FT : Deutsche Wohnen investor seeks injunction to block capital increase

Deutsche Wohnen investor seeks injunction to block capital increase
Proposed deal to help seal €18bn Vonovia merger ‘unprecedented and legally questionable’, says US hedge fund

US hedge fund Davidson Kempner is seeking an injunction to block a capital increase by German residential landlord Deutsche Wohnen, saying its “sole purpose” is to help rival Vonovia overcome shareholder resistance to their proposed €18bn merger.

The proposed deal has received lacklustre support from Deutsche Wohnen shareholders. Last month, Vonovia increased its initial bid of €52 a share made in May by €1, a 17 per cent premium on the undisturbed share price. In mid-September it waived all offer conditions.

The deal would create a real estate giant owning 500,000 flats in Germany, Austria and Sweden worth almost €90bn. The companies say the tie-up would generate annual cost savings of €105m.

Deutsche Wohnen has agreed to sell its treasury stock to Vonovia and is willing to issue new shares representing roughly 5 per cent, which would be acquired by Vonovia to push the deal over the line.

Davidson Kempner, which says it holds a 3.2 per cent stake in Deutsche Wohnen, on Thursday said in a statement that the company’s pledge to issue new shares and sell them to Vonovia was “unprecedented and legally questionable” and “raises serious corporate governance concerns”.

It also pointed to a potential conflict of interest as Deutsche Wohnen chief executive Michael Zahn would become deputy CEO of the enlarged company, while finance director Philip Grosse would become the new chief financial officer.

Deutsche Wohnen dismissed the criticism. In a statement, the company said it was “legally and factually incorrect” to assert that its management was facing a conflict of interest as it was “common practice” that executives of a target company join the enlarged group.

It added that its pledge to sell treasury shares to Vonovia and launch a capital increase was in line with German law. “There is a very legitimate reason for granting these shares to Vonovia while excluding pre-emptive rights, namely the overall interest in implementing the business combination that is in the best interest of Deutsche Wohnen.”

Two of Germany’s largest long-only asset managers, holding 1.5 per cent of Deutsche Wohnen between them, also voiced their unease. “From a governance point of view, we are highly critical of the capital increase,” Ingo Speich, head of sustainability and corporate governance at Deka, told the Financial Times. “Such behaviour must not become a precedent for future M&A transactions in Germany.” 

Michael Muders, a fund manager at Union Investment, said he was “unsure if Deutsche Wohnen’s management is still acting in the interests of shareholders”. Previously, he has said that €56 per share would be an appropriate price.

He pointed to the fact that the deal had been rejected by shareholders several times. “The management does not seem to care about this,” he said, adding that it was “not intuitively clear” why a capital increase was necessary. “The debt level is low, and Deutsche Wohnen does not need cash.” 

The first offer was accepted by 47.62 per cent of Deutsche Wohnen investors In July, narrowly missing the minimum acceptance threshold of 50 per cent. Vonovia says it now controls 48.45 per cent of the target’s stock and has waived all minimum thresholds. Without Deutsche Wohnen’s capital increase, Vonovia may still struggle to become the majority owner.

Davidson Kempner accused Deutsche Wohnen’s management of severely undermining shareholder rights and “their prerogative to decide on takeover offers”.

The hedge fund filed a request for an injunction against the capital increase with Berlin’s regional court 10 days ago, according to people familiar with the matter.

The court confirmed it had received an injunction request, adding that Deutsche Wohnen had until Friday to file its legal opinion. The court is likely to determine next week whether a hearing is required or if the matter can be decided immediately.

Vonovia declined to comment. 

FT : Hedge funds reap windfall by betting on specialist commodity markets

Hedge funds reap windfall by betting on specialist commodity markets
Firms such as Man Group have gained from spiking gas prices and sharp moves in iron ore

Hedge funds that expanded into UK natural gas and German electricity have made big gains this year from the European energy crisis and sharp moves in specialist commodity markets, with one fund soaring more than two-fifths.

