TheChek News Flow

* Equinor Upgraded to Buy at Pareto Securities; PT 240 Kroner

Non-Standard Finance had launched takeover bid late last week

Provident Financial, the doorstep lender, has rebuffed a hostile takeover approach from a rival led by its former chief executive, branding it “irresponsible”.

Non-Standard Finance, a company founded by John van Kuffeler in 2014 after his exit from Provident, launched an unexpected bid last Friday. Three shareholders controlling more than 50 per cent of Provident — and which are also major shareholders of NSF — gave their backing to the deal.

“This hostile offer represents an irresponsible approach in the context of a financially regulated business which is recovering from a period of substantial instability,” Provident’s board said in a statement on Monday.

It added that the offer “could have a negative and destabilising impact on [Provident’s] stakeholders, including its customers, for a considerable period of time.”

“The Provvy” has faced a turbulent 18 months, issuing three profit warnings as both regulators and parliament have cracked down on lenders targeting people who find it difficult to get credit with high interest loans. All three of its main businesses have been investigated by the Financial Conduct Authority.

The company’s chairman, Patrick Snowball, on Monday blamed the company’s previous management for the difficulties.

“Provident Financial’s management team has stabilised the business in a very turbulent period over the past 18 months, which has largely consisted of addressing managerial mistakes of the past”, he said.

Provident said it recognised the backing given by three of its largest shareholders — Neil Woodford, through his funds, Marathon and Invesco — to NSF, in which the shareholders also have a substantial holding. But it said it was committed to maximising value for all shareholders and would explore alternatives to achieve that objective.

Stocks spent much of the week on a continued upswing, largely on lingering hopes for a breakthrough in US-China trade talks. The Yuan moved up after Chinese officials reiterated that the currency would not be used as a pawn in the trade debate. Ultimately President Trump at an Oval Office meeting on Friday reiterated openness to extending the March 1 China tariff deadline should progress continue to be made after the Chinese Vice Premier Liu announced his delegation would be staying in DC for two additional days of trade talks. Oil prices continued upward to levels not seen since November even though US domestic production reached 12M bpd for the first time. The Greenback edged lower, which coincided with a further breakout in gold prices. Apr gold futures crossed $1,340 for the first time since May 2018 before backing off late in the week. Wednesday’s FOMC minutes and a slew of Fed speakers that followed affirmed the 'patient' narrative has been adopted by a consensus and many view the balance sheet unwind coming to an end sometime this year.

For the week the S&P rose 0.6%, the Dow added 0.6% and the NASDAQ gained 0.7%. The focus was on more quarterly earnings in corporate news for this President’s Day-shortened week. Walmart’s holiday quarter came in ahead of expectations on both top and bottom line, as well as on same store sales, despite the poor Dec sales data released by the Commerce Dept last week. Avis Budget lifted on an earnings beat, helping Hertz shares, noting lower fleet costs and improved pricing. Domino’s dropped on disappointing same store sales and margins hit by inflationary pressures. Kraft Heinz fell precipitously after announcing a weak earnings report that included news of an SEC investigation and a dividend cut. Stamps.com market cap was nearly halved after it said it would discontinue its exclusive partnership with USPS.

Macro :

- U.S.-China Said to Haggle Over How to Enforce Currency Pact

- May Pledges Brexit Vote by March 12 in Another Play for Time

Keep an eye on :

