBITDA (based bottom-of-range €12.1bn EBITDA forecast). Every
0.2x increase, equates to an extra €1 FV. VIV offers modest upside albeit with some risk
around how cash proceeds get reinvested. Even assuming €17bn effective take-out value
for SFR, rump assets trade close to 6.5x 2015e EV/EBITDA. At 8.5x, VIV FV climbs to €24.
BYG faced the prospect of a chronically challenged Telecom assets without SFR. With SFR -
and even if remedies reach €4bn - our analysis suggests €8/share upside. Currently shares
trade c.€4 above 5 March close (before BYG announced its bid). NUM's growth outlook look
challenged as a standalone entity. It faces loss of c.0.4m BYG white label subs in due course.
ILD will likely experience smoother mobile deployment with site and spectrum bottlenecks
removed. Conflict with Government also potentially resolved.

(BFW) Siemens Said to Explore Sale of Microbiology Business Unit

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Siemens Said to Explore Sale of Microbiology Business Unit 2014-03-11 16:12:40.42 GMT

By Aaron Kirchfeld, David Welch, Jodi Xu and James Ludden March 11 (Bloomberg) -- Siemens has hired a bank to seek potential buyers for microbiology business, people familiar with matter say. * Could fetch $300m-$600m, according to one of the people, who asked not to be identified because talks are private * Unit supplies equipment for bacterial identification and antibiotic susceptibility testing * Investment banks also gauging private-equity interest in larger diagnostics division (rev. EU3.9b) even though Siemens hasn’t decided to sell the business or hired a bank to explore a disposal, people familiar say * Business pitched to buyout firms including Blackstone, Carlyle

Story link: {NSN N2A4YX6JTSED <go>} Link to Company News:{SIE GR <Equity> CN <GO>} Link to Company News:{BX US <Equity> CN <GO>} Link to Company News:{CG US <Equity> CN <GO>}

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

To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net

NYT : Men’s Wearhouse Nears Deal for Jos. A. Bank

Men’s Wearhouse and Jos. A. Bank are expected to announce a deal as early as Tuesday that would end months of hostilities between the two retailers, according to people briefed on the matter.

The companies and their advisers worked through the weekend and are closing in on a deal in which Men’s Wearhouse would acquire Jos. A. Bank for about $65 per share or slightly higher, these people said. That price would give Jos. A. Bank a market value of about $1.8 billion, and mark the successful completion of Men’s Wearhouse’s so-called Pac Man defense.

Jos. A. Bank in October attempted to acquire Men’s Wearhouse for $48 per share, or $2.3 billion, in a surprise takeover bid just months after George Zimmer, the Men’s Wearhouse founder, was forced out as chairman of the company.

Men’s Wearhouse swiftly rejected the offer, and was soon exploring buying the shoemaker Allen Edmonds in a deal some viewed as a defensive move.

By late October, pressure for Men’s Wearhouse to engage in deal talks was ratcheting up, with Jos. A. Bank offering to raise its bid if it gained access to Men’s Wearhouse’s books, and the hedge fund Eminence Capital called for Men’s Wearhouse to engage in talks.

But by mid-November Jos. A. Bank dropped its bid, and just weeks later, Men’s Wearhouse struck back, offering $1.5 billion for its onetime suitor and paving the way for the deal expected to be announced Tuesday.

BArrons : Bull Market Looks Good, But Beware Ides of March

Even at the ripe old age of 5, this bull has legs. But both sentiment and the calendar give reason for pause.

As the bull market celebrates its 5th birthday, let's get one thing out of the way first: Too many technical factors are lined up in favor of the bulls to warrant cashing out of the market right now. Investors, however, should be aware of a few interesting factors based on the calendar and investor attitudes.
Sunday marked the five-year anniversary of the Standard & Poor's 500's devilish 666 print and intraday low for the 2007-2009 bear market. Clearly, the stock market has come a long way since then, and while the current bull run is mature, 60-months does not make it Methuselah-like. Age alone is not a reason to sell.
March has been the home to some important turning points during the past decade and a half. Aside from the start of the current rally, it also marked the peak of the dot-com bubble in 2000 and the start of the next bull market in 2003 (see Chart 1).
Chart 1
Standard & Poor's 500
We need to clarify one point here. The low for the 2000-2002 bear market occurred in October 2002, but the start of the next bull market on the S&P 500 was March 2003. There was a transition period between the two major trends.
To be sure, three major March turns over a two-decade period is not statistically significant. But that does not mean we should dismiss the possibility of its meaning. Why? Because the last bull market peaked at exactly five years of age - from October 2002 to October 2007.
Time is one of the least understood parts of technical analysis. While most investors are familiar with the "sell in May" mantra, and many are familiar with the four-year Presidential cycle, longer patterns are more obscure. Oddities such as market inflection points occurring during the doldrums of summer are indeed out of the public eye (see Getting Technical, "Frustration Is August's Middle Name", Aug. 24, 2005).
There is another part of technical analysis at play here, too. Sentiment, as measured by investor surveys such as Investors Intelligence or simply anecdotal measures such as magazine covers, can help augment other analysis and give a more reliable result.
Last week, the stock market sold off vigorously on the news that Russia had moved into Crimea region of Ukraine. The CBOE volatility index, also known as the VIX or the fear index, spiked higher. And the usual suspects in times of crisis -- gold, oil and Treasury bonds -- also saw gains. The previously stable, not to mention Fed-protected, world of Wall Street seemed to panic.
But the next day, when Russia said it was pulling troops back, everything reverted back to its previous state. Stocks gained back more than they lost and then the VIX settled all the way back down. Curiously, sentiment returned to its previous bullish levels as if nothing had happened. And that is what should raise a red flag, too. The Crimea situation is far from over.
This is all good background material, but the question for investors is how to recognize a real market top soon after it happens. I think we can stipulate that picking the actual top is a rare, if not impossible job.
Trading at 1,872 Monday afternoon, the S&P 500 is still above former resistance from its December and January highs at roughly 1,850 (see Chart 2). Last week's upside breakout is still in effect.
Chart 2
Standard & Poor's 500
It is also trading comfortably above its 50-day moving average, currently near 1828, so the intermediate-term trend is still up. And the major trend from November 2012 near 1,775 is also intact. This week's trading opened on a sour note, but there have not been any major breaks on the charts at this time.
At a minimum, the short-term 20-day exponentially smoothed moving average should provide the first indication that conditions are starting to deteriorate. That average is at 1,848 Monday so it, too, remains intact.
So while price action and technical indicators are in good shape, the time is actually right -- and ripe -- for an important pullback. That does not mean it will happen, but as a middle school teacher of mine used to tell us ad nauseam, "to be forewarned is to be forearmed."

