FT : Nippon Paint prepares for deal spree in $150bn coatings industry

Nippon Paint prepares for deal spree in $150bn coatings industry
Asian group lays groundwork for consolidation in sector hard hit by coronavirus

Nippon Paint is gathering firepower for a worldwide deal spree and will assume a central role in the consolidation of a $150bn global industry hit hard by the coronavirus, said its chief executive. 

A fresh acquisition drive by Nippon Paint would come on the heels of a $12bn deal with its largest shareholder — a private company founded by one of Singapore’s richest billionaires — that will combine two of Asia’s biggest paints and coatings groups into a regional titan.

To ready itself for a potential flurry of mergers and acquisitions, Nippon Paint said on Thursday it would restructure its worldwide automotive coatings operations into a single unit better able to absorb new companies as they are acquired.

Like others in the sector, Nippon Paint has been pressured by Covid-19 as the global shutdown of car factories hit its automotive paint business, causing a 19 per cent year-on-year fall in net profit for the first six months of the year.

But in an interview with the Financial Times, the Japanese group’s chief executive Masaaki Tanaka said that the crisis offered opportunities it may not have had otherwise. The severe downturn, he said, provided a chance for Nippon Paint to make strategic global acquisitions across a still fragmented paints industry. 

“When the entire market is down, there will be industry realignment opportunities for a company like us with financial firepower and stable management since there will be players that will be difficult to survive on their own,” added Mr Tanaka. “We will of course consider launching M&A.” 

Mr Tanaka, the former deputy president of Mitsubishi UFJ Financial Group who headed the bank’s US operations, engineered a complex deal with Singapore’s Wuthelam Holdings, its largest shareholder. Under the agreement Nippon Paint will issue new shares to Wuthelam, the paints business founded by 93-year-old Goh Cheng Liang that has already built a 39.6 per cent stake in the Japanese group. 

The $12.2bn third-party share allotment will by January raise Wuthelam’s stake in Nippon Paint to 58.7 per cent of outstanding shares, building on a 50-year relationship under which the Singaporean group has steadily increased its stake and taken an active role in its strategic direction. 

In a circular deal structure, the majority of funds raised from the share issuance will be deployed by Nippon Paint to buy out a series of Asian joint ventures it has established over the years with Mr Goh’s company. The deal will include the Japanese group’s acquisition of Wuthelam’s wholly owned business in Indonesia for $2bn.

Last year, Nippon Paint paid more than $3bn for paint-makers in Australia and Turkey.

Since announcing the tie-up with Wuthelam on August 21, Nippon Paint shares have risen 36 per cent, earlier this week hitting their highest level since their listing in 1949. 

>>> What to look at today - 1st of October 2020

Stock futures advanced and the dollar fell Thursday on signs of potential progress toward fresh U.S. fiscal stimulus. The offshore yuan climbed, though holidays in Asian markets risked amplifying moves.
In Japan, the Tokyo Stock Exchange halted trading after its worst breakdown, exacerbating an already slow day for stock markets in Asia where China, Hong Kong, Taiwan and South Korea are closed for holidays. Shares in Australia and Singapore rose more than 1%. S&P 500 and European futures edged higher.
A report said Treasury Secretary Steven Mnuchin bolstered the assistance previously offered by Republican negotiators. Mnuchin earlier said there had been no agreement on pandemic relief, though negotiations would continue. Treasury yields were steady.
US After Hours AMAG +42% spikes on rumors of takeover deal; SELB -45% slides on Phase 2 COMPARE trial data

Nikkei +0.00% Hang Seng +0.79% CSI -0.10% Shanghai -0.20% Shenzen +0.05%

Eur$ 1.1748 CNH 6.7408 CNY 6.7910 JPY 105.50 GBP 1.2942 CHF 0.9295 RUB 77.6856 WTI$ 40.20 -0.02%

S&P +0.47% Nasdaq +0.45% EuroStoxx +0.19% FTSE +0.21% Dax +0.11% SMI

Macro :
- Trump Signs Stopgap Funding Bill, Averting Government Shutdown
- Fed’s Bullard Says Debate on Fiscal Aid Can Be Delayed to 2021
- France's Second Wave to Hit 4Q Before Vaccine Emerges
- Asana Valued at $5.5 Billion After Direct Listing Debut
- U.S. Investor Bull-Bear Spread -16.8: AAII