Man Group and Leda Braga’s Systemica Investments are among the firms whose top-performing portfolios have been well placed to profit from soaring gas prices in recent months, sparked by supply shortage fears. Natural gas prices in the UK alone have rocketed from just under 60 pence per therm at the end of April to more than 180 pence this month.

“The European power complex is one of the strongest trends I’ve seen in years, and I don’t even know if it’s over,” said Doug Greenig, a former chief risk officer at Man Group’s AHL unit who now runs London-based hedge fund Florin Court Capital.

His fund is up almost 20 per cent this year, according to a person who had seen the numbers, having profited from big moves in European electricity and gas markets as well as other markets as diverse as shipping and urea.

That performance marks the fund’s best year since Greenig overhauled it in 2017 to focus on niche areas such as cryptocurrencies and Chinese peanut kernels rather than more traditional sectors.

Most hedge funds in the so-called managed futures sector use algorithms to try to latch on to trends in mainstream bond, currency, stock and commodity futures. But the sector has swelled in size from $30bn two decades ago to more than $300bn today, according to data provider HFR.

In turn, that growth has led some managers including Florin Court to seek less crowded markets which are more likely to be driven by fundamental supply and demand in their industries.

Beyond gas prices, changing dynamics in other markets have also benefited commodity investors who have focused on less popular markets. While lumber and iron ore soared in the first half of the year, driven by supply chain bottlenecks and surging global demand as economies reopened, they have since dropped sharply. Funds have been able to profit from both the rise and fall in prices.

Another big hedge fund winner this year is Gresham Investment Management. Its ACAR fund, which trades around 100 alternative commodity markets, is up around 43 per cent, having profited from moves in European electricity and carbon credit markets, as well as coke, coking coal and iron ore in China.

“This year is fairly exceptional in terms of the strength, consistency and duration of trends” said Scott Kerson, head of systematic strategies at Gresham.

“We want to be invested in markets where underlying production and consumption decisions drive the price,” Kerson added. “We don’t want to be invested in an arms race” with other quant funds, he added, referring to his decision to be invested in smaller markets.

Man Group’s AHL unit, one of the early pioneers of quant investing in specialist markets, has also performed well. Its $4.6bn Evolution fund is up around 15 per cent this year. Its smaller Evolution Frontier fund, which trades assets such as milk, butter and African currencies, has gained around 35 per cent, according to numbers sent to investors.

Meanwhile, Systematica’s $4.8bn Alternative Markets fund is up 22.7 per cent, said a person who had seen the numbers, with gains also coming from EU carbon credits and Chinese iron ore. Aspect’s Alternative Markets fund has gained 20 per cent, and has also profited from commodities such as German electricity and lumber. 

Betting on less actively traded markets can be costly and complicated, particularly in relation to shipping.

However, charter rates have soared with surging commodity prices and rebounding economies. That has helped funds such as Paralos Asset Management, a shipping specialist, up more than 60 per cent this year.

“There are supply chain changes, and the world in general is moving to some new equilibrium,” said Florin Court’s Greenig, pointing to “amazing” trends in charter prices on routes such as from the Middle East to China.

“Shipping has been crazy,” he said.

FT : Hotels fear hard winter without the business traveller

Hotels fear hard winter without the business traveller
Summer bookings surged in leisure locations but city sites continue to struggle

Pent-up demand gave hotels in leisure destinations a late summer boom this year, but it could be a harsh winter for city-based lodgings.

Hotels and holiday cottages in regional destinations such as Cornwall in the UK or the Alps in Europe enjoyed record levels of demand as restrictions on international travel coupled with steep testing costs pushed consumers to book domestic vacations.

Accommodation in northern European countries that traditionally see many people head to the shores of the Mediterranean during the summer have been the biggest beneficiaries of closed borders.

“We have never been in a position where so much is dependent on government regulations and travel restrictions,” said Amar Lalvani, chief executive of The Standard, a group of nine boutique hotels.

