Carl Icahn Has Sizable Stake in Cigna, Plans to Vote Against Express Scripts Deal
Activist investor likely to urge other shareholders to vote against $54 billion proposed takeover
Activist investor Carl Icahn has built a sizable stake in Cigna Corp. CI 1.96% and plans to vote against the health insurer’s $54 billion purchase of Express Scripts Holding Co., the latest sign of trouble for the planned tie-up.
Mr. Icahn, whose stake amounts to less than 5% of Cigna’s shares outstanding, believes the company is paying too high a price for the pharmacy-benefit manager, which faces threats on a number of fronts, according to people familiar with the matter.
Cigna in March agreed to pay what amounted to about $96.03 a share in cash and stock for Express Scripts. In a sign of shareholder fear that the deal won’t go through, Express Scripts stock was already trading well below the offer price and fell further after The Wall Street Journal reported on Mr. Icahn’s stance. It closed at $74.44, down 6.3%. Cigna stock rose by about 2%.
The activist is leaning toward trying to convince other shareholders to oppose the deal too, the people said. Cigna and Express Scripts shareholders are set to vote on the deal Aug. 24. A majority of the outstanding shares of both companies must vote for the deal in order for it to close.
Behind Mr. Icahn’s opposition, the people said, is fear the combined company would have to contend with Amazon.com Inc.’s growing presence in the health-care industry and a proposal to limit the manufacturer rebates pharmacy-benefit managers receive.
Cigna had no immediate comment. The company has said the deal will help the company expand its health-care offerings and better control costs. Express Scripts said “Our combination with Cigna will deliver significant value to shareholders and position our companies to continue transforming healthcare.”
The tie-up has been challenged from the beginning. Cigna investors registered their disapproval when it was announced, driving down the company’s shares by 15% in the ensuing days.
An influential activist like Mr. Icahn coming out against the deal could galvanize the opposition and increase the risk it will fall through. However, only Cigna shares accumulated by July 10 can be voted for or against the deal, meaning Mr. Icahn won’t be able to convince other hedge funds to jump in and oppose it.
Critics of the deal believe the combined company would face a challenge keeping up with Amazon, which has taken a number of steps toward entering the health-care industry and said in June it would spend $1 billion to buy PillPack Inc., an online pharmacy that presorts medications and ships them to customers’ homes in nearly every state.
Pharmacy-benefit managers such as Express Scripts, which act as middlemen and help negotiate discounts with drugmakers, are also at risk of losing lucrative rebates they receive under a proposal from the Trump administration meant to lower drug prices.
Cigna agreed to the deal after a previous agreement to combine with fellow health insurer Anthem Inc. was blocked by regulators and as many other health-care services companies were blurring traditional lines and joining forces. CVS Health Corp. late last year signed a nearly $70 billion deal to buy health insurer Aetna Inc.
Express Scripts was dealt a blow last year when Anthem, its biggest customer, said it planned to launch its own pharmacy-benefit manager.
Should the deal close, Cigna shareholders would own about 64% of the combined company, while Express Scripts investors would own the rest.
Express Scripts reported its second-quarter earnings late Wednesday. It had net income of $877.3 million, a 9% increase from a year ago, driven by higher gross profits in its core pharmacy-benefit business. Cigna is slated to report earnings Thursday morning.
Barclays rebuffs activist pressure with buoyant results
Strong investment bank performance boosts earnings
Barclays has fired back against activist investor Edward Bramson with a strong quarterly performance in its investment bank, which helped the UK group to report an almost trebling of pre-tax profits in the period.
Boosted by stronger equity trading activity in the three months to June, Barclays international unit reported slight year-on-year rises in pre-tax profits and in revenues that strengthens its case for investing in the contested investment bank rather than pulling back.
The investment banking unit’s solid performance, which mirrors strong trading results from US rivals, contributed to an overall 10 per cent rise in revenues at Barclays. Revenues inched up at its UK unit, but this made a healthy pre-tax profit compared with a loss last year.
Operating costs across the group were down 2.6 per cent, while lower litigation and conduct charges helped the bank to make a net profit of £1.2bn - more than a third above consensus analysts’ expectations and compared to a loss of £1.4bn in the same period of last year.
The bank proposed an interim dividend of 2.5p and said it was on track more than double the annual pay-out to 6.5p this year. The bank had a return on tangible equity of 11.8 per cent and said it was on track to hit its target of above 9 per cent next year.
Jes Staley, chief executive, said: “The second quarter …underlines the growing pace of delivery at Barclays. This is a business which is performing well, having addressed the challenges of the last decade.”