Keep an eye on :
- AA/ LN : AA Plc Likely To Get Offer With Little Premium, Berenberg Says
- ABF LN : Asos, AB Foods and BAT Added to RBC’s Global Best Ideas List
- AAL US : American Air Moves Ahead With 19,000 Layoffs as U.S. Weighs Aid
- AKE FP : Chemical Maker Arkema’s U.S. CEO Cleared of Criminal Charge
- AMAG US : Apollo’s Covis Said to Near Deal to Buy Amag Pharmaceutical +40%
- ASC LN : Asos, AB Foods and BAT Added to RBC’s Global Best Ideas List
- AZN LN : Oxford-Astra Covid Vaccine Review Said to Start in Europe
- AZN LN : *ASTRAZENECA ADRS FALL 1.5% AS FDA WIDENS VACCINE SAFETY INQUIRY
- BAT LN : Asos, AB Foods and BAT Added to RBC’s Global Best Ideas List
- BAYN GY : Bayer Sees 2021 Core EPS Slightly Below 2020; May Cut Jobs
- BEZ LN : Beazley Loses Only Negative Call, Risks Now Balanced: Peel Hunt
- CINE LN : Cinema Trade Group Says 70% of Smaller U.S. Theaters May Fail
- CNCT LN : Connect Group Says Performance is in Line With Expectations
- DIA SM : Diasorin Virus Test Kit Gets U.S. FDA Approval for Emergency Use
- Dutch Star SPAC : Dutch Star Companies Two Seeks Listing on Amsterdam Exchange: FD
- ENGI FP : Engie Welcomes New Suez Offer, Wants Extension Until Oct. 5
- GBLB BB : GBL’s Ergon Reports Haudecoeur Bought Tea Maker Palais Imperial
- ISS DC : ISS Growth, Margins Seen Staying Under Pressure: Morgan Stanley
- LIT IM : Asterion Enters Into Agreements to Buy 24.1% Stake in Retelit
- MAERSKB DC : Maersk Searches for New Acquisitions on Land, CEO Tells Borsen
- DRLCO DC : Maersk Drilling Gets $12.1 Million Contract From Dana
- NESN SW : Nestle to Invest $450m for Pet Food Plant in North Carolina
- NOVN SW : Novartis Says Zolgensma Interim Data Show ‘Significant’ Benefit
- ORSTED DC : Orsted a Buy as Growth Potential Too Big to Ignore: Berenberg
- PAH3 GY : Porsche Employees Probed by German Prosecutors Over Emissions
- UG FP : French Sept. New Car Registrations Drop About 3%: CCFA
- PSM GY : ProSieben to Sell Drug Site Windstar Medical: Reuters
- REC NO : Asos, AB Foods and BAT Added to RBC’s Global Best Ideas List
- RR/ LN : Rolls-Royce Ends Talks With Singapore, Kuwait Funds, Sky Says
- SOBI SS : *SWEDISH ORPHAN, SELECTA: SEL-212 DIDNT MEET PRIMARY ENDPOINT
- STM FP : STMicroelectronics Sees Full Year Rev. Above $9.65 Bln
- SEV FP : Suez Gave Engie Board Alternative Plan for Coveted Stake: Figaro
- ULTIMO NO : Ultimovacs Says Cancer Vaccine Phase 1 Trial Meets Safety Goal
- VIE FP : Veolia Says It Accepts Engie’s Requests on Suez Offer
- VWS DC : Vestas Cements Leadership With EU3.6b Orders in 3Q: Sydbank
- WDI GY : Singapore Shuts Wirecard Payments Operation, Singapore Adds Charges Against Director in Wirecard-Linked Case, Wirecard Says Intends to Comply With MAS Directions in Singapore
- WDI GY : Financial Times: EY faces mounting backlash after Wirecard whistleblower revelation https://t.co/z7BuP7M6qy
- WLN FP : Worldline Wins Conditional EU Approval for Ingenico Deal

>>> Europe : Brokers Upgrades & Downgrades - 1st of Ocotber 2020

>>> Up
* AA PLC Raised to Hold at Berenberg; PT 30 pence
* Aegon Raised to Overweight at JPMorgan; PT 2.80 euros
* Airbus Raised to Buy at Berenberg; PT 76 euros
* Banco Santander Raised to Buy at Oddo BHF; PT 2.10 euros
* Beazley Raised to Hold at Peel Hunt; PT 325 pence
* Coca-Cola HBC Raised to Buy at Goldman; PT 2,500 pence
* Goodyear Raised to Buy at Northcoast; PT $12
* Grifols Raised to Neutral at Citi
* Puma Raised to Reduce at AlphaValue
* Telenor Raised to Hold at SocGen; PT 150 kroner