The UK sent 16m holidaymakers to Spain and 7.1m to France in 2019, according to Abta, the travel association. When travel restrictions cut confidence in going abroad earlier in the summer, flocks of British tourists opted for staycations instead.

Occupancy at UK hotels reached 71 per cent in August, compared to 63 per cent in Spain and 60 per cent in France, though they remain down on 2019 levels.

City centres dragged down the average occupancy rates this year as workers stayed away and the number of international sightseers remained low.


But now the holidays are over and questions loom as to whether business travel — a staple for hotels during the winter months — will return to fill the books. Companies have been slower than expected to recall workers to offices amid a spread of the more infectious Delta variant.

Hotel companies have reported that several group bookings for the autumn have been pushed into next year.

Robin Rossmann, managing director at the industry data provider STR, described it as “an autumn hangover from a pretty stellar summer for hotels that had any kind of leisure appeal”.

“Generally nobody really knows [if business travel will return], other than there’s nothing on the books at the moment,” he said.

The dual pressures of companies wounded by the pandemic reining in costs and environmental concerns could result in a long term, perhaps permanent, dip in corporate travel.

Both Airbnb and Marriott, the world’s largest hotel group, have signalled that they believe the future lies in a blending of work and leisure trips.

“Zoom may not be helpful for business travel but it’s good for family travel, and longer weekends that blend work and leisure, made possible by part-time remote work, also will be part of the future,” Airbnb said this week.

It noted that in the US, the number of longer weekend trips had increased with three- and four-day weekend bookings in the second quarter of this year up 70 per cent on the same period in 2019.


Francis Davidson, chief executive of Sonder, an apartment-hotel company, said that remote workers “will counterbalance some of the drop in business travel [but] there is no doubt that travel will be different”.

For hotels, there has been a better recovery in daily rates than occupancy. Even in UK city centres such as Liverpool and Manchester, 80 per cent of hotels are selling rooms at rates above 2019 levels, thanks to the boost to domestic demand.

There has also been less group travel and therefore fewer group discounts to quell the rise in prices.

The increase has been less marked in countries such as France and Spain, however, which are much more reliant on inbound demand. Rates in Cornwall during August, for example, increased 66 per cent compared to the same month in 2019. In Spain’s Malaga province, however, they fell 1.1 per cent.

“It’s the northern European markets that have driven that rate recovery,” Rossmann said.

Maintaining those rates will be crucial as hotels face up to spiralling cost pressures: food price inflation, increasing energy bills and the tapering of government support.

Acute staff shortages across the industry have already caused several hotels to cut capacity and reduce food and laundry services.


But developers still believe in the future for hotels.

STR said that the number of hotel projects under way this month in Europe is 13 per cent below the same point in 2019, but increasing as construction opens up.

Rossmann estimated that 2021 and 2022 would be record-breaking years for hotel openings, although some of that can be attributed to projects put on hold during lockdowns.

According to a survey of 50 hotel groups in the UK by the commercial property agency Fleurets, 44 per cent plan to increase capital investment into their hotels this year, while almost a third are planning new acquisitions.

FT : Daimler teams up with Stellantis to build European gigafactories

Daimler teams up with Stellantis to build European gigafactories
Automaker to take 33% equity stake in joint venture backed by French and German governments

Daimler is to join forces with competitor Stellantis and energy company TotalEnergies to develop and produce battery cells for electric cars in Europe.

The German luxury automaker said on Friday that it would take a 33 per cent equity stake in Automotive Cells Company, a joint venture set up by Stellantis and TotalEnergies last year, which plans to build gigafactories in France and Germany.

ACC has already secured €1.3bn in financial support from the French and German governments. Daimler said it would invest a further “mid-three-digit-million euros” next year in the project, on which it will hold two board seats.

Additional funding from Daimler over the next few years will not exceed €1bn, the carmaker added, but it said the entire project would require more than €7bn in investment to reach “a capacity of at least 120 gigawatt hours in Europe” by the end of the decade.

