VIVENDI SAYS SALE FINAL SELECTION OF FINANCIAL ADVISORS FOR THE SALE OF A STAKE IN UMG SHOULD BE COMPLETED IN THE COMING WEEKS
DIA – white knights and wishful thinking
MergerMarket.comHopes that a white knight bidder might emerge to bail out shareholders in Spanish supermarket chain DIA [BME:DIA] have received something of a boost.
A few names are now on the table: Carrefour [EPA:CA], Lidl and Sonae [ELI:SON], are looking at making a rival offer to the EUR 0.67 per share bid already on the table from 29% shareholder LetterOne, according to a local media report.
While there are some solid arguments for an offer bump on DIA, rival bids don’t look like the obvious route for that to happen.
First among the reasons that rivals might want to steer clear of an offer for DIA is because of its key shareholder. LetterOne has close to a controlling position in the supermarket’s stock, so any bidder would need to work in co-operation with LetterOne to complete a deal. LetterOne does not look like an obvious seller of stock at anything close to EUR 0.67, having paid as much as EUR 4.36 per share for 5% of the business in January 2018.
Second, grocery retailers have plenty of their own issues to contend with without adding more. Competitive pressure from discounters and online providers have eroded top-line growth and pressured margins. Shares in Carrefour and Sonae have struggled to make progress over the past five years despite a wider market rally, partly as a result of these pressures. Both Carrefour and Lidl are already outperforming DIA with respect to market share in Spain, according to Kantar market share data for 2018, further reducing the rationale for a bid.
Even if an improved offer were tendered to DIA’s shareholders, a successful bidder would have to contend with a potentially difficult significant majority shareholder in LetterOne. Delisting the business would be hard as a result and synergies, therefore, tough to achieve. Lidl, meanwhile, has never made a significant acquisition of note.
A more plausible scenario perhaps is a bump from LetterOne itself. LetterOne would be motivated to do this not necessarily to stave off rivals but as a sweetener to shareholders in order to hit a minimum 50% of remaining shares acceptance threshold on its voluntary offer. Failure to secure control runs the risk of DIA’s financial difficulties triggering losses for all shareholders.
There’s also a very outside possibility Spain’s stock market regulator CNMV forces LetterOne to up its bid. LetterOne made its latest investment in DIA in September at a price of around EUR 2 per share. Had the investment vehicle launched a mandatory offer, it would have been forced to pay this price but a voluntary offer enabled it to get around the requirement. CNMV has yet to rule on the issue but it’s just one scenario of many in a highly uncertain buyout situation.
Fed's Brainard (voter, dove): retail sales data today certainly caught my eye but it's only one month's data; data does add to story of downside risks - CNBC interview
- Downside risks have definitely increased
- Reiterates expects US growth to be slower y/y
- Downside risks include slower growth in China and Europe, as well as tightening financial conditions
- US underlying growth has been pretty solid but remains attentive to global growth
Viking Global (Andreas Halvorsen) discloses updated portfolio positions in 13F filing: New ADBE position, increased MPC FB CRM MSFT V NFLX holdings
Highlights from 2018 Q4 filing as compared to 2018 Q3 filing:
- New positions in: ADBE (~2.78 mln shares)
- Increased positions in: MPC (to ~13.24 mln shares from ~7.15 mln shares), V (to ~6.13 mln from ~1.25 mln), FB(to ~4.8 mln from ~1.78 mln), CRM (to ~5.17 mln from ~2.18 mln), MSFT (to ~13.17 mln from ~10.27 mln) IQ(to ~4.43 mln from ~1.58 mln), EXAS (to ~3.96 mln from ~1.29 mln) NFLX (to ~3.03 mln from ~0.59 mln), PGR(to ~3.46 mln from ~1.29 mln),
