TheChek News Flow

Asian shares were mixed and U.S. equity futures rose as investors awaited the next chapter in the Sino-American trade dispute. Australian and Indian assets outperformed following elections in the two countries.

Stocks in Japan were little changed, while they declined in China and Hong Kong. Australian stocks climbed and the Aussie jumped after a surprise election victory for conservative Prime Minister Scott Morrison. Indian shares surged as exit polls showed Prime Minister Narendra Modi is poised to retain power. China’s offshore yuan strengthened, showing some relief after trade turmoil dragged down the currency to a five-month low. The yen slipped as unexpected economic growth in Japan came with reasons for caution.

Nikkei +0.35% HAng Seng -0.65% CSI -1.30% Shanghai -0.88% Shenzen -1.29%

Eur$ 1.1153 CNH 6.9387 CNY 6.9117 JPY 110.14 GBP 1.2735 CHF 1.0118 RUB 64.6433 TRY 6.0737 WTI$ 63.66 +1.21%

S&P +0.32% EuroStoxx -0.12% FTSE +0.11% Dax -0.09% SMI -0.15%

Macro :

- FOMC Minutes, EU Parliamentary Elections: Week Ahead May 20-24

- U.S.-China Trade Talks Appear to Have Stalled: CNBC (Friday - 9pm)

- Switzerland Votes ‘Yes’ to Being Tax Home for Big Business

- Japan 1Q GDP Rose Annualized 2.1% Q/q; Est. -0.2%

- Modi’s Coalition Will Sweep to Victory in India, Exit Polls Show

- Austria’s Kurz Goes for Victory Hoping to Pillage Populist Vote

Keep an eye on :

- AC FP : Goldman Is Said to Near 2 Billion Euro Deal for PAI’s B&B Hotels

- ADP FP : Le Maire Postpones Decision on Aeroports de Paris Privatization

- AGFB BB : Agfa-Gevaert Names Activist Holder Roehrig Chairman of the Board

- AGFB BB : Agfa-Gavaert might consider selling radiology unit - DeTijd

- AIR FP : Boeing Wins Order From Air New Zealand for Wide-Body Jet:Reuters

- AML LN : Daily Mail says activist shareholder wants to wind up company and sell its assets

- BO DC : New B&O Luxury TV to Hit Markets After Summer, Borsen Reports

- BIDU US : Baidu Falls 17%, Most Since Nov. 17, 2008: Chinese U.S. Listings

- BOI FP : Boiron Says Regulator Gives Unfavorable Opinion on Reimbursement

- BON LN : Bonmarche Say Spectre’s Day Has Not Agreed to Meet With Board

- BSGR NA : B&S Group First Quarter Revenue EU425.9 Mln

- CPB US : Campbell Asks Mondelez, KKR to Reconfirm Bids This Week: AFR

- CRS LN : Cenkos Securities Urged to Lead Consolidation With Rivals: FN

- CBK GY : Commerzbank Partners With GTC to Automate Trade Finance Business

- DBK GY : FT : Why Goldman Sachs should buy Deutsche Bank - https://on.ft.com/2Jtq2uF

- DBK GY : Deutsche Didn’t Alert Watchdog on Suspicious Trump Accounts: NYT

- DTE GY : T-Mobile, Sprint Said to Prepare U.S. Government Concessions

- ERICB SS : Google Suspends Some Business With Huawei: Reuters

- FCT IM : Two Shipbuilders Pull Out of UK’s Support Vessel Shortlist: FT

- FRE GY : would not rule out large acquisitions, Frankfurter Allgemeine

- GIVN SW : Givaudan to Buy Vietnamese Flavor Company Golden Frog

- GYC GY : Grand City Properties First Quarter FFO I EU52.7 Mln

- IFX GY : *INFINEON TECHNOLOGIES SUSPENDS SHIPMENTS TO HUAWEI: NIKKEI

- KER FP : A Gucci Bubble Gets Pricked by the Trade War: Andrea Felsted

- LMI LN : Sibanye-Stillwater Says Lonmin Offer Won’t Be Further Increased

- MNZS LN : John Menzies Holders Vote Against Authority to Allot Shares Plan

- NOKIA FH : Google Suspends Some Business With Huawei: Reuters

- PURE LN : PureCircle Holder Olam Reports 16.57% Voting Rights

- REP SM : Exxon Gulf of Mexico Sale Is Said to Draw Repsol, Ineos Interest

- RET BB : Retail Estates Sees FY2020 Dividend EU4.40/Share, Est. EU4.52

- RBREW DC : Royal Unibrew Bought Back DKK136m of Shares on May 13-16

- RYA LN : *RYANAIR SEES BROADLY FLAT FY20 PROFITS, STARTS EU700M BUYBACK

- RQWE GY : RWE’s Bleak Gas Outlook Prompts Rethink for Further Price Drop

- SGKM SW : St.Galler Kantonalbank: Demand for Rights Above Maximum Number

- SNH GY : Steinhoff Seeks to Extend CVA Long-Stop Date to June 30

- TKO FP : Morgan Stanley acquires stake in French group Tikehau - FT : https://on.ft.com/30nQJGm

- UBER US : BlackRock, Tiger Tried To Sell Uber Shares Pre-IPO: WSJ

- YNGN LN : Young & Co’s Holder Octopus Investments Reports 9.09% Stake

- WDI GY : -ve Article in the FT : Wirecard document points to reliance on 3 partners, Company fails to explain why spreadsheet’s data should be disregarded - https://on.ft.com/2WUgV9m

US group wants growth in transaction banking and a German deal could help achieve that

Deutsche Bank has long liked to see itself as Europe’s answer to Goldman Sachs. But what if Deutsche were Goldman’s answer to Europe?