The better-than-expected results may relieve some of the pressure on Barclays from Mr Bramson’s activist investment fund Sherborne, which recently became one of its biggest shareholders by acquiring a 5.4 per cent interest in the bank.
Mr Bramson is yet to publicly show his hand but one person who knows him well said he was likely to call for Barclays to return to shareholders much of the £23bn of capital tied up in its corporate and investment banking division by shrinking the unit.
But Barclays said its closely watched fixed income trading unit decreased revenues by 2 per cent in the quarter while its equity trading revenues were up 32 per cent.
Since he took over as Barclays chief executive in December 2015, Jes Staley has sought to clear up the non-core assets that were clogging up its balance sheet and the litigation risks that represented a barrier to rebuilding its dividend.
Barclays recently completed its multiyear restructuring and sold off most of its African operation to address longstanding concerns about its capital levels.
China Tower raises $7bn in world’s biggest IPO since 2016
Deal prices at the bottom of marketed range as demand wanes
China Tower Corporation, the world’s largest telecommunications tower group by revenue, has raised $6.9bn in the biggest initial public offering globally since 2016, despite falling short of the company’s IPO target.
The state-backed Beijing-based company, which controls about 97 per cent of the network that supports China’s mobile communications, has sold shares at HK$1.26 each, valuing the company at about HK$217bn ($27.6bn).
China Tower’s IPO is the largest since Postal Savings Bank of China, which raised $7.4bn when it listed in September 2016, according to data provider Dealogic.
However, the IPO priced at the bottom end of the range, undershooting the company’s ambition to price at the upper end of the band at HK$1.58 a share, following lacklustre demand from investors.
The IPO price is a multiple of 7.1 times adjusted earnings before interest, tax, depreciation and amortisation for 2018.
If the overallotment option is exercised then the total amount raised would reach about $8bn. Shares will start trading next Wednesday.
The IPO follows on the heels of Chinese smartphone maker Xiaomi, which priced at the bottom of its range to raise $4.72bn, valuing the company at just half its original $100bn goal.
The damped investor demand comes as Chinese stocks have plunged over the past few months, with the Shanghai Composite index sliding into bear market territory in June. China’s economic growth has recently showed signs of slowing down, while trade tensions with the US continue to escalate.
Despite the lax investor interest, bankers say there is a strong pipeline of deals in Hong Kong, including fintech and biotech companies. Hong Kong Exchanges and Clearing has made a series of initiatives this year to attract listings, including allowing biotech companies that have yet to generate revenue or profit to float.
China Tower made a pre-tax profit of Rmb2.7bn ($398m) in 2017 but was lossmaking as recently as 2015.
Analysts said China Tower had an unchallenged monopoly of the domestic mobile market, which is dominated by government-backed groups. While China Tower controlled more than 1.8m mobile towers, the second-largest company in the market had just 17,260 towers, according to China Tower’s listing application.
The IPO attracted private and state-backed investors that bought a combined $1.4bn portion of the deal. Chinese private equity group Hillhouse Capital took a $400m stake and Alibaba took $100m. Other investors included state-owned Industrial and Commercial Bank of China, China National Petroleum Corporation and SAIC Motor. New York-listed OZ Management absorbed a $300m stake.
The joint sponsors for the China Tower float are CICC and Goldman Sachs. Bank of America Merrill Lynch and JPMorgan are joint global co-ordinators and joint bookrunners.
Credit Suisse chooses Frankfurt as key post-Brexit hub
Bank has already moved several hundred million dollars of assets to support new centre
Credit Suisse has picked Frankfurt as a key post-Brexit centre for its investment banking and capital markets business and has already moved several hundred million dollars of assets to support the new hub.
The corporate manoeuvres to create the new structure are revealed in the notes to Credit Suisse’s expectation-beating second-quarter earnings the bank reported on Tuesday.
The Swiss group, one of the last big international banks to reveal its post-Brexit plans, is also moving 50 traders to Madrid, as reported earlier this week, and recently confirmed it had been granted a new brokerage licence in Paris.
In Frankfurt, Credit Suisse is re-purposing an existing entity so that it can become part of the group’s Investment Banking & Capital Markets unit, which advises companies on mergers and acquisitions, raising debt and equity.
A person familiar with the plans said the change in structure was “certainly part of the Brexit strategy” and would facilitate Credit Suisse doing investment banking and capital markets business out of Germany.
The financial statements show that the transfer affects about $200m of net assets held by Credit Suisse (Deutschland) Aktiengesellschaft, which have been moved from Credit Suisse’s wind-down unit to IBCM.
The person would not comment on the number of bankers who might move to Germany, but it is likely to be in the range of about 50.