- AST IM : Astaldi Sees ~EU365M 2019-2021 From Receivables Securing FRNs

- HMSO LN : Hammerson Set to Announce More Assets Sales This Week: Times

- ISP IM : Intesa May Acquire Stake in Pirelli Investor Camfin, Sole Says

- LBK SM : Abanca Sends Letter to Liberbank Board Outlining Proposal

- NOVN SW : Novartis Therapy Seen as Cost-Effective at Up to $1.5 Million

- PSN LN : Persimmon Faces Review of Help to Buy Participation: Times

- PIRC IM : Intesa May Acquire Stake in Pirelli Investor Camfin, Sole Says

- SFER IM : Salvatore Ferragamo Chairman Says Iconic Brand Is Not for Sale

- SCR FP : Scor sues Barclays over botched takeover deal documents - FT

- SEN GY : Senvion Delays Annual Statement as Board Seeks to Secure Funding

- SDRL US : Seadrill Proposes Amendments to 12% Senior Secured 2025 Notes

- SWEDA SS : Folksam Calls on Swedbank to Inform Market About Transactions

- TIT IM : Vivendi Asks Telecom Italia to Replace Five Elliott Directors

- VIV FP : Vivendi Asks Telecom Italia to Replace Five Elliott Directors

* WSJ (Weekend): Citing progress in U.S.-China trade talks, Donald Trump said he will consider extending a deadline to raise tariffs, and hopes to meet next month with Chinese leader Xi Jinping to complete a broad trade agreement; +/- FB: Millions of smartphone users share data, including personal health information, with apps, but few are aware that in many cases that data is being passed on to Facebook without their permission or knowledge; Brazilian investment firm 3G hit the scene a decade ago with a string of acquisitions, and then cut costs using a hard-nosed budgeting tactic to create efficient production machines, but after shaking up the American consumer landscape, its strategy appears to be running out of juice; Health clinics that provide on-site abortions, or refer women for the procedure, are set to lose millions of dollars in federal family-planning funds, according to a new Trump administration rule; California Republicans convening for their spring convention this weekend will have to decide whether the path to a comeback lies in minimizing their relationship with Trump, or strengthening it; Eight states led by Democratic governors launched a campaign to pressure the Trump administration to reconsider a measure in the 2017 tax overhaul that high-tax states say has led to a sharp revenue decline; Republican lawmakers in Virginia said they planned to invite lieutenant governor Justin Fairfax and two women who have accused him of sexual assault to testify before a legislative committee, a move that drew criticism from Fairfax and other Democrats; Saudi Arabia signed a wide-ranging set of agreements on energy and trade with China, as crown prince Mohammed bin Salman accelerated efforts to court an economic power that offers a potential counterweight to the U.S., which has become increasingly critical of Riyadh; U.S. stocks have bypassed a nine-consecutive-week winning streak, and are on track for their biggest early-year advance in three decades, a major turnaround that has given investors renewed faith in the nearly 10-year bull market; + TSLA: Automaker rushed a batch of Model 3 vehicles across the Pacific to beat a looming tariff deadline in China, were Tesla hopes the car can deliver the same kind of boost as it did in the U.S.; +/- TWTR: Co-founder and former chief executive Evan Williams is stepping down from the company’s board, closing a 13-year run that started with a simple idea to use up some leftover money; “Volatility measures in markets from stocks to currencies have retreated this year—a sign that investors are shedding caution even as uncertainties linger in the global economy”; H.O.T.S.: It’s becoming clear that KHC’s radical cost-cutting strategy can’t be considered a success, and that food companies must stay ahead of changing consumer tastes; Wayfair is accustomed to spending more money on acquiring customers than it gets back—a habit it should consider breaking; With a market value of nearly $90 billion, BKNG is one of the largest internet companies on the market but is undervalued relative to its peers.

* FT (Weekend): New York Fed president John Williams said the chronically low inflation rates that have plagued developing countries since the financial crisis are creating risks that central bankers must now confront; A study by the UN that amounts to its first assessment of biodiversity warned that a decline in the number and variety of living species poses a “severe threat” to the world’s capacity to produce sufficient food; Big Read piece says HMC’s plan to close a U.K. factory in Swindon “has rocked a sector seen as a British manufacturing story,” and reflects “not just Brexit but a wider set of pressures that are leading carmakers to change gear”; Lex Column: KHC management, long accustomed to a strategy of “slash and burn investing” needs a fresh approach to pull off a recovery; Non-Standard Finance’s performance raises doubts it will be able to deliver should it succeed in a hostile bid for Provident Financial; Newmont shareholders should rightly ask why an underappreciated Goldcorp would deserve even a modest premium in a tie-up while their company received none; Comment: The political deadlock in the U.K. over Brexit may be breaking apart, says Camilla Cavendish, as a recent rebellion among independent politicians in Parliament changes the atmosphere and causes old fault lines to disappear

* NY POST (Saturday): +/- UA: Story reports that MSBNC anchor Stephanie Ruhle was only of several people at the network who had close ties to chief Kevin Plank by serving as his consultants; TSLA chief Elon Musk uses mortgages to keep himself liquid financial, and recently took a $61M on five California homes—some of which he will use to refinance a Bel Air mansion he acquired in 2012; (Sunday): “New York business owners are feeling harassed and baffled by the latest city and state campaigns to tackle workplace sexual harassment—moves that researchers say won’t effectively curb abuse.”