(RTR) U.S. investors closely monitoring Pimco after internal strife

(Reuters) - Several U.S. institutional investors said they are closely monitoring the developments at Pimco, the world's largest bond firm, in the wake of Mohamed El-Erian's abrupt resignation as CEO and ensuing acrimony between him and co-founder Bill Gross.

The investors, including retirement systems, have formally put Pimco on "watch lists," a signal that they will keep a much closer eye its performance than usual. It could eventually lead to reductions in the amount of money they allocate to funds at the firm, whose full name is Pacific Investment Management Co and which has $1.91 trillion in assets.

"We intend to go out and meet with them over the course of the next month," said David Hunter, chief investment officer of the North Dakota State Investment Board. The board, which has about $400 million invested with Pimco, put the fund on its watch list on February 28.

Hunter said the board could ultimately decide not to make any changes to its allocation.

The California Public Employees' Retirement System, the largest U.S. pension fund, said it had not placed Pimco on a formal watch list, but it was also paying close attention to developments.

"CalPERS staff has tremendous respect for the staff at Pimco," the system said in an emailed statement. "That being said, we are monitoring the issue and will keep our board aware of the changes."

In a statement, Pimco CEO Douglas Hodge said: "We are focused on communication with our clients, and have been in regular contact with them following the recent leadership transition. They understand the changes we have taken and why, and are ready to move forward with us."

In a Tweet on Monday, Gross wrote, "No distractions here - just long term performance satisfaction - working hard as always for clients."

The closer scrutiny by state and local pension systems shows that Gross, though, may have more work to do to assuage investor concerns after El-Erian's surprise departure and reports of growing discord between the two men amid weak fund performance.

Overall, customers withdrew $41.1 billion from Pimco's flagship Total Return Fund last year, a record amount for the manager, according to investment research firm Morningstar. The fund posted another $1.6 billion in outflows in February, reducing assets to $236 billion and marking the 10th straight month of outflows.

The Total Return Fund, which Gross manages, trailed more than 70 percent of its peers in February.

Last month, a Wall Street Journal article described the worsening relationship between the two men as Pimco's performance deteriorated. Later, Gross told Reuters that El-Erian, who is due to leave the firm in less than a week, was trying to "undermine" him by talking to the Journal.

ELEVATED CONCERN

A memo from investment consultant NEPC to the City of Fresno Retirement System Joint Boards noted "an elevated level of concern" around the changes at Pimco.

During a recent on-site visit to the bond firm's offices, "it was clear that there was a profound sense of disappointment and surprise within Pimco regarding Mr. El-Erian's departure," the memo said, adding: "Mr. Gross viewed Mr. El-Erian as his successor and during the meeting he expressed a level of sadness and frustration regarding the resignation."

The Fresno systems were already weighing investing with Pimco when news of El-Erian's departure, as well as other staff changes, came out. When the city wanted reassurance on organizational questions, Pimco sent a team to the Fresno offices.

The Fresno systems are now negotiating with Pimco and expect to invest money with the firm in coming months.

"You're talking a lot of depth (of the bench). It's not driven by two people," said Stanley McDivitt, the systems' retirement administrator.

Other investors said they were not in a rush to make changes to their allocations to Pimco, which is owned by German financial services company Allianz SE.

The Florida State Board of Administration spokesman Dennis MacKee said it placed Pimco on its watch list as a routine procedure, which it followed for any firm that was undergoing management shifts.

The Florida board has about $1.7 billion in its pension fund at Pimco and about $240 million from its defined contribution plan with the firm.

"We think of our watch list as just enhanced oversight. You look a little deeper," MacKee said.

Neil Rue, a managing director at Pension Consulting Alliance, said it was too early to make any decisions about how these changes might affect Pimco's performance.

"On the fixed income front, we told our clients don't take any major action, but we need to watch this closely," Rue said.

If Pimco's style remains consistent, given Gross' strong track record over many years, there may be no changes recommended, Rue added.

R. T. Jones Capital Equities Management Inc Chief Investment Officer Steve Davis said his fund pulled out $100 million from Pimco Total Return Fund last year because of a desire to reduce duration exposure and interest rate risk, but he would consider returning to the bond giant in the future.

"Nor do we think the internal turmoil will negatively affect the performance of the fund. In fact, we don't rule out using the fund again in the future," Davis said. "We have very high respect for Bill Gross and his team at Pimco."