“This new partnership allows us to secure supply, to take advantage of economies of scale and to provide our customers with superior battery technology,” said Daimler chief executive Ola Kallenius.

Mercedes-Benz, which is owned by Daimler, said this year that it would be prepared to phase out internal combustion engine models by the end of the decade, “wherever market conditions allow”.

The Stuttgart-based manufacturer has rolled out electric versions of its flagship S-Class saloon and E-Class models in recent months, and plans to offer emissions-free versions of the rest of its line-up. Smart, the brand Daimler co-owns with China’s Geely, is already fully electric.

In order to produce its electric vehicles, Mercedes-Benz would need at least 200GWh in battery capacity, the brand said in July when it announced it would build eight gigafactories worldwide: one in the US, four in Europe and three in Asia.

ACC said last year that it would build gigafactories in Douvrin, France and Kaiserslautern, Germany, close to the site occupied by Stellantis brand Opel, to “ensure industrial independence in Europe”.

The plants will reach a cumulative capacity of 48GWh each by 2030, enough for 1m electric vehicles to be produced a year, the company said.

Daimler already buys batteries from third parties such as China’s CATL and has a stake in Chinese battery-cell manufacturer Farasis, which aims to build a plant in Germany.

The German automaker denied media reports that early batteries made by Farasis — whose shares have lagged behind others in the sector this year — had proved to be below standard, adding that the battery maker “remains a key partner for Mercedes-Benz”.

>>> Stoxx 600 Pre-Market Indications

  • Rio Tinto (RIO1 TH) +1.1%
  • Just Eat Takeaway (T5W TH) +0.7%
  • TeamViewer (TMV TH) +0.7%
    • TeamViewer Rated New Buy at Bankhaus Metzler; PT 35 euros
  • Prosus (1TY TH) +0.5%
  • Air Liquide (AIL TH) +0.5%
  • Stellantis (8TI TH) +0.5%
    • Mercedes Joins Stellantis in $8.2 Billion European Battery Pact
  • Continental (CON TH) +0.5%
  • Kering (PPX TH) +0.4%
  • LVMH (MOH TH) +0.4%
  • Universal Music Group (0VD TH) +0.4%
  • Deutsche Boerse (DB1 TH) -0.6%
  • TUI (TUI1 TH) -0.6%
  • Thyssenkrupp (TKA TH) -0.7%
  • Rheinmetall (RHM TH) -0.7%
  • Rolls-Royce (RRU TH) -1.1%
  • OMV (OMV TH) -1.2%
  • Adidas (ADS TH) -1.7%
    • Watch Adidas, Puma Shares After ‘Large’ Nike Guidance Cut
  • Puma (PUM TH) -2%
  • Terna (UEI TH) -3.3%
    • Italy Approves $3.5 Billion Package to Curb Energy Prices (2)
  • Bawag (0B2 TH) -3.5%
    • Bawag Offering by Holder Prices at EU50.5/Share: Terms

>>> TradeGate Pre-Market Indications

DAX:
  • Allianz (ALV TH) +0.6%
  • Siemens Healthineers (SHL TH) +0.4%
  • Daimler (DAI TH) -0.4%
    • Mercedes Joins Stellantis in $8.2 Billion European Battery Pact
  • Deutsche Bank (DBK TH) -0.4%
    • Why ‘Cum-Ex’ Tax Dodge Casts Shadow on Global Banks: QuickTake
  • E.On (EOAN TH) -0.5%
  • Adidas (ADS TH) -1.5%
  • Puma (PUM TH) -2.1%
    • Watch Adidas, Puma Shares After ‘Large’ Nike Guidance Cut
MDAX:
  • Thyssenkrupp (TKA TH) -0.4%
  • Telefonica Deutschland (O2D TH) -0.5%
SDAX:
  • Nordex (NDX1 TH) +0.8%
  • LPKF (LPK TH) +0.8%
  • Metro (B4B TH) -0.4%
  • flatexDEGIRO (FTK TH) -0.6%

