>>> Uniper could see another offer that rivals Fortum bid - report (translated)

Uniper could see another offer that rivals Fortum bid - report (translated)
29 SEP 2017
Germany's Uniper [ETR:UN01], could get another offer to rival the one made by Fortum [HEL:FORTUM], according to Kauppalehti Online.
The Finnish-language newspaper said, without citing anyone by name, that it is fully possible Uniper will get a rival bid. Fortum CEO Pekka Lundmark has also admitted that the deal is not 100% complete as of yet.
Fortum announced earlier this week it was to acquire 46.65% stake in Uniper from the German E.ON [ETR:EOAN].

>>> Asian Update

Asia Mid-Session: Asian trading session fairly quiet into month-end; US Sept Chicago PMI data and Central Bank speak in focus; China and HK money market rates jump ahead of Golden Week holidays next week

***Asia Summary***
-Asian equities have traded mixed on today’s session. Overall, trading has been fairly quiet amid the batch of data seen out of Japan and South Korea. Looking ahead, Euro Zone Sept Preliminary CPI is due to be released along with the US Sept Chicago PMI data. Central bank speak is also on the agenda with comments expected from the BoE’s Carney, ECB’s Draghi and Fed’s Harker.
-China offshore yuan (CNH) money market rates rise sharply ahead of upcoming National Day Golden Week holidays, as Chinese markets will be closed next week.

***Key economic data***
-(AU) AUSTRALIA AUG PRIVATE SECTOR CREDIT M/M: 0.5% V 0.5%E; Y/Y: 5.5% V 5.5%E
-(JP) JAPAN AUG NATIONAL CPI Y/Y: 0.7% V 0.6%E; CORE (EX-FRESH FOOD) Y/Y: 0.7% V 0.7%E
-(JP) JAPAN SEPT TOKYO CPI Y/Y: 0.5% V 0.6%E; CORE (EX-FRESH FOOD) Y/Y: 0.5% V 0.5%E
-(JP) JAPAN AUG PRELIM INDUSTRIAL PRODUCTION M/M: 2.1% V 1.8%E; Y/Y: 5.4% V 5.2%E
-(JP) JAPAN AUG JOBLESS RATE: 2.8% V 2.8%E; JOB-TO-APPLICANT RATIO: 1.52 V 1.53E
-(JP) JAPAN AUG RETAIL SALES M/M: -1.7% V -0.5%E; RETAIL TRADE Y/Y: 1.7% V 2.5%E
-(JP) JAPAN AUG OVERALL HOUSEHOLD SPENDING: 0.6% V 0.9%E
-(KR) SOUTH KOREA AUG INDUSTRIAL PRODUCTION M/M: 0.4% V 0.5%E; Y/Y: 2.7% V 1.3%E
-(KR) SOUTH KOREA AUG BOP CURRENT ACCOUNT BALANCE: $6.06B V $7.26B PRIOR; GOODS BALANCE: $9.31B V $10.7B PRIOR
-(KR) South Korea Aug Cyclical Leading Index: 0.0 v 0.2 prior
-(KR) South Korea Oct Business Manufacturing Survey: 79 v 83 prior; Non-Manufacturing Survey: 78 v 78 prior
-(NZ) New Zealand Aug Building Permits m/m: 10.2% v 1.7% prior
-(NZ) RBNZ 2017 Annual Report: New Zealand's economy and financial system are sound
-(UK) UK SEPT GFK CONSUMER CONFIDENCE: -9 V -11E
-(UK) UK Sept Lloyds Business Barometer: 23 v 17 prior

***Speakers and Press***
China
-(CN) China Premier Li Keqiang said to stay for another term - HK Press
-(CN) China Investment Corp (CIC) said to end Aug with assets over $900B - Chinese Press
-(CN) China said to raise fuel prices from Sept 30th

Other
-(JP) BoJ Sept Meeting Minutes: One member said more easing is necessary to stimulate demand**Note: At the Sept BoJ meeting, the incoming member Kataoka was the lone dissenter (8 to 1 vote). The official said then that the yield curve control is not enough to meet the inflation target; Also, the official saw a low chance of CPI increasing from 2018.
-(JP) Japan Fin Min Aso: Confirms need to delay FY2020 primary balance target ‘a bit’
-(KR) South Korea Finance Ministry: Affirms sees 2017 GDP growth at 3%; To continue to monitor global financial markets during 10-day holidays; Uncertainty high ahead of North Korea's party foundation day on Oct 10th.
-(KR) South Korea Financial Regulator: Bans all forms of initial coin offerings in the country

***Asian Equity Indices/Futures (00:30ET)***
- Nikkei -0.1%, Hang Seng +0.2%, Shanghai Composite +0.3%%, ASX200 +0.2%, Kospi +0.7%
- Equity Futures: S&P500 flat; Nasdaq +0.1% , Dax flat , FTSE100 flat

***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.1776-1.1791; JPY 112.27-112.69; AUD 0.7839-0.7858; NZD 0.7208-0.7238
- Aug Gold -0.1% at 1,287/oz; Aug Crude Oil -0.1% at $51.51/brl; Sept Copper -0.1% at $2.975/lb
- GLD SPDR Gold Trust ETF daily holdings flat at 864.7 metric tons
-(CN) China PBOC sets yuan reference rate at 6.6369 v 6.6285 prior
-(CN) PBOC OMO: SKIPS V INJECTED CNY70B IN 14 AND 28-DAY REVERSE REPOS PRIOR; net drain CNY160B
-(AU) Australia sells A$800M in 2028 Bonds, avg yield 2.8913%, bid to cover 5.43x
-(NZ) New Zealand sells NZ$150M in 3.5% April 2033 Bonds, avg yield 3.2958%, implied bid to cover 3.33x