- Closed positions in: GE (from ~132.43 mln shares), PE (from ~16.62 mln), OLN (from ~7.19 mln), PCG (from ~5.73 mln), PTEN (from ~4.56 mln), WPX (from ~3.41 mln), LNC (from ~3.31 mln), TS (from ~2.19 mln), RACE(from ~1.52 mln), PDD (from ~1.41 mln)
- Decreased positions in: TD (to ~8.99 mln shares from ~74.17 mln shares), DIS (to ~3.39 mln from ~10.87 mln),DWDP (to ~5.85 mln from ~10.39 mln), LEN (to ~0.25 mln from ~3.4 mln), MYL (to ~1.93 mln from ~3.76 mln),MIDD (to ~0.62 mln from ~2.41 mln), RJF (to ~2.49 mln from ~4.17 mln), TMO (to ~0.55 mln from ~1.88 mln),ABEO (to ~0.29 mln from ~0.78 mln)
White House Econ Adviser Kudlow: there are glitches in the retail sales data; data was affected by govt shutdown - Fox News interview
- Hopefully now the Fed will step aside; delighted that Fed policy is now on hold
- Confirms that Pres Xi will join China-US trade team discussions on Friday
- The vibe in Beijing has been good
- Still no decisions yet on whether to postpone March 1 trade deal deadline
- Despite deficit numbers this week, administration still thinks tax cuts will lead to lower deficits in the long run
ana Partners (Barry Rosenstein) discloses updated portfolio positions in 13F filing: New SNPS CNC WP MA CRM positions
Highlights from 2018 Q4 filing as compared to 2018 Q3 filing:
- New positions in: SNPS (~0.46 mln shares), CNC (~0.4 mln), WP (~0.2 mln), WSC (~0.13 mln), CRM (~0.12 mln), MA (~0.08 mln), IVV (~0.07 mln)
- Increased positions in: EDU (to ~0.88 mln shares from ~0.08 mln shares), EDU (to ~0.88 mln from ~0.08 mln),TIF (to ~1.89 mln from ~1.13 mln; also has calls), CVNA (to ~0.55 mln from ~0.15 mln), MSFT (to ~0.69 mln from ~0.33 mln) ZAYO (to ~1.89 mln from ~1.67 mln), ADBE (to ~0.26 mln from ~0.21 mln) SPY (to ~0.29 mln from ~0.27 mln), ANTM (to ~0.29 mln from ~0.28 mln),
- Maintained positions in: ADSK (~0.36 mln shares
- Closed positions in: KDP (from ~3.25 mln shares), HAIN (from ~1.33 mln), A (from ~0.81 mln), EA (from ~0.66 mln), FTCH (from ~0.39 mln), DLTR (from ~0.38 mln), BABA (from ~0.35 mln), SVMK (from ~0.32 mln)
- Decreased positions in: FLMN (to ~1.35 mln shares from ~4.59 mln shares), FDC (to ~2.12 mln from ~2.84 mln), HDS (to ~5.4 mln from ~6.02 mln), TEVA (to ~2.45 mln from ~2.91 mln), BSX (to ~1.79 mln from ~1.97 mln), AAPL (to ~0.1 mln from ~0.28 mln), ZBH (to ~2.29 mln from ~2.44 mln
Trade Friction Stymies Growth in Germany and Japan
Powerhouse economies avoid recession but look set for a weak year ahead
Japan and Germany avoided slipping into recession as 2018 drew to a close, but the world’s third- and fourth-largest economies seem set for a year of weak expansion amid uncertainty about the future of global trade rules and the severity of China’s slowdown.
The abrupt slowdown in the eurozone’s industrial powerhouse in the second half of last year partly reflected short-term problems in its key automobile and chemical industries. Similarly, Japan’s economy was hit in the third quarter by a typhoon that closed a major airport and an earthquake that left the northern island of Hokkaido without electricity for two days.
Japan’s return to growth was more decisive than Germany’s in the final three months of the year, with gross domestic product increasing at an annualized rate of 1.4% in the Asian giant, compared with 0.1% in its European counterpart.
But both suffered from weakening exports, which will likely continue to hold back growth this year. Exports subtracted 0.3 percentage point from Japanese growth in the October-December quarter, showing the impact of the U.S.-China trade conflict and the overall slowdown in the Chinese economy.