Credit Suisse will move some bankers to other EU corporate centres, as well as its Paris brokerage, bringing the total moves from London to about 250 from the Swiss bank’s 5,500 headcount there.
Frankfurt and Paris, the favoured post-Brexit choices of large US banks, had long been mooted as potential homes for Credit Suisse’s EU businesses after Brexit, along with Amsterdam.
Credit Suisse had explored converting its Irish third country branch into one of its Brexit hubs, but decided against this after discussions with the Central Bank of Ireland. Credit Suisse will continue to run its prime brokerage trading business from Dublin under the existing licence.
Several other banks also said they had difficulty obtaining licences in Dublin for post-Brexit hubs, though Bank of America has managed to get licences to base its EU trading and banking entities in Dublin.
While the investment bank has become a smaller part of Credit Suisse under a three-year restructuring plan, chief executive Tidjane Thiam argues that they are essential for supporting the wealth management activities at the centre of the group.
His strategy won plaudits from analysts and investors earlier in the week when the bank announced an 81 per cent rise in second quarter pre-tax profits versus a year earlier.
New Air France-KLM CEO expected in September, possibly American (translated)
02 AUG 2018
French-Dutch airline Air France-KLM [EPA:AF] expects to present its new CEO early September, Dutch daily Het Financieele Dagblad reported, citing financial Manager Frédéric Gagey and KLM CEO Pieter Elbers.
Gagey said it’s difficult to find the right person for the job because there are not many candidates with suitable profiles.
In May Jean-Marc Janaillac resigned from his position as CEO. Since then, the airline has been looking for a replacement. Several candidates were mentioned, but none of them seemed to be up to the job, the report said.
A report on the Dutch news site Iex.nl said that, based on information from French business magazine La Tribune, the new CEO could be a national from the USA. Earlier reports suggested that Air France-KLM insisted on having a European CEO, but talks with a US national are reported to be taking place. The name of the US candidate was not mentioned.
Het Financieele Dagblad also reported that Air France-KLM made a profit of EUR 109m and a turnover of EUR 6.6m in the second quarter of this year, despite strikes at Air France. KLM was significantly more profitable than Air France with an operating income of EUR 328m for KLM and an operating income of EUR 13m for Air France in the second quarter.
Asian stocks declined with the steepest losses in China as trade worries came back to the fore. Japan’s 10-year bonds swung as the central bank stepped in to temper yield gains following its policy tweaks earlier this week.
China and Hong Kong equity indexes led losses across the region with declines of more than 3 percent, while emerging-market currencies fell with developing nation stocks. Ten-year JGB yields touched 0.145 percent, the highest since February 2017, before paring gains as the Bank of Japan made an unscheduled offer to buy bonds. Treasury yields fell after reaching 3 percent this week for the first time since June as the Federal Reserve unanimously decided to leave rates unchanged while making it clear borrowing costs are headed higher. The offshore yuan edged lower.
US After Hours : DXCM +20%, TSLA / FTNT +9% are higher, while RRD -14%, TRIP -12%, FEYE -4% are lower following earnings/guidance
Nikkei -1.08% Hang Seng -2.33% CSI -2.96% Shanghai -2.78% Shenzen -3.41%
Eur$ 1.1642 CNH 6.8325 CNY 6.8142 JPY 111.58 GBP 1.3096 CHF 0.9931 RUB 63.0235 WTI$
S&P -0.24% EuroStoxx -0.40% FTSE -0.23% DAX -0.65% SMI -0.76%
Macro :
- Switzerland July Consumer Confidence -7 vs Est. +2
Keep an eye on :
- AKA FP : Akka’s Targets Achievable, PT Set at Street-High: Berenberg
- ARGX BB : Argenx First Half Operating Loss Narrower Than Estimates
