>>> Shire, Takeda rumoured to have reached logjam over price - report

Shire, Takeda rumoured to have reached logjam over price - report

Shire [LON:SHP] and potential acquirer Takeda Pharmaceutical [TYO:4502] of Japan are rumoured to have reached an impasse in negotiations over the deal’s valuation, the Financial Times reported. Amid the market speculation, Shire’s share price dropped slightly, the report said.
Dublin-headquartered Shire has a market capitalisation of GBP 32.9bn (USD 38.0bn).
The original report appeared in print, page 20

FT : Shire/Takeda: stretch exercise
Japanese group is likely to struggle to extract big operational savings from a tie-up

Bid talk is a tonic in a jittery market. Shire’s shares soared 19 per cent on news of a potential deal. It is the nerves of investors in the would-be buyer — Takeda of Japan — that need soothing.

Japan’s largest drug company has been aggressively seeking growth outside its slowing home market since Frenchman Christophe Weber, a former GlaxoSmithKline executive, became its first foreign boss in 2014.

Takeda described its approach as exploratory. But it sounds keen. It listed six advantages of a deal, including beefing up its position in the US and replenishing its drug pipeline.

Buying Shire would be a big stretch. At about £30bn (¥4.4tn), Takeda’s market capitalisation is only £2bn more than that of Shire before reports of the deal broke. Including a bid premium of, say 30 per cent, and Shire’s hefty net debt of £13.5bn, a deal might be valued at about £50bn.

No wonder Takeda took pains to say it would take a disciplined approach, mindful of its dividends and credit rating. Investors might be unconvinced. When Takeda bought US oncology group Ariad Pharmaceuticals in Mr Weber’s first big deal for $5.2bn, it paid a premium of 75 per cent. The deal increased Takeda’s ratio of net debt to operating earnings before standard deductions to 2.6 times, resulting in a cut to its credit rating.

If a Shire takeover resulted in a ratio of about three times, the companies — with forecast 2018 operating earnings of roughly £7.6bn — would have net debt of almost £23bn. To make this work, Shire holders would have to accept a big wodge of Takeda paper.

Justifying that bid premium would be tricky. Takeda is likely to struggle to extract big operational savings, although some parts of Shire’s business — particularly gastrointestinal and neuroscience — might be a good strategic match.

Having seen its shares fall by nearly a third over the past year, Shire investors will be in a receptive mood. Greater competition and the debt acquired with the $32bn Baxalta deal in 2016 had left the stock trading at just 8.5 times this year’s earnings.

Takeda’s approach is likely to inspire other potential buyers. Good. There are better potential matches. Novartis and Pfizer spring to mind. AbbVie might have another go. Its 2014 bid was nixed by a US tax crackdown. Shire investors will hope any bidder is more successful this time round.

>>> US Close Dow -0.50% S&P -0.29% Nasdaq -0.47% Russell -0.50%


Closing Market Summary: Stocks Trim Weekly Gains on Friday

Stocks slipped on Friday, ending a positive week on a disappointing note, as some geopolitical angst prompted investors to take some money off the table ahead of the weekend. The S&P 500 declined 0.3%, the Nasdaq Composite lost 0.5%, and the Dow Jones Industrial Average dropped 0.5% -- trimming their gains for the week to 1.8%-2.8%.

The major averages started the session modestly higher following better-than-expected first quarter earnings results from financial giants JPMorgan Chase (JPM 110.30, -3.07, -2.7%), Wells Fargo (WFC 50.89, -1.81, -3.4%), and Citigroup (C 71.01, -1.12, -1.6%). However, after a short stint in the green, the financial sector moved lower, bringing the broader market with it. Volatility picked up in the final stretch, with the major averages dropping to new lows before bouncing back, as investors contemplated the likelihood of a U.S.-led strike on Syria over the weekend.

President Trump has promised that the U.S. will be striking the Syrian government, which is accused of carrying out a chemical attack against the rebel-held town of Douma last Saturday, but the president has intentionally made the timing of the attack unclear. Adding to the uncertainty, an attack would likely put the U.S. at odds with Russia, who supports Syrian President Bashar al-Assad and has vowed to shoot down any missiles fired at Syria.

The energy sector (+1.1%) helped keep losses in check on Friday, extending its weekly gain to 6.0%, as oil prices rallied for the fifth day in a row. West Texas Intermediate crude futures jumped 0.3% to $67.26 per barrel -- their best level in more than three years -- benefiting, once again, from the uncertainty surrounding the oil-rich Middle East. The utilities (+0.7%), consumer staples (+0.5%), and real estate (+0.5%) sectors also advanced, but the seven remaining groups finished in the red.