Deutsche has been under increased scrutiny of late, as it has struggled with a share price slump, higher funding costs and a succession of scandals. Despite widespread support for chief executive Christian Sewing and his efforts to boost performance, there is understandable scepticism that this bank — which made a 1.3 per cent return on tangible equity in the first quarter, a tenth the level of US rivals — can find its own way out of trouble.

Hence the decision in March to enter into merger talks with Commerzbank. To little purpose ultimately — besides the opportunity to cut costs by slashing jobs in the groups’ domestic retail banking operations, it turned out there was no convincing rationale for a deal. Happily Mr Sewing ended talks last month.

Attention has now focused on alternative suitors for Commerzbank — might UniCredit or ING come in to buy Germany’s second-biggest bank?

But Deutsche’s fate is that much more important. For global regulators, it is a systemically important bank. For Europe it is an economically important lender and investment bank. Its fixed-income franchise, for all the challenges posed by tougher post-crisis regulation and a brand stained by scandal, remains in the global top five.

Mr Sewing is doing a noble job trying to trim here and bolster there. But the truth is that if Deutsche cannot make good returns in this environment of booming markets and decent economic growth, what hope does it have in a downturn? For a business that is subscale in many areas, with a business mix still geared to pre-2008 heydays and an inability to invest sufficiently in the vital IT upgrades that its top rivals are making, the industrial logic in favour of M&A is compelling.

One of those competitors is Goldman Sachs. Like Deutsche it has long been a strong player in fixed-income markets, but has spent recent years trying to build out other activities to offset the lower returns in that core area. Its Marcus unit has taken it into the consumer finance space for the first time. Last week it made its biggest acquisition in 20 years, buying wealth manager United Capital for $750m.

Goldman’s other stated growth area is the prosaic business of corporate cash management and other forms of so-called transaction banking. This might seem like a humbling prospect for the masters of the universe that control Goldman. But it may also be very sensible: one thing Goldman excels at is whizz-bang technology. And of all the subsections of banking that could do with a tech upgrade, transaction banking must be among the most in need.

But how much more powerful would that operation be — and how much faster would it achieve its ambitions — if it made a big acquisition in transaction banking, as it has in wealth management, and bought market share?

Which is where Deutsche — a top five transaction bank — could come in. There could be appeal, too, in consolidating the two groups’ fixed income operations. Currently ranked fourth and fifth in the world, according to Bloomberg data, they would together rival global leader JPMorgan Chase. In Europe in particular they would be a dominant force.

There was of course a Goldman angle to the Commerzbank merger plan: an advisory mandate aside, chairman Paul Achleitner, an ex-head of Goldman Germany, and deputy finance minister Jörg Kukies, another ex-head of Goldman Germany, were both keen on the combination.

A Deutsche-Goldman tie-up would be far more politically sensitive. Notwithstanding Mr Kukies’ influence in Berlin, it is hard to see the German government allowing the country’s eponymous bank to bought by foreigners.

For Goldman, the idea would be problematic, too: Deutsche has been so accident prone for so long that any buyer would be nervous about legacy risks.

But a deal would be cheap: Deutsche’s current market capitalisation is barely a fifth of the value of its net assets, at €14bn (that’s just 18 months of profit for Goldman). And it would be neatly symmetrical: the US bank was founded by Marcus Goldman, the inspiration for its new consumer brand, after the German emigrated from Frankfurt to New York in 1848. You could even spin it as a new national champion.

Move is part of a trend of asset managers selling minority positions to third parties

Morgan Stanley is acquiring a 5.5 per cent stake in French asset manager Tikehau as the Paris-based company looks to tap North American investors and new asset classes.

The US bank will invest at least €300m of fresh equity into the asset manager, together with other existing investors in a deal signed last week, people familiar with the transaction said.

The move is part of a wider trend of asset managers selling minority positions to third parties as they seek permanent capital to expand into new markets and products.

“New shareholders bring industry and local expertise,” said Mathieu Chabran, co-founder of Tikehau.

“All asset managers are looking for long-term capital because they help take the business forward with strategic ideas, opening of new offices and new asset classes.”

The transaction is expected to be announced officially on Monday morning.

Mr Chabran and fellow co-founder Antoine Flamarion will remain controlling shareholders with more than 60 per cent of the share capital alongside management, people familiar with the matter said.

The proceeds from a share capital increase, which will also see existing shareholders inject additional capital, will be used to boost Tikehau’s plan for growth and expansion, these people said.

Morgan Stanley is investing in Tikehau through its North Haven Tactical Value, a unit within the US bank focused on deploying opportunistic capital.

The investment is into Tikehau asset manager and not its listed vehicle.

“Tikehau Capital is a premier asset manager comprised of seasoned investment professionals with strong investment performance,” said Pedro Teixeira, co-head of Morgan Stanley’s investment vehicle. 

Founded by two former bankers at Merrill Lynch and Goldman Sachs in 2004, the European asset manager has more than doubled its assets under management since listing in 2017 from €10bn to more than €22bn today.

It has hired top financiers and high-profile political figures, including François Fillon, the former French presidential candidate.

This is not the first time Tikehau has had a minority shareholder. In 2016 Singapore’s Temasek injected €510m of fresh equity as it looked to buy debt and equity in European companies.

Alternative asset managers have rushed to sell stakes to peers, including Blackstone and Dyal Capital, in recent years. Last summer, London-based private equity group Bridgepoint sold a small stake to Dyal Capital in a deal that will see the New York-based investment firm take portion of dividends and performance fees.