Under-fire Chinese telecoms group introduces model costing up to $2,600

Huawei has joined Samsung in the race to persuade consumers they need to spend more than $2,000 on a new type of foldable smartphone by unveiling its Mate X device at Mobile World Congress in Barcelona on Sunday.

Huawei is on the offensive at the annual telecoms industry event in Barcelona, despite intensifying rows with governments across the US and Europe over the security of its networking products.

Richard Yu, chief executive of Huawei’s consumer business group, took swipes at the company’s smartphone rivals Apple and Samsung on Sunday as he unveiled the Mate X, which unfolds to reveal a seamless 8-inch display.

Mr Yu claimed it was the “world’s fastest foldable 5G phone”, thanks to its in-house processor and modem. He also said it was slimmer than Samsung’s recently unveiled Galaxy Fold, and offering “uncompromised viewing” compared to its rivals.

Mate X is also one of the most expensive smartphones ever released, costing as much as €2,299 ($2,600) when it goes on sale later this year. Samsung drew criticism for pricing its Galaxy Fold at $1,980, when it unveiled the product last week in San Francisco.

The smartphone industry is hoping that as the first generation of foldable smartphones go on sale this year, they will spur consumers to upgrade their existing devices more quickly. Slower replacement rates contributed to a decline in smartphone sales last year.

Despite the industry’s overall decline, Huawei enjoyed strong growth last year, selling more than 206m smartphones, boosting its consumer group’s revenues to more than $52bn. Some analysts forecast that the company could overtake Apple and Samsung to become the world’s largest smartphone maker within the next year or two.

“Seven years ago, nobody knows Huawei, even in China,” Mr Yu said. “Today we are becoming one of the leading brands globally.”

With the Mate X, Huawei is taking a different approach to Samsung in the emerging category for smartphone-tablet hybrids.

Samsung’s Galaxy Fold opens outwards like a book, with a small 4.6-inch display on the exterior, intended for one-handed use. Huawei, by contrast, wraps the display around the exterior of the device, allowing for a much larger 6.6-inch screen on the front when folded in half. Mr Yu said Samsung’s approach was “too small” and “difficult to use” when folded.

Huawei engineers have been working for three years to develop the patented “falcon wing” hinge that sits at the centre of the device.

Huawei’s approach makes the Mate X much thinner — measuring 11m when closed — than the Galaxy Fold, which is 17mm thick.

Forrester analyst Thomas Husson said the Mate X “clearly shows that Huawei is a technology innovation leader” but warned that it would take “a lot more time for a critical mass of consumers to experience the benefits of foldable phones and 5G technology”.

Earlier on Sunday, Huawei showed off updates to its Matebook range of Windows-based laptops and a new 5G hotspot to improve in-home connectivity.

Now in its third year of producing laptops, Huawei said it saw growth of 335 per cent in its PC business last year.

With design and features that aim to appeal to users of Apple’s MacBook line, the new Matebook X Pro offers a 3K touchscreen display, Dolby Atmos audio and a recessed videoconferencing camera that pops up out of the keyboard, which Huawei said offered better security.

Another flagship feature is the Matebook’s ability to send files instantly between the PC and a Huawei smartphone, similar to Apple’s quick-share Airdrop.

Private equity group KKR is exploring a bid for UK supermarket chain Asda after a planned £7.3bn takeover of the UK’s third-biggest grocer by its larger rival J Sainsbury looks set to collapse.

People with knowledge of KKR’s thinking confirmed that the US group is monitoring the situation, but cautioned that the interest was early-stage and there was no certainty it would proceed with an offer for the Walmart-owned grocer.

The Sunday Times, which first reported KKR’s interest, said Tony De Nunzio, a senior adviser at the buyout group, would become the company’s chairman if it manages to strike a deal. Mr De Nunzio served as Asda’s finance director and later its chief executive before stepping down in 2005.