“Risk is tilted toward the downside, in our view, with further economic slowdown in China and around the globe and a deterioration in sentiment due to trade friction as the main downside risk factors,” said Goldman Sachs economist Naohiko Baba.
In addition to the prospect of weaker sales to Chinese buyers, Germany also faces the threat of a rise in U.S. tariffs on automobile imports from Europe, and the impact of a potentially disorderly U.K. departure from the European Union.
“The headwinds to German exporters should pick up further,” said Andreas Rees, an economist at UniCredit.
Responding to the fourth-quarter figures, Deutsche Bank slashed its growth forecast for this year to 0.5% from 1%. If realized, that would be the weakest expansion rate since 2013, when the eurozone was still mired in its government-debt and banking crises.
Germany’s slowdown is part of a wider European trend that has cast a cloud over the global economy’s prospects this year. Italy entered a technical recession at the end of last year—defined as two straight quarters of falling output—with France’s economy impaired by mass protests against President Emmanuel Macron’s reform agenda.
Figures also released Thursday by the EU’s statistics agency showed the eurozone economy grew at an annualized rate of 0.8% in the final three months of last year, a slightly weaker expansion than the 0.9% it previously estimated. And there were signs that weakness was spreading to other European countries that have close ties with Germany, with Poland’s economy slowing sharply in the final quarter.
Figures released Wednesday showed factory output in the eurozone fell at the fastest annual pace in nine years as 2018 drew to a close, with the sector seeing two straight quarters of contraction as overseas demand for equipment and tools weakens.
As a leading exporter, Germany’s fortunes often reflect swings in the global economy, and the signs aren’t encouraging. German goods exports to China dropped 7.6% from a year earlier in December, while shipments to the U.S. and the U.K. fell by 6.4% and 8.8%, respectively, from December 2017, according to the country’s statistics body.
Figures released Thursday that show China’s exports surged in January appear to be a rare piece of good news for the global economy. But economists cautioned that they likely reflect exporters hurrying out orders ahead of February’s Lunar New Year holiday and ahead of a March 1 deadline to reach a trade deal. Even given what will likely prove to be a temporary boost to activity, China’s imports from the rest of the world fell for the second straight month.
China Seeks to Lure U.S. With Pledges to Boost Chip and Other Purchases
Trade talks remain deadlocked as Beijing refuses to eliminate coerced technology transfers or government subsidies to Chinese companies
BEIJING—China is counting on promises of big purchases of semiconductors and other U.S. goods to ease trade tensions and persuade President Trump to extend a tariff truce and later resolve the market-rattling dispute directly with Chinese leader Xi Jinping.
During the negotiations this week that were in their fourth day Thursday, U.S. and Chinese officials have remained deadlocked on a number of issues underlying the current trade dispute, according to people with knowledge of the matter. These include Washington’s complaints that China pressures American firms to share technology and uses industrial policies to favor domestic companies at the expense of U.S. competitors.
Having denied those allegations, Chinese officials instead are focusing on ways to boost U.S. exports to China. For instance, China’s top economic-planning agency is proposing to increase U.S. semiconductor sales to China to $200 billion over six years, said U.S. companies briefed on the plan. The sum is about a five-fold increase over current exports.
Chinese negotiators are also offering to eliminate a national vehicle-procurement policy that has given consumers subsidies to buy domestically made new-energy, small-engine and other types of cars, the people with knowledge of the talks said.
These proposals come on top of recent pledges Beijing has made to significantly increase China’s purchases of U.S. farm and energy products, including soybeans, liquefied natural gas and crude oil. Late last month, in the Oval Office, President Trump, who has campaigned on cutting the bilateral trade deficit, praised the soybean pledge.
Chinese negotiators, led by Vice Premier Liu He, hope that boosting exports will pave the way for a summit between Chinese President Xi and Mr. Trump, who would then try to work out thornier issues, including China’s industrial policies, the people said.