Unsurprisingly, the financial sector (-1.6%) finished at the bottom of the sector standings following the negative reaction to the big bank earnings. The consumer discretionary space (-0.6%) also underperformed, but no other group lost more than 0.3%. Within the top-weighted technology space (-0.3%), chipmaker Broadcom (AVGO 246.94, +7.51) outperformed, adding 3.1%, following news that the company's board has authorized the repurchase of up to $12 billion of common stock.

In the bond market, U.S. Treasuries finished Friday mixed, flattening the 2s10s spread to 45 basis points -- its lowest level since 2007. The yield on the benchmark 10-yr Treasury note slipped one basis point to 2.82%, while the yield on the 2-yr Treasury note climbed two basis points to 2.37%.

Reviewing Friday's economic data, which was limited to the preliminary reading of the University of Michigan Consumer Sentiment Index for April and the Job Openings and Labor Turnover Survey for February:

  • The preliminary reading of the University of Michigan Consumer Sentiment Index for April declined to 97.8 (consensus 100.6) from 101.4 in March.
    • The key takeaway from the report is that the monthly drop was due to worries about trade policies and expectations for rising interest rates.
  • The February Job Openings and Labor Turnover Survey showed that job openings decreased to 6.052 million from a revised 6.228 million (from 6.312 million) in January.

On Monday, investors will receive Retail Sales for March, the Empire State Manufacturing Survey for April, Business Inventories for February, and the NAHB Housing Market Index for April.

  • Nasdaq Composite: +2.9% YTD
  • Russell 2000: +0.9% YTD
  • S&P 500: -0.7% YTD
  • Dow Jones Industrial Average: -1.5% YTD

>>> Weekly Update

Weekly Market Update: Indices Gain on Softening Trade Rhetoric

Coming into the week much of the focus remained on trade, but on Monday stock markets were initially unsettled by another chemical attack in Syria and a report the office of President Trump’s personal lawyer Cohen was raided by an FBI filter team. Speculation that China was gearing up to devalue the Yuan were quickly pushed aside by more conciliatory comments from President Xi. His speech on Tuesday opened the door for softer rhetoric from President Trump encouraging investors to step back into equity markets. Facebook shares bounced that day as well helping overall FANG sentiment as CEO Zuckerberg appeared in Washington largely deflecting key questions from Congress. Volumes remained light though, as it was another week characterized by 1%+ intraday swings in the indices largely attributed to evaporating bids and offers more so than aggressive positioning. Stocks turned lower on Friday after key bank earnings failed to maintain the rally and ongoing handwringing over the President and is growing contempt for figures at the Dept of Justice. Treasury yields moved up modestly but the curve continued to flatten. Economic data stayed on the softer side, particularly in Europe offsetting what some viewed as mildly hawkish FOMC minutes. WTI crude has consolidated above $67 and is looking at the highest weekly close since 2014 heading into the weekend and a potential Trump decision regarding Syria. For the week the S&P gained 2% led by the energy complex, NASDAQ bounced 2.8% on a tech rebound and the Dow added 1.8%.

In corporate news this week, earnings season kicked off with the release of some bank quarterly reports. JPMorgan, Citi, and Wells Fargo shares drifted lower as investors weighed modest loan growth against rising deposit betas. Delta lifted on a positive earnings release, while American and United descended after offering Q1 guidance. Shares of Bayer and Monsanto jumped when reports indicated that the DOJ was prepared to approve their merger, following the EU issuing its own approval this week of the deal’s modifications. Verifone charged forward after reaching a $3.4B deal to be taken private by Francisco Partners. Biotech firm Avexis announced it would be acquired by Novartis for $218/shr in a cash transaction valued at $8.7B, which lifted other names in the gene therapy sector. And cloud-based software provider Zuora’s IPO opened for trade on the NYSE at $20.00/shr, 42% above its pricing