>>> Down
* Altice Europe Cut to Neutral at Exane; PT 4.20 euros
* Bayer Cut to Hold at HSBC; PT 59 euros
* Bayer Cut to Neutral at Citi; PT 51.50 euros
* Boliden Cut to Hold at Deutsche Bank; PT 265 kronor
* Britvic Cut to Neutral at Goldman; PT 910 pence
* CaixaBank Cut to Neutral at Oddo BHF; PT 2.70 euros
* DCC Cut to Sell at Goldman; PT 5,000 pence
* Elisa Rated New Sell at SocGen; PT 40 euros
* Koenig & Bauer Cut to Hold at HSBC; PT 20 euros
* Rubis Cut to Neutral at Goldman; PT 40 euros

>>> Initiation
* Borussia Dortmund Rated New Hold at MainFirst; PT 6 euros
* ISS Reinstated Underweight at Morgan Stanley; PT 80 kroner
* Orsted Rated New Buy at Berenberg; PT 1,060 kroner
* RPS Group Rated New Buy at Berenberg; PT 60 pence
* Siemens Gamesa Reinstated Equal-Weight at Morgan Stanley

>>> Call
* AA Plc Likely To Get Offer With Little Premium, Berenberg Says
* Asos, AB Foods and BAT Added to RBC’s Global Best Ideas List
* Beazley Loses Only Negative Call, Risks Now Balanced: Peel Hunt
* ISS Growth, Margins Seen Staying Under Pressure: Morgan Stanley
* Orsted a Buy as Growth Potential Too Big to Ignore: Berenberg
* Siemens Gamesa ‘Compelling,’ But Upside Limited: Morgan Stanley
* Vestas Cements Leadership With EU3.6b Orders in 3Q: Sydbank

Fwd:Briefing; WRAPX; After Hours Summary: AMAG +42% spikes on rumors of takeover deal; SELB -45% slides on Phase 2 COMPARE trial data


After Hours Summary: AMAG +42% spikes on rumors of takeover deal; SELB -45% slides on Phase 2 COMPARE trial data

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: N/A

Companies trading higher in after hours in reaction to news: AMAG +42% (in talks to be acquired by Covis Pharma, per Bloomberg), SBH +7% (to join the S&P SmallCap 600), SAIL +6.6% (to join the S&P MidCap 400), PRVB +5.9% (announced submission of clinical module for teplizumab BLA), FLR +4.4% (awarded $1.1 bln Navy contract), PLTR +3.5% (continued volatility following public debut), KDMN +2.8% (submitted NDA for belumosudil for the treatment of patients with cGVHD), AMC +3% (to reopen additional theaters in California and Michigan), FMCI +1.9% (stockholders approve extending date to complete business combination to October 30), IONS +1.2% (ION373 received orphan drug designation for the treatment of Alexander disease)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: N/A

Companies trading lower in after hours in reaction to news: ZSAN -53.7% (received discipline review letter for Qtrypta NDA), SELB -45.2% (announced top-line data from Phase 2 COMPARE trial), LOGC -23.9% (announced public offering of common stock), CLI -5.2% (suspends dividends for Q3 and Q4), MDT -0.9% (under investigation in ventilator antitrust probe, according to WSJ)

WSJ : Palantir Grabs $21 Billion Valuation With Direct Listing as Trading Begins

Palantir Grabs $21 Billion Valuation With Direct Listing as Trading Begins
Data firm joins Asana trading on NYSE in pair of direct listings Wednesday

Palantir Technologies Inc. PLTR 31.03% grabbed a valuation of roughly $21 billion in its trading debut on the New York Stock Exchange, as it became the latest technology company to try its hand at a direct listing.

The stock closed at $9.50, higher than the $7.31 and $9.17 average prices where the stock changed hands in private trades in August and September, respectively. It ended 31% above the reference price of $7.25 a share, a guidepost that is set by the NYSE where no money changes hands.

The few direct listings that have happened to date have all traded above their reference prices on the first day.

The first Palantir trade on Wednesday landed around 1:40 p.m. in New York at $10. The Wall Street Journal reported last week that Palantir’s bankers had told investors the stock could start trading around $10.

