A bling takeover row may end with a face-saving truce. French behemoth LVMH and its target Tiffany are negotiating a price cut on the U.S. jeweler’s pre-pandemic $16 billion price tag, Reuters reported on Tuesday. A deal at around $130 a share, above yesterday’s close around $123, may get Tiffany to the table. It would save French tycoon Bernard Arnault some $600 million – hardly a massive amount. But settling for a discount, albeit small, could offer benefits to both.
For Tiffany, getting a new agreement quickly makes obvious sense. The pandemic has taken some of the sparkle off the New York-based company. Enforcing its merger contract in court, as it’s trying to do, further delays the arduous process, and there’s no guarantee it will be successful. If it pushed through the U.S. court system and failed to force LVMH to close the deal, its shares would tank. Worse, Chief Executive Alessandro Bogliolo would have to battle the fallout of Covid-19 on his own as it continues to ravage its main U.S. market.
For Arnault, obtaining a discount may be a matter of pride more than finance. The tycoon balked at Tiffany’s decision to continue to pay dividends during the virus crisis. Cutting the deal by $5 a share saves him just 4%. But he’s kicked up such a fuss – and already put his own shareholders through the uncertainty by snubbing the original $135-a-share offer – that he needs to save face.
More importantly, with the merger now clear of antitrust hurdles, a quick deal might allow LVMH to own the jeweler before Christmas and the all-important Chinese New Year. If given the chance, best for both companies to start 2021 on the right foot.
Nielsen in talks over $2.9bn sale of consumer goods data unit
Approach by private equity group Advent International would break company into two
Advent International is in talks to buy a key business unit of the data company Nielsen, in a deal that would value it at about $2.9bn, according to two people familiar with the matter.
The US-based private equity group is looking into acquiring Nielsen’s Global Connect unit, which tracks sales of consumer goods. It is not clear whether a formal offer has been made and the people cautioned that there was no certainty a deal would proceed.
Such a transaction would effectively break Nielsen into two. The company currently comprises two units, Global Connect and Global Media, which provides data on media consumption including television ratings. Advent’s interest is in the former, which sells data on consumer goods purchases to retailers and manufacturers.
Advent and Nielsen declined to comment.
Nielsen, which is listed on the New York Stock Exchange, has a market capitalisation of $4.7bn and net debt of $8.7bn. Its shares have tumbled since the beginning of the coronavirus pandemic, falling from as much as $22 in late February to $13.25.
The company has been reviewing options for the unit for some time. Nielsen said in November last year that it was planning to spin off Global Connect into a separate publicly traded entity. The company has been under pressure from the hedge fund Elliott Management which bought a stake in 2018.
Nielsen has been in private equity hands before. A group of buyout companies including Blackstone and Hellman & Friedman, alongside Carlyle, KKR and others, took it private in 2006 and listed it in 2011 with total debt of more than $8bn.
Shares in Nielsen had been more than 3 per cent lower in afternoon trading in New York, before changing course and ending the day 5.4 per cent higher.
SoCal Edison Says It May Have Caused Orange County Wildfire
Utility admits possible responsibility for one of two blazes that have burned more than 21,000 acres
Power company Southern California Edison told state regulators that its equipment may have ignited one of a pair of fast-moving wildfires in Orange County, Calif., that have prompted evacuation orders for 80,000 people.
The Silverado Fire, which broke out early Monday, has consumed more than 11,000 acres of tinder-dry brush in the foothills above Irvine and other cities south of Los Angeles. The inferno had caused minimal property destruction as of midday Tuesday, but two firefighters were in critical condition after suffering burns.
A few miles to the north, the Blue Ridge Fire also broke out Monday and has blackened more than 10,000 acres and led to evacuation orders for the city of Yorba Linda. Both conflagrations were driven by Santa Ana winds gusting up to 80 miles an hour. In all, more than 16,000 homes valued at $14.1 billion were at risk from the twin fires, according to estimates by Realtor.com.
Irvine resident Alan Sung evacuated with this wife and 3-year-old daughter to stay with family 10 miles away in Laguna Hills. The 46 year-old grew up in the city but said this was the first time he had to evacuate because of a wildfire threat.