Such an arrangement may fall short for the Trump administration. This week’s negotiations began Monday with lower-level officials. U.S. Trade Representative Robert Lighthizer, who, along with Treasury Secretary Steven Mnuchin, is leading the U.S. side in the high-level talks on Thursday and Friday, is expected to make a recommendation to President Trump about whether to take the deal with Beijing, the people with knowledge of the matter said.
Mr. Lighthizer has been seeking more fundamental changes in the way Beijing runs the economy, such as eliminating coerced technology transfers and government subsidies to domestic companies. The latest Chinese proposals don’t appear to address those structural issues.
Changes to the vehicle-subsidy policy at the national level, for example, may not address similar policies by local governments, hindering sales of imported foreign vehicles in China. Boosting semiconductor purchases may also bolster China’s plans to dominate high-tech industries like aerospace and robotics—policies heavily criticized by the Trump administration.
The continuing trade talks are part of a 90-day truce declared by Messrs. Trump and Xi at their last meeting on December 1. U.S. markets have been rising recently on expectations, fed by Mr. Trump’s comments about progress in the talks, that the U.S. will either reach a limited deal by the March 1 deadline or extend the trade truce.
Such an outcome could open Mr. Trump to criticism from his conservative base—already upset by his willingness to compromise on funding to build a wall on the U.S.-Mexico border. Tariffs on $200 billion of Chinese goods are currently scheduled to rise to 25% from 10% at 12:01 a.m. March 2.
“The President should definitely impose tariffs on March 1,” said former White House strategist Steve Bannon, who works closely with other conservative antifree traders. “Then the Chinese will hear the clock ticking. Trump has them cornered,” he said. “Why lift the pressure?” Mr. Bannon blames Wall Street executives for weakening Mr. Trump’s resolve.
Beijing is pinning its hopes on a presidential summit to solve the trade dispute. During his trip to Washington last month, Vice Premier Liu, Mr. Xi’s economic point-man, extended an invitation to Mr. Trump to meet with the Chinese leader on the tropical island of Hainan.
Mr. Trump and White House officials have said the U.S. leader hopes to meet with Mr. Xi soon, but elsewhere. On Wednesday, White House Press Secretary Sarah Sanders told Fox News that Mr. Trump’s Mar-a-Lago retreat in Palm Beach, Florida, would make a good venue for such a meeting.
Some of China’s plans to increase U.S. purchases could also run into trouble with American business groups and companies. The semiconductor plan would require U.S. companies to rework their supply chains, so that chips are shipped directly to China from the U.S. instead of being routed through countries like Mexico or Malaysia, where many semiconductors are assembled and tested, the companies said. The goods would be counted as U.S. exports, rather than, say, Malaysian exports.
The assembly and testing could also be done in China, and the goods would still be counted as U.S. exports, under the Chinese proposals. The National Development and Reform Commission, the Chinese planning agency that proposed the semiconductor purchases, has said that the cost of remaking the supply chain would be financed by Chinese local governments eager to get more employment and taxes that come with testing-and-assembly facilities.
Beijing is also arguing that its purchase of chips overall would rise, given an expected profusion of electronic products expected to be linked to the internet in coming years. U.S. companies said they wouldn’t be able to meet the demand China is projecting; the U.S. exported $6.1 billion of semiconductors to China in 2017.
So far, U.S. companies have rebuffed the Chinese offer as lacking substance and making them more dependent on China, when they are trying to lessen their dependence. They have urged the U.S. government not to accept the proposal. One U.S. chip maker said it had been lobbied by the U.S. Commerce Department on the merits of the plan.
The U.S. Commerce Department and China’s NDRC didn’t immediately respond to requests for comment.
“This semiconductor purchase pledge is a distraction and too clever by a half,” said John Neuffer, chief executive of the Semiconductor Industry Association, a U.S. trade association. He described the offer as an “accounting gimmick designed to help China achieve its Made-in-China 2025 goals.”
Made-in-China 2025 is a 2015 Chinese plan to become dominant in high-technology industries. Chinese officials have said the program is being revised after sustained foreign criticism.