The data-mining software company became the fourth notable firm to use the direct listing model. Asana Inc. ASAN 37.14% also went public through a direct listing earlier Wednesday, with its stock trading higher in its debut. Only two other major companies— Spotify Technology SA and Slack Technologies Inc. —had ever completed direct listings before Wednesday.

Doing a direct listing skirts investment-banking underwriters, allowing companies to save millions of dollars in fees. It also means the companies don’t raise money for themselves. Instead, employees and early investors are typically able to cash out stock on the first day of trading as shares simply list on the exchange and advisers match buyers and sellers.

Both Asana and Palantir enlisted Citadel Securities as their designated market maker and Morgan Stanley as their lead financial adviser for their debuts.

Strong debuts for the two listings are the latest sign of strength in the IPO market as companies are rushing to go public and investors are especially hungry for technology listings. U.S.-listed IPOs have raised more than $98 billion this year through Tuesday, according to data provider Dealogic. That surpasses the amount raised in every full year of listings since the tech boom of 1999 and 2000. If this pace continues, bankers, lawyers and executives say they anticipate the IPO market to even beat those years when measured by amount of money raised.

“September will close out to be the busiest month in the history of NYSE when it comes to new listings,” said John Tuttle, vice chairman and chief commercial officer who oversees global listings at the NYSE, referring to the number of new listings this month. “Even through the highs and lows [of 2020], capital markets have remained open for companies and investors.”

The strong investor interest in Palantir comes even as its founders have put in place one of the most aggressive governance structures ever seen.

Tuesday’s dueling direct listings were a balancing act for the NYSE, which had never dealt with opening two on the same day. Given the relatively untested nature of direct listings and their complexities, some people close to the Palantir and Asana offerings had told the Journal they weren’t thrilled that two were happening on the same day.

Both Slack and Spotify’s direct listings went fairly smoothly, with the two companies closing 49% and 13% higher than their respective reference prices on their first trading day.

Since then, the trading success of the two companies has diverged. Slack closed Wednesday at $26.86, 30% below where it closed on its first day of trading last year. Shares of Spotify, meanwhile, had mostly languished below their first-day closing price of $149.01 in 2018 until they shot higher this year. They closed Wednesday at $242.57, up 63% from the first-day close.

Like many other tech companies that go public, Palantir has never made a profit. For 2019, it posted a loss of $579.6 million, roughly even with 2018. The first half of 2020 showed improvement, with a $164 million loss compared with a $274 million deficit in the same period in 2019.

>>> US Close Dow +1.20% S&P +0.83% Nasdaq +0.74% Russell +0.20%

Closing Stock Market Summary

The S&P 500 gained 0.8% on Wednesday in a busy news day, wrapping up a negative month and a positive third quarter. The Dow Jones Industrial Average outperformed with a 1.2% gain, the Russell 2000 underperformed with a 0.2% gain, and the Nasdaq Composite (+0.7%) performed comparably to the benchmark index. 

The session opened modestly higher, as the futures market shook off any residential weakness that followed the first presidential debate. Cyclical sectors were leaders throughout the morning and early afternoon, largely due to better-than-expected economic data and renewed stimulus optimism. 

The stimulus optimism was stirred by hopeful-sounding commentary from House Speaker Pelosi, White House Chief of Staff Meadows, and Treasury Secretary Mnuchin, but the market later got upset on news that Senate Majority Leader McConnell said both sides remain far apart. Ms. Pelosi and Mr. Mnuchin met for 90 minutes but did not agree to a deal. 

In about one hour of trading, the S&P 500 cut its gain to 0.2% from 1.7% with the industrials (-0.3%) and energy (-0.2%) sectors slipping into negative territory. Buyers stepped in, though, and helped the S&P 500 close above its 50-day moving average (3357), which was an important observation for traders. 

The health care (+1.7%), consumer staples (+1.2%), financials (+1.2%), and information technology (+0.9%) sectors were among today's biggest winners. 

Regarding today's data, the ADP Employment Change Report for September, the Chicago PMI for September, and the Pending Home Sales report for August each came in stronger than expected. While not typically market-moving events by themselves, the batch of data did finally contribute to some movement in U.S. Treasuries (to the downside).  

The 2-yr yield increased two basis points to 0.13%, and the 10-yr yield increased three basis points to 0.68%. The U.S. Dollar Index declined 0.1% to 93.84. WTI crude futures rose 2.6%, or $1.01, to $40.21/bbl.