“Maybe going forward we need to have an emergency bag ready, because what if you don’t have the time,” Mr. Sung said. “It’s a valuable learning experience. I wouldn’t wish it on anybody, but I’m thankful that everyone is safe.”
Thick clouds of billowing smoke have obscured visibility in Orange County and sent air-quality readings into the unhealthy range. The noxious air and fires prompted closures for some area schools that recently resumed limited in-person instruction, including Chapman University.
The causes of the two fires were still under investigation. But Edison officials said in a filing Monday with the California Public Utilities Commission that the Silverado Fire may have been sparked by contact between a wire and a conductor line in overhead electrical facilities where the blaze originated.
Edison officials weren’t immediately available for comment. The utility, like its neighbor PG&E Corp. in Northern California, cut power in the past few days to lower the risk of electrified wires causing fires.
Edison in November 2019 agreed to pay $360 million to compensate about two dozen local governmental entities for damages and other costs related to a series of fires and resulting mudslides that hit the region in 2017 and 2018.
PG&E emerged from bankruptcy earlier this year after grappling with billions of dollars in wildfire-related liability costs. The company’s equipment sparked a series of destructive wildfires in 2017 and 2018 that collectively killed more than 100 people and burned more than 15,000 homes in Northern California.
More recently, PG&E told California regulators its equipment might have contributed to the 56,388-acre Zogg Fire that broke out Sept. 27 near Redding, Calif., killing four people and destroying 204 homes and other structures.
More than 4 million acres have been consumed by wildfires in California this year, including four of the five largest blazes in state history.
Microsoft beats by $0.46, beats on revs (213.25 +3.17)
- Reports Q1 (Sep) earnings of $1.82 per share, $0.46 better than the S&P Capital IQ Consensus of $1.36; revenues rose 12.4% year/year to $37.15 bln vs the $35.78 bln S&P Capital IQ Consensus.
- Co will guide for Q2 (Dec) on the call today.
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Productivity and Business Processes segment revenue rose 11% yr/yr to $12.3 bln vs prior guidance of $11.65-11.90 bln.
- Office Commercial products and cloud services revenue increased 9%;
- LinkedIn revenue rose 16%; Dynamics products and cloud services rose 19%.
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Intelligent Cloud segment revenue rose 20% to $13.0 bln vs prior guidance of $12.55-12.80 bln.
- Server products and cloud services revenue increased 22%, driven by Azure revenue growth of 48% yr/yr.
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More Personal Computing segment revenue rose 6% to $11.8 bln vs prior guidance of $10.95-11.35 bln.
- Windows OEM revenue fell 5%; Windows Commercial products and cloud services revenue increased 13%.
- Xbox content and services revenue increased 30%.
- Surface revenue increased 37%.
- Search advertising revenue excluding traffic acquisition costs decreased 10%.
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Productivity and Business Processes segment revenue rose 11% yr/yr to $12.3 bln vs prior guidance of $11.65-11.90 bln.
- Co says demand for its cloud offerings drove a strong start to the fiscal year with commercial cloud revenue generating $15.2 billion, up 31% yr/yr.
Closing Stock Market SummaryThe S&P 500 declined 0.3% on Tuesday in a tight-ranged session. The mega-cap stocks had a strong outing that fueled the outperformance of the Nasdaq Composite (+0.6%), while many of the value/cyclical stocks dragged on the Dow Jones Industrial Average (-0.8%) and Russell 2000 (-0.9%).
New macro developments were lacking, and earnings reactions were generally disappointing, leaving investors grappling with the same growth/coronavirus concerns that were attributed to yesterday's retreat. The key difference today was that these concerns were manifested in a more constructive way: decent gains in the mega-caps.
Accordingly, the S&P 500 consumer discretionary (+0.6%), communication services (+0.6%), and information technology (+0.5%) sectors finished in positive territory. Microsoft (MSFT 213.25, +3.17, +1.5%) provided support for the tech sector ahead of its earnings report after the close.
No other sector within the benchmark index closed higher, and the cyclical industrials (-2.2%), financials (-1.9%), energy (-1.4%), and materials (-1.0%) sectors declined at least 1.0%.