>>> What to look at today - 24th of September 2021

Stocks rose Friday and sovereign bond yieldsclimbed on optimism about the economic outlook, though uncertainty lingers about potential risks from the debt crisis at China Evergrande Group.
Shares jumped in Japan and were steady in Hong Kong and China, where Evergrande has yet to make a statement on a dollar-bond interest payment that was due Thursday. Global market uneaseabout contagion emanating from Evergrande has ebbed, but it remains unclear if Beijing plans to manage the fallout from any potential default at the word’s most-indebted developer.
U.S futures fluctuated after the S&P 500’s biggest two-day gain since July. The Wall Street advance was led by economically-sensitive sectors like energy and financials, as investors embraced the view that a looming reduction in Federal Reserve stimulus shows confidence in the recovery from the pandemic. The dollar ticked up and oil held around $73 a barrel.
The prospect of tighter monetary policy spurred a global selloff in bonds. Long-term Treasury yields have surged the most in 18 months as traders brought forward expectations for the first Fed rate hike to the end of 2022. The Bank of England opened the door to a 2021 rate increase, pushing down 10-year gilts. Yields also jumped on sovereign debt in Australia and New Zealand. 
US After Hours NKE -3.8% falls on earnings, weak guidance; COST +0.6% ticks higher on earnings; PRGS +6.8% up nicely on big beat/M&A news

Nikkei +2.08% Hang Seng +0.00% CSI +0.38% Shanghai -0.33% Shenzen -0.16%

Eur$ 1.174 CNH 6.4598 CNY 6.4596 JPY 110.49 GBP 1.3717 CHF 0.9250 RUB 72.7760 TRY 8.7788 WTI$ 73.47 +0.235 Gold 1,754.88 +0.69% BTC 44,355 -0.79% ETH 3,85 -1.81%

S&P -0.02% Nasdaq -0.13% EuroStoxx +0.02% FTSE +0.02% Dax +0.03% SMI -0.02%

Macro :
- Lagarde Says Many Causes of Higher Prices Are Temporary: CNBC
- Evergrande USD Bondholders Yet to Receive Interest Due Thurs (1)

Keep an eye on :
- ADS GY : Nike Slides After 1Q Revenue Misses Consensus Estimate: Snapshot -->-3.8% in After Hours
- AIR FP : ArianeGroup Plans to Cut 600 Jobs in 2022: AFP Cites Unions
- AI FP : *CO2 SUPPLY CHALLENGES ARE LIMITED TO U.K. MARKET: AIR LIQUIDE
- ARB LN : *ARGO BLOCKCHAIN OPENS AT $15.01, IPO AT $15
- BABA US : Alibaba Seeks to Exit Media Firm After Beijing’s Scrutiny
- BAYN GY : Monsanto Sued for PCB Contamination Damage in Delaware
- BG AV : Bawag Group Share Sale by GoldenTree Books Is Covered: Terms
- BNTX US : CDC Panel Backs Pfizer Booster Dose for People Ages 65 and Older
- BPOST BB : Bpost Picks Ritchey, Crowe to Head U.S. Unit Radial Immediately
- DAI GY : Mercedes Joins Stellantis in $8.2 Billion European Battery Pact
- DHER GY : Delivery Hero Is Said to Invest in Gorillas at $3 Billion Value
- DUFN SW : Dufry Sees Positive Impact From Spain’s New Concession Fees Law
- EXS SS : Exsitec Holding Offering by Holders Prices at SEK176/Share
- G IM : Mediobanca Builds Generali Clout as Leadership Battle Heats Up
- GLEN LN : Glencore May Sell Cobar Copper Mine After Receiving Interest
- HUMBLE SS : Humble Group Offering of Shares Prices at SEK23.5/Share
- HUMBLE SS : Humble Buys Solent in SEK1.38b Deal, Lines Up 6 More Takeovers
- MB IM : Mediobanca Builds Generali Clout as Leadership Battle Heats Up
- MITRA BB : Mithra Pharma 1H Cash And Cash Equivalents EU55.8M
- NEON FP : Neoen to Sell Its Stakes in Two Solar Power Plants in France
- NIBEB SS : Nibe Says Chip Shortage Good for Element Business, DI Reports
- RNO FP : Carlos Ghosn Can’t Wait to Sell Renault Shares After Nissan Exit
- ROG SW : Roche Data Show Evrysdi Maintained Ability to Swallow
- SAN FP : Sanofi Sees Between 0% and -1% 3Q Forex Impact on Sales, EPS
- SGO FP : Saint-Gobain Names Noemie Chocat Strategy Head From Oct. 1
- SQI FP : DBAY Advisors Plans Offer for Remaining Sqli Shrs at EU30/Shr
- TMO US : Thermo Fisher Scientific Authorizes $3B of Share Repurchases
- DG FP : Vinci Completes German Road Financing, Investment EU500M