MON APRIL 9TH
*(CN) CHINA TO STUDY CNY CURRENCY (YUAN) DEVALUATION AS A TOOL IN TRADE SPAT - financial press
*(EU) EURO ZONE APR SENTIX INVESTOR CONFIDENCE: 19.6 V 20.8E
MON Dept of Justice reportedly will approve Bayer/Monsanto deal in exchange for additional concessions - press
(US) FBI raids office of Trump's longtime personal lawyer Michael Cohen; search doesn't appear to be directly related to Mr. Mueller’s investigation - New York Times
PAY To be acquired by Francisco Partners for $3.4B at $23.04/shr in cash, which includes Verifone’s net debt
(CN) China President Xi: China to lower auto and auto product import tariff later this year, open sector to higher foreign ownership; China reform and opening will definitely succeed, world should push for free trade - remarks at Boao conference

TUES APRIL 10TH
*(US) MAR PPI FINAL DEMAND M/M: 0.3% V 0.1%E; Y/Y: 3.0% V 2.9%E
(EU) ECB spokesperson: Nowotny's views are his own and do not represent the view of the Governing Council
TMUS Reportedly Sprint and T-Mobile have restarted deal talks; discussions are in preliminary stage - press

WEDS APRIL 11TH
TSCO.UK Reports FY17/18 adj PBT £1.30B v £145M y/y, adj Op £1.64B v £1.60Be, Rev (Inc Fuel) £57.5B v £57.7Be; declares annual dividend of 3.0p/shr
(UK) FEB INDUSTRIAL PRODUCTION M/M: 0.1% V 0.4%E; Y/Y: 2.2% V 2.9%E
FAST Reports Q1 $0.61 v $0.61e, Rev $1.19B v $1.18Be; Reports March Daily Net Sales $19.0M, +13.1% y/y
(US) President Trump tweets " Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!"
(US) MAR CPI M/M: -0.1% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI NSA: 249.554 V 249.588E
(US) Speaker of House Ryan (R-WI) reportedly will not run for re-election in November - Axios
CA.FR Reports Q1 Rev €20.8B v €20.9Be
(SY) Prime Min May reportedly orders UK submarines within range of Syria - press
BBBY Reports Q4 $1.48 v $1.41e, Rev $3.72B v $3.67Be
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50%; AS EXPECTED
(CN) China said to be planning to raise fuel prices Friday; Gasoline by CNY55/ton; Diesel by CNY50/t - Chinese press

THURS APRIL 12TH
9983.JP Reports Q2 Net ¥25.6B v 26.5Be, Op ¥56.6B v ¥48.2Be
(SE) SWEDEN MAR CPI M/M: 0.3% V 0.3%E; Y/Y: 1.9% V 2.0%E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €9.17B VS. €7.25-9.25B INDICATED RANGE IN 2021, 2025, 2038 AND 2048 BTP BONDS
MDR Reports prelim Q1 $0.15-0.17 v $0.05e, Rev $600-610M v $591Me
DAL Reports Q1 $0.74 v $0.73e, Rev $9.76B v $9.88Be
*(EU) ECB ACCOUNT OF MARCH POLICY MEETING (MINUTES): Council broadly agreed that not enough evidence that inflation is sustained
*(US) INITIAL JOBLESS CLAIMS: 233K V 230KE; CONTINUING CLAIMS: 1.871M V 1.84ME
(US) MAR IMPORT PRICE INDEX M/M: 0.0% V 0.1%E; Y/Y: 3.6% V 3.8%E
ZUO IPO opens for trade at $20.00
(US) Sen Roberts (R-KS): During meeting Trump indicated he assigned Larry Kudlow and other advisers to take another look at Trans Pacific Partnership (TPP)
(MX) MEXICO CENTRAL BANK (BANXICO) LEAVES OVERNIGHT RATE UNCHANGED AT 7.50%; AS EXPECTED
*(SG) SINGAPORE MONETARY AUTHORITY (MAS) SEMIANNUAL MONETARY POLICY STATEMENT: TO 'INCREASE SLIGHTLY' SLOPE OF S$NEER POLICY BAND (vs. zero pct appreciation policy prior); First tightening measure since April 2012
*(CN) CHINA JAN-MARCH (Q1) TRADE BALANCE (CNY): +326.2B, (surplus narrows 21.8% y/y)
*(CN) CHINA MAR TRADE BALANCE (USD): -$4.98B V +$27.9BE (first deficit in 13-months)
*(CN) CHINA MAR TRADE BALANCE (CNY): -29.8B V +160.0BE