Caterpillar (CAT 157.91, -5.29, -3.2%) and 3M (MMM 161.04, -5.12, -3.1%) were notable drags on the industrials sector after the companies refrained from providing guidance. Health care companies Pfizer (PFE 37.42, -0.50, -1.3%), Merck (MRK 77.99, -0.85, -1.1%), and Eli Lilly (LLY 131.90, -23.29, -5.6%) issued in-line/upside guidance, but shares still closed lower.
Separately, Xilinx (XLNX 124.35, +9.80, +8.6%) agreed to be acquired by Adv. Micro Devices (AMD 78.88, -3.35, -4.1%) in an all-stock transaction valued at $35 billion. Exact Sciences (EXAS 131.12, +24.22, +23.0%) said it will acquire Thrive for up to $2.15 billion in cash and stock.
U.S. Treasuries padded recent gains, pushing yields lower across the curve. The 2-yr yield declined one basis point to 0.15%, and the 10-yr yield declined two basis points to 0.78%. The U.S. Dollar Index decreased 0.1% to 92.96. WTI crude futures rebounded 2.5%, or $0.97, to $39.55/bbl.
Reviewing Tuesday's economic data:
- Total durable orders increased 1.9% m/m in September (consensus +0.7%) following a downwardly revised 0.4% increase (from 0.5%) in August. Excluding transportation, durable orders rose 0.8% m/m (consensus +0.4%) on top of an upwardly revised 1.0% increase (from 0.7%) in August.
- The key takeaway from the report is that business spending continued to rebound, evidenced by the fifth consecutive increase in nondefense capital goods orders, excluding aircraft, which jumped 1.0% after increasing 2.1% in August.
- The Conference Board's Consumer Confidence Index slipped to 100.9 in October (consensus 101.9) from a downwardly revised 101.3 (from 101.8) in September.
- The key takeaway from the report is that consumers are feeling less confident about the short-term outlook, as the rise in coronavirus cases and still-high unemployment levels have contributed to concerns about job prospects.
- The FHFA Housing Price Index for October increased 1.5% (consensus 0.8%).
- The S&P Case-Shiller Home Price Index for August increased 5.2% (Briefing.com consensus 3.8%).
Looking ahead, investors will receive the weekly MBA Mortgage Applications Index on Wednesday.
- Nasdaq Composite +27.4% YTD
- S&P 500 +5.0% YTD
- Dow Jones Industrial Average -3.8% YTD
- Russell 2000 -4.7% YTD
France Emerges as Covid-19 Epicenter as Cases Surge Across Europe
Earlier curfews and weekend lockdowns are being weighed for some hot spots to curb a second wave of infections
PARIS—France has emerged as the epicenter of the second wave of coronavirus infections now sweeping much of Europe, causing hospitals to brace for a surge of new patients and pushing the government to consider tough new restrictions in some places.
The country saw daily cases top 50,000 over the weekend, while the seven-day average of new daily cases has increased by more than 50% over the past week, reaching nearly 36,429 on Monday. That compares with a seven-day average of 69,967 cases in the U.S., whose population is around five times as big.
In response, President Emmanuel Macron could implement tough new restrictions to confront Europe’s largest coronavirus outbreak, as previous measures appear to have been insufficient in containing the spread.
Earlier this month, French authorities ordered a curfew from 9 p.m. to 6 a.m. in the Paris region and nine other cities.
The government is now considering earlier curfews in many parts of the country, as well as weekend lockdowns that would sharply curtail individuals’ movements in virus hot spots such as Paris, effectively confining them to home, according to a close presidential aide.
Mr. Macron is meeting with members of his government on Tuesday and Wednesday morning to decide which measures to adopt, the person added. Mr. Macron will address the nation on Wednesday evening.
The surge in infections in France comes amid a sharp rise this autumn in much of the continent, reversing the gains Europe had won by last summer, when draconian, nationwide lockdowns in many European countries pushed infections down to a trickle.
Now, European governments are struggling to respond to the second wave, loath to impose new lockdowns that would compound the economic pain the coronavirus pandemic has already inflicted on their countries, but concerned about the steady rise in hospitalizations and deaths.