KKR declined to comment. Other private equity firms were quick to rule out their own interest on Sunday, explaining that there were many challenges for an outside investor to put together a successful deal.

Executives at these firms highlighted the ruthless competition in the fragmented UK grocery market sector and cited the frequent price wars in the industry. A takeover of Asda would be “too tricky, too big in a very competitive space”, said one buyout executive.

KKR has experience operating in the retail sector. Its acquisition of pharmacy chain Alliance Boots and its subsequent combination with US rival Walgreens stands as its most profitable investment over the past three decades.

But it is unlikely to be able to match the £7.3bn value implied by Sainsbury’s cash-and-stock bid, since KKR would not be able to achieve the same level of savings as a direct rival.

UK regulators last week dealt a near-fatal blow to Sainsbury’s takeover of Asda, prompting speculation about Walmart’s intention for the supermarket group it has owned since 1999.

The Competition and Markets Authority, in its provisional findings, said the deal would reduce competition nationally and in more than 600 local areas. The regulator called for the parties to pursue large-scale store disposals and even sell one of its brands to create to a new competitor, if they wanted the deal approved.

Analysts expect the two companies to see through the merger review process, which completes on April 30, but speculation has already turned to Asda’s fate should the deal collapse.

Many interpreted that the sale to Sainsbury’s showed that Walmart was no longer interested in directly operating the supermarket chain. Under the terms of the transaction, Walmart would have owned 40 per cent of the combined group’s stock but its voting interest would be restricted to 29.9 per cent.

Walmart is under no pressure to sell Leeds-based Asda, which has remained cash generative even as it ceded customers to rivals Aldi and Lidl. The grocer’s market share was stable at about 15 per cent in 2018, ending the severe reversals of previous years. It also notched up rising same-store sales, helped by UK food price inflation.

French reinsurer wants bank to stop using the documents and hand them over

French reinsurer Scor has sued Barclays, demanding that the bank hand over hundreds of pages of confidential documents relating to a botched takeover bid it was working on. 

Barclays had been advising Covéa, a French mutual insurer, which last year wanted to make a bid for Scor. Covéa is already Scor’s largest shareholder with 8 per cent and has a standstill agreement not to go beyond 10 per cent until April of this year. Scor pushed back strongly against the potential bid and Covéa has since said it was no longer interested in a deal.

In court documents filed with the UK High Court relating to the case, Scor claims that “Barclays obtained from Covéa information that was highly confidential and sensitive to Scor”. Scor is demanding that Barclays stop using the documents and hand them over.

The information includes details of a valuation of Scor prepared by BNP Paribas and details of a rival deal that Scor was working on.

This information, it alleges, came from Covéa’s chief executive Thierry Derez, who at the time had a seat on Scor’s board. He resigned from the board last November. 

“Barclays knew, or ought reasonably to have known, that such information was confidential to Scor and/or that it had been obtained by Mr Derez in breach of confidence and loyalty owed to Scor,” the court documents say. 

“So far as Scor is aware,” adds the filing, “Barclays remains in receipt of the confidential information and remains engaged by Covéa in relation to a potential acquisition by Covéa of Scor.”

Scor is also claiming damages, although the court documents do not detail how much it wants, and it wants an inquiry into how much information Barclays received from Covéa or Mr Derez. 

Barclays declined to comment.

Scor has previously launched legal action against Covéa, Mr Derez and Rothschild, one of the insurer’s other advisers. Rothschild has declined to comment and Covéa has denied any wrongdoing. Its board said last month that it “firmly rejects all the groundless accusations made by Scor and reaffirms its unanimous support to Thierry Derez and his action”.

Mr Derez has dismissed Scor’s claims as “contrived”.

Rothschild and Credit Suisse had also been advising Scor on the takeover attempt but the Swiss bank pulled out in the autumn. 

In an interview with French daily Les Echos last month, Denis Kessler, Scor’s chief executive, said Tidjane Thiam, chief executive of Credit Suisse, intervened personally to stop the bank advising Covéa. 

The Scor boss also said that after winning a case in London’s High Court in December to force Credit Suisse to hand over documents relating to the deal, the bank “sent us more than 395 mails and 3,000 pages, which contained information and documents from Scor that should never have been sent to third parties”.