FRI APRIL 13TH
(BE) ECB's Smets (Belgium): Weak inflation remains a lingering concern
JPM Reports Q1 $2.37 v $2.28e, Managed Rev $28.5B v $27.7Be
C Reports Q1 $1.68 adj v $1.61e, Rev $18.9B v $18.9Be
*(US) APR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.8 V 100.5E
(CN) China reportedly plans to postpone deal reviews due to US trade tensions - press
(US) Weekly Baker Hughes US Rig Count: 1,008 v 1,003 w/w (+0.5%) (highest in 3 years)

>>> Citigroup on Conference Call




Citigroup on Conference Call (70.28   -1.84)

  • Digital use remains strong, up 13% in usage and 25% in new users.
  • Credit Costs were in line with expectations. Reaffirms outlook for NCL rate in the rage of 5% in 2018; Credit remains favorable as it reflected some seasonality in cards but delinquencies were stable.
  • NIR to grow by over $2.7 bln in 2018 (Original was $2.5 bln of growth).
  • Expect top line growth to stay broadly in line with Q1 in following quarters (+/-3%).
  • Reiterates tax rate being closer to 25%
  • Markets revenue will reflect overall operating environment; Does expect a seasonal decline in trading revenue in Q2 from Q1; Expect revenue growth in accrual businesses.
  • Looking forward to seeing CCAR results; Said 2018 goal of returning $20 bln to shareholders and remain on track to hit these returns. 
  • Efficiency Ratio- Accounting changes impacted rate by 50-60 bps which does not impact target of low 50s by 2020 (Reaffirm)
  • Expects continued top line momentum for the rest of the year.
  • Trading Liabilities cover 50% of Trading Assets which mitigates the LIBOR impact; NIM impact was very little; Was not a noticeable factor.
  • Equity environment has been very strong.
  • March rate hike was not in the previous outlook provided; Every 25 bps will add $80 mln of NIR for the year; As get more rate hikes will see some compression in the gains as beta increases; COntinues to expect positive impact on NIM from future rate hikes.
  • Feel good about equities business, Q1 performance provides evidence that it built up market share in 2017; FICC, investors are the variable, good core foundation but it is the market that will determine the revenue flows in this business; IB saw volumes down and drop in IB is in line, says 'have not hit the stop button but the pause button'; notes some regulatory issues that are leading to taking pause.
  • SLR Level- Has never been a binding constraint for it so has never optimized the SLR and getting to the leverage; A more standardized approach will not have as large of a gap as the advanced approach; Applauds the increased flexibility but it has not been something that has impacted its overall business; What impacts bank is focus on maintaining a 3% G-SIB score; 

>>> Altice shortlists bidders in mobile phone towers sale - sources

MergerMarket

Altice shortlists bidders in mobile phone towers sale - sources
13 APR 2018
Altice [AMS:ATC], the telecommunications group, has shortlisted bidders for its French and Portuguese telecoms towers, said five sources familiar with the situation.

The shortlist includes a mix of infrastructure funds and trade players and due diligence is to begin in the coming days, said the first source familiar.

Spain’s Cellnex [BME:CLNX], a strategic bidder that bid for both sets of assets, is no longer involved in the bidding for the French assets, said the second source familiar.

There is no clarity on which firms are in or out yet, said a person familiar with Cellnex. Even so, the auction appears to be aimed more at funds rather than strategic buyers, said the person. Cellnex dropping out of the French auction would make sense in that context, the person said.
The French assets seemed more targeted at funds, agreed a third source familiar with the situation.

Cellnex is understood to be focused on the Portuguese assets, said a sector expert. Cellnex declined to comment.

In addition to Cellnex, French private equity firm Antin also bid for both sets of assets, as reported.

There are also other French bidders for the French assets, said a fourth source familiar.

American Tower [NYSE:AMT], a strategic bidder, was shortlisted in France, but not in Portugal, the first source said.

Morgan Stanley Infrastructure got shortlisted for the Portuguese assets, said a fifth source familiar with the situation.

KKR Infrastructure, which owns 40% of Telxius; Brookfield [TSE:BAM.A], a shareholder in France’s TDF and AMP Capital, which owns Axion of Spain, were also previously reported to be interested in either asset.

Canada’s PSP Investments is no longer interested, said the third source familiar.

Altice is advised by JP Morgan and Lazard, as reported.

The 10,000 French towers could fetch around EUR 0.2m apiece, pointing to a total valuation of EUR 2bn. The Portuguese and French assets have an EBITDA of EUR 35m and EUR 200m, respectively, as reported.

Altice, PSP, AMP and Morgan Stanley declined to comment. Antin, KKR, Telxius, Brookfield, TDF, and Axion did not reply to request for comment.