In key corporate news, Walt Disney (DIS 124.13, -1.27, -1.0%) announced plans to lay off 28,000 employees due to the coronavirus still negatively impacting its business. Micron (MU 46.96, -3.75, -7.4%) issued downside EPS guidance for its fiscal first quarter. 

Reviewing Wednesday's economic data:

  • The third estimate for Q2 GDP produced a slight upward revision to -31.4% q/q annualized (consensus -31.7%) from the second estimate of -31.7%. The GDP Price Deflator was also revised higher to -1.8% (consensus -2.0%) from -2.0%.
    • The key takeaway from the report is that it won't matter to the market given its dated nature, but it still matters in the sense that, despite the slight revision, the second quarter of 2020 marked the biggest downturn for the U.S. economy on record.
  • The ADP Employment Change report for September estimated 749,000 jobs were added to private-sector payrolls (consensus 600,000). The August reading was revised higher to 481,000 from 428,000.
  • The Chicago PMI for September surged above expectations to 62.4% (consensus 53.0%) from 51.2% in August.
  • Pending home sales jumped 8.8% in August (consensus 3.2%) following a 5.9% increase in July.
  • The weekly MBA Mortgage Applications declined 4.8% following a 6.8% increase in the prior week.

Looking ahead, investors will receive the ISM Manufacturing Index for September, the Personal Income and Spending report for August, the weekly Initial and Continuing Claims report, and Construction Spending for August on Thursday.

  • Nasdaq Composite +24.5% YTD
  • S&P 500 +4.1% YTD
  • Dow Jones Industrial Average -2.7% YTD
  • Russell 2000 -9.6% YTD

WWD : Stefan Larsson Stepping Up as PVH CEO

Stefan Larsson is stepping into the corner office at PVH Corp. and will take on the role of chief executive officer from Manny Chirico on Feb. 1.

It’s a changing of the guards that’s been planned since Larsson, 46 and formerly ceo of Ralph Lauren Corp., took on the role of president at the Tommy Hilfiger and Calvin Klein parent 16 months ago.

The plan always was for Larsson to learn the business over a period of time from Chirico, 63. But his short tenure has been something of a trial by fire, with COVID-19 shutting down retail, prompting furloughs as well as lasting cost cuts and steep revenue drops, at PVH and across the industry.

PVH’s second-quarter revenues fell 33 percent to $1.58 billion as COVID-19 sent consumers home and the company — one of the few to even hazard guess for the rest of the year — projected its second-half revenues will be down by about 25 percent.

It will now be Larsson’s hand on the rudder as PVH steers a course that’s intended to set the company up to be even stronger as it comes out of the pandemic — whenever that is.

“It has been a privilege to work side by side with Manny in recent months, to learn firsthand how he has built PVH into one of the world’s most admired fashion and lifestyle companies, and driven impressive growth,” Larsson said. “It is an honor to become the leader of this exceptional company, and as we move into a new chapter of growth for PVH, I look forward to continuing its evolution, building on our inherent strengths, getting closer to the consumer than ever before, and working with an incredible team.”

Chirico will remain as chairman, continuing to look out over the business he played a big role in transforming from a men’s dress shirt producer into a global fashion powerhouse and a key industry consolidator.

PVH’s revenues tallied $9.9 billion last year, up from just $1.4 billion before the transformative 2003 acquisition of Calvin Klein.

“It has been an honor to work with the outstanding people at PVH for more than 25 years — 14 of those as ceo,” Chirico said. “With Stefan as our next ceo, we are well-positioned to navigate the rapidly changing retail landscape, drive brand relevance and meet the needs of our consumers, while positioning the company for long-term growth.

“Stefan’s global experience, consumer focus and high-performance track record — especially in this unprecedented time of disruption — are unparalleled assets for PVH to succeed in the ‘new normal’ that is taking shape across our industry,” he said. “I am confident in Stefan’s unique abilities to lead PVH in its next chapter of growth and I look forward to continuing our close partnership as chairman of the board.”

Before Larsson’s brief and rocky 18-month tenure at Ralph Lauren — where he crafted a business plan that was lauded, but clashed with the company’s founder — he was global president of Gap Inc.’s Old Navy division, enjoying a stretch with growing revenues and profits. Prior to that he spent 15 years at Hennes & Mauritz and was part of the team that helped the fast-fashion retailer grow sales from $3 billion to $17 billion in a global expansion.