>>> Europe : Brokers Upgrades & Downgrades - 24th of September 2021

>>> Up
* Aegean Air Raised to Buy at Wood & Company; PT 6 euros
* Autoliv Raised to Equal-Weight at Morgan Stanley; PT $85
* Centamin Raised to Outperform at BMO; PT 140 pence
* LondonMetric Raised to Buy at Citi; PT 299 pence
* Phoenix Group Raised to Hold at Peel Hunt; PT 690 pence

>>> Down
* Geberit Cut to Underperform at Exane; PT 750 Swiss francs
* LVMH Cut to Hold at Erste Group
* Rockwool Cut to Underperform at Exane; PT 3,150 kroner
* Schroder UK Public Private Cut to Hold at Investec
* Volvo Cut to Hold at Stifel; PT 210 kronor


>>> Initiation
* Feedback Rated New Buy at Panmure Gordon; PT 1.50 pence

>>> Call

>>> US After Hours Summary: NKE -3.8% falls on earnings, weak guidance; COST +0.

After Hours Summary: NKE -3.8% falls on earnings, weak guidance; COST +0.6% ticks higher on earnings; PRGS +6.8% up nicely on big beat/M&A news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AEHR +21.7% (issues upside guidance for Q1, raises FY22 guidance), PRGS +6.8% (also to acquire privately held Kemp for $258 mln), COST +0.6%

Companies trading higher in after hours in reaction to news: VTVT +18.6% (announces results from multiple ascending dose study evaluating HPP737 for psoriasis), GLYC +3.5% (announces publication of data from study of uproleselan in journal BLOOD), GDYN +2.4% (enters into strategic partnerships with Evinced to drive accessibility in mobile app development), FLGT +1.8% (to provide COVID-19 testing to Houston-area public schools), TMO +1% (announces $3 bln share repurchase authorization), TAST +1% (CEO to retire), LMT +0.6% (increases dividend; also authorizes repurchase of up to an additional $5 bln of stock), ERJ +0.3% (EmbraerX announces aerial agriculture partnership with Pyka), BNTX +0.1% (CDC panel endorses Pfizer booster for people 65+, according to CNBC), LOKB +0.1% (Navitas and BRUSA announce development partnership to accelerate EV adoption), AVB +0.1% (increases guidance for residential rental revenue for Same Store communities), TREB +0.1% (System1 raises guidance)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CAMP -9.1%, NKE -3.8%, AIR -2.1%, MTN -1.7%, HNI -0.2% (lowers Q3 revenue guidance)

Companies trading lower in after hours in reaction to news: MGY -1.9% (announces proposed block trade of 7.5 mln shares by EnerVest), EFTR -1.6% (stock offering), INVH -1.4% (stock offering), BLL -0.2% (announces plans to build a new US aluminum beverage packaging plant in Las Vegas), PFE -0.1% (CDC panel endorses Pfizer booster for people 65+, according to CNBC), PEB -0.1% (acquires Margaritaville Hollywood Beach Resort for $270 mln)