Jean-François Delfraissy, a doctor and immunology specialist who leads a scientific board advising the French government on how to tackle the pandemic, said this week that the actual number of new daily cases of infection in France is probably closer to 100,000 a day, and is likely to continue to increase.
“The second wave could be worse than the first one,” Dr. Delfraissy said.
France was slow to react to a steady increase in Covid-19 cases that began in the summer, epidemiologists say. The country had managed to reduce the number of new daily cases to fewer than 400 at the end of spring after a two-month national lockdown that crippled its economy. But the government failed to protect its hard-fought gains as summer drew to a close and colder temperatures approached.
As they reunited with friends and family, and flocked to restaurants and theaters, many people stopped following social-distancing recommendations so closely, epidemiologists and health officials say. Some people even resuscitated the country’s customary double cheek kiss, which had been sidelined in spring.
The nighttime curfew French authorities ordered on the Paris region and nine other cities was extended last week to 38 French départements—or about two thirds of the French population—as the epidemic accelerated across the country. But epidemiologists say it may be too little, too late.
“This is not nearly enough,” said Paris-based epidemiologist Martin Blachier . “People continue to have social interactions.”.
France’s neighbors are also fighting an alarming rise in infections. In Belgium, the average number of new daily cases in the small European Union country jumped by nearly 40% over the past week, local health authorities said on Tuesday. The country reported more deaths per 100,000 inhabitants than any other European country over the past two weeks.
Italy, Spain, Germany and the U.K. have also seen a surge in new infections.
To be sure, greatly expanded testing has surfaced a larger number of infections than in the spring, when the confirmed cases were likely a fraction of overall infections.
“That number could look very different depending on the country’s testing strategy,” said Catherine Hill, a French epidemiologist and biostatistician.
The number of Covid-related deaths in France remains comparable or even lower than in other EU countries, though such figures typically lag infections by several weeks.
But the death toll in France is increasing rapidly. On Monday, 258 Covid patients died in French hospitals, a record since the end of the lockdown in May. At the height of the surge in infections and deaths last spring, nearly 900 people died each day of Covid in French hospitals
Hospital beds are filling up, too. The seven-day average of new hospital admissions has risen by more than 60% over the past week, reaching 1,867 on Monday. In the Paris region, more than two thirds of the beds in intensive-care units are occupied by Covid patients, according to health authorities.
Eric Caumes, who heads the infectious and tropical-disease department at the Pitié-Salpêtrière University Hospital in Paris, one of the country’s largest hospitals, says his unit is already full.
“We have been running after the virus for weeks. We should have taken stronger measures earlier,” Dr. Caumes says. “Now we no longer have a choice. The country needs to go back into lockdown,” he added.
Daimler to increase stake in Aston Martin to 20%
German carmaker will give UK sportscar group access to its electric vehicle technologies
Daimler will increase its stake in the struggling sportscar group Aston Martin to 20 per cent over the next three years, the carmakers have said, in exchange for giving the UK manufacturer access to its electric vehicle technologies.
The two companies have been working together since 2013, when Daimler’s Mercedes-Benz began co-operating with Aston Martin over the development of AMG V8 engines and battery-powered cars in return for a 5 per cent stake.
After Aston Martin’s disappointing initial public offering in 2018, and subsequent capital raises, Daimler’s stake fell to about 2.6 per cent.
The Stuttgart-based group said on Tuesday that it would now spend up to £286m to acquire new shares in Aston Martin, but would not hold more than 20 per cent in total.
“We already have a successful technology partnership in place with Aston Martin that has benefited both companies,” said Wolf-Dieter Kurz, head of product strategy at Mercedes-Benz Cars. “With this new expanded partnership we will be able to provide Aston Martin with access to new cutting-edge technologies and components, including next-generation hybrid and electric drive systems.”
Earlier this year, Aston Martin said it had postponed plans to build its first electric car, the Rapide E, and added it would not electrify its Lagonda sub-brand until the middle of the decade.
The company, which has been haemorrhaging cash, was rescued by Canadian billionaire Lawrence Stroll earlier this year.
Daimler, conversely, is spending billions of euros on electric models, including of its luxury sub-brands AMG and Maybach.