- ASC IM : F2i Says It Made Offer to Invest in Ascopiave, Asco Holding
- ATC NA : Altice Europe 2Q Adj. Ebitda EU1.32B; Est. EU1.3B
- ATC NA : Altice Raises Stake in Siresp Telecom System to 52.1% (1)
- AMG NA : AMG Advanced 2Q Ebitda Rises 59% to $50.7m, Raises Dividend
- AMUN FP : Amundi Adj. Net Income Rises 12% in 2Q, Gets Inflows of EU2.6bln
- ANDR AV : Andritz Second Quarter Net Income 3.3% Above Estimates
- ACA FP : Credit Agricole Gets 13.8 Mln New Shares From Capital Increase
- CS FP : Axa Earnings Per Shares Rose 6%, Towards Top End of Target Range
- BFIT NA : Basic-Fit First Half Adjusted Ebitda 2.4% Below Estimates
- BMW GY : BMW Second Quarter Ebit 2.6% Above Estimates
- CGG FP : CGG 2Q Operating Profit $40M; Outlook Reiterated
- CSGN SW : Credit Suisse Chooses Frankfurt as Post-Brexit Hub: FT
- DAI GY : Mercedes-Benz USA July Vehicle Sales Fall 23% to 20,034 Units
- DLG GY : Dialog Semi Sees Third Quarter Revenue $365 Mln To $395 Mln
- EDF FP : EDF Renewables, PGGM Sign Pacts on U.S. Wind and Solar Projects
- ELG GY : Elmos Semi Second Quarter Revenue EU69.1 Mln
- FB FP : WhatsApp to Charge Companies Sending Messages to Customers
- GAM SW : GAM Suspends Redemptions in Unconstrained/Absolute Return Fund
- GRF SM : Grifols Completes Purchase of Biotest for $286 Million
- H5E GY : HELMA Eigenheimbau Rated New Buy at Berenberg; PT 46 Euros
- BOSS GY : Hugo Boss Second Quarter Adjusted Ebitda Misses Lowest Estimate
- ILD FP : Iliad Says It’s Still Gaining Free Mobile 4G Subscribers
- INGA NA : ING Second Quarter Underlying Pretax Profit Beats Estimates
- INTER NA : Intertrust Second Quarter Underlying Revenue +5.4%
- KARN SW : Kardex First Half EBIT EU23.6 Mln
- LXS GY : Lanxess Revises Full Year Adjusted Ebitda Forecast
- OMV AV : OMV Second Quarter Clean CCS Operating Result Misses Estimates
- PFV GY : Pfeiffer Vacuum Second Quarter Ebit EU20.3 Mln
- PIRC IM : Pirelli to Buy 49% of China Production Plant for EU65m
- PST IM : Poste Italiane First Half Revenue Meets Estimates
- RHM GY : Rheinmetall Sees FY Organic Revenue About +8%, Saw +8% To +9%
- RHK GY : Rhoen Klinikum First Half Ebitda EU51.1 Mln
- RYA LN : Ryanair Says German, Dutch Pilots Likely to Join Aug. 10 Strike
- SIE GY : Siemens Unveils New Structure to Navigate Tech Disruption
- GLE FP : SocGen 2Q Net Income Rises; Trading Revenue Tops Estimates
- GLE FP : OTP Bank To Buy Societe Generale’s Albanian, Bulgarian Units
- SONOS IPO : Sonos IPO Prices at $15/Shr, Below Range of $17-$19/Shr
- TEN IM : Tenaris Second Quarter EPS Misses Estimates
- TGS NO : TGS Second Quarter Ebit Beats Estimates
- UBI IM : UBI Concluded Transfer of Bad Loans Gross Book Value EU2.75B
- VACN SW : VAT First Half Ebitda CHF122.1 Mln
>>> Up
* Biffa Upgraded to Buy at Peel Hunt
* Elementis Upgraded to Overweight at JPMorgan; PT 2.90 Pounds
* Ferrari Upgraded to Equal-weight at Morgan Stanley; PT $120
* GBL Upgraded to Buy at SocGen; Price Target 102 Euros
* Legrand Upgraded to Buy at Kepler Cheuvreux; PT 70 Euros
* Norma Upgraded to Buy at HSBC; PT 63 Euros
* Sabadell Upgraded to Sector Perform at RBC; PT 1.45 Euros
* Scor Upgraded to Buy at HSBC; PT 40 Euros
* Standard Chartered Raised to Hold at Independent Research
* Wihlborgs Upgraded to Buy at Kempen & Co; PT 115 Kronor
>>> Down
* Campari Downgraded to Market Perform at Raymond James
* Castellum Downgraded to Neutral at Kempen & Co; PT 160 Kronor
* Shell Cut to Equal-weight at Morgan Stanley; PT 28.60 Pounds
* Subsea 7 Downgraded to Underperform at Macquarie; PT 101 Kroner
* WDP Downgraded to Neutral at Kempen & Co; PT 115 Euros
>>> Initiation
* Akka Technologies Rated New Buy at Berenberg; PT 77 Euros
* Asos Rated New Outperform at Wells Fargo; PT 96 Pounds
* boohoo Rated New Market Perform at Wells Fargo; PT 2 Pounds
* Gamma Communications Rated New Buy at Citi; PT 9.30 Pounds
* Zalando Rated New Outperform at Wells Fargo; PT 62 Euros
>>> Call
* Shell Overweight Rating No Longer Supported, Morgan Stanley Says