***Equities notable movers***
Australia
-Pilbara Minerals, PLS.AU China’s Great Wall Motor to give update on plan to buy up to 3.5% stake; +18%
Japan
-Yamato Holdings, 9064.JP Some disappointment with medium term outlook; -5.5%

***US markets on close: Dow +0.2%, S&P500 +0.1%, Nasdaq flat, Russell +0.3% ***
- Best Sector in S&P500: Real Estate +0.7%
- Worst Sector in S&P500: Consumer Discretionary -0.1%
- At the close: VIX 9.55 (-0.32 pts); Treasuries: 2-yr 1.459% (-2bps), 10-yr 2.312% (flat), 30-yr 2.871% (+1bp)

***US Market Summary***
-US stocks rallied off of opening lows to end the day about flat, after US GDP and jobless claims data were largely in line with expectations and as Republicans continued to make their case for tax cuts. Treasury yield curves saw steepening trades remain entrenched, with long rates extending modestly higher after a strong 7-year note sale. The Dollar index broke a three-day winning streak but the giveback was benign. The US IPO market heated up with four NASDAQ issues opening for trade including a 50% pop for Roku. Materials and healthcare names were outperformers on the day, while consumer discretionary and industrials lagged slightly.

***US Afterhours Movers***
-ATEN Raises Q3 Rev $59-60M v $55.6Me (prior $53-57M); EVP sales to leave company; +24.8% afterhours
-SGH Reports Q4 $0.79 v $0.64e, Rev $223.0M v $211Me; Guides Q1 $0.79-0.83 v $0.68e, Rev $225-240M v $211Me, gross margin 21-22%; +6.7% afterhours
-TSN Raises FY17 $5.20-5.30 v $5.09e (prior $4.95-5.05); plans to reduce headcount by ~450 positions; +4.9% afterhours
-HLT Files to sell 14.6M shares by holder Blackstone (4.5% of shares outstanding) via GS: -1.4% afterhours
-PRTA Reports results from Phase 1b multiple ascending dose study of PRX003 in patients with Psoriasis; Prerequisites were not met; -5.5% afterhours

>>> US After Hours Summary: SGH +6.8%, TSN +5.6%, KBH +2% following ea

After Hours Summary: SGH +6.8%, TSN +5.6%, KBH +2% following earnings/guidance, PLAB +4.9% and PARR +4% on S&P SmallCap 600 addition news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AEHR +19% (also received follow-on orders totaling $2.7 mln from a subcontractor), ATEN +18.8%, SGH +6.8%, TSN +5.6%, KBH +2%

Companies trading higher in after hours in reaction to news: APVO +13.9% (extends cash runway $20 mln and retains term loan agreement; completes sale of hyperimmune products for up to $74.5 mln), PTCT +9% (higher despite confirming FDA Advisory Committee vote against Ataluren), PLAB +4.9% and PARR +4% (to join S&P SmallCap 600 effective October 6 prior to the open), ZYNE +3.8% (upgraded to Overweight from Neutral at Piper Jaffray), HRL +1.2% and PPC +1% (following TSN guidance), BLUE +1% (announces first patient treated with second anti-BCMA CAR T bb21217 in CRB-402 Phase 1 study; to receive $15 million option exercise payment from Celgene), PHM +0.9% (ticking higher following KBH results), V +0.5% (initiated after the bell with Overweight rating at Cantor Fitzgerald)

After Hours Losers:

Companies trading lower in after hours in reaction to news: NITE -6.1% (modestly pulling back from today's 10 point surge higher), PRTA -5.5% (announces results of a Phase 1b study of PRX003 in patients with psoriasis were insufficient to advance PRX003 into mid-stage clinical development), GLYC -4.1% (files for $250 mln mixed securities shelf offering ; entered $100 mln common stock Sales Agreement with Cowen via at the market offering), NXST -1.9% (attributed to block trade pricing), SRPT -1.1% (following late move higher on PTCT FDA news), CSGP -0.8% (priced offering of 2,884,616 shares of common stock at $260.00 per share)

>>> US Close Dow +0.18% S&P +0.12% Nasdaq flat Russell +0.27%

Closing Market Summary: S&P 500 Ticks Up, Settles at New All-Time High

Stocks were restricted to a pretty narrow range on Thursday as investors continued to chew on the GOP's tax reform outline--which was released in the prior session. The Dow (+0.2%), the Nasdaq (unch), and the S&P 500 (+0.1%) all settled with slim gains, but only the S&P 500 managed close at a new all-time high (2,510.06).

The benchmark index was not alone in finishing at a new record high, however, as the Dow Jones Transportation Average (+0.5%), the Russell 2000 (+0.3%), and the S&P MidCap 400 (+0.2%) also rewrote their respective record-high closing marks. 

Conviction was weak at the macro level on Thursday, but there were several individual movers of note. For instance, Dow component McDonald's (MCD 157.49, +3.44) climbed 2.2% after Longbow Research upgraded the company's shares to 'Buy' from 'Neutral' on Thursday morning. 

Health care giants AbbVie (ABBV 88.96, +4.21) and Abbott Labs (ABT 53.64, +1.49) touched new record highs, ending the day with gains of 5.0% and 2.9%, respectively. AbbVie rallied after reaching a settlement with Amgen (AMGN 185.46, +0.58) regarding the intellectual property rights of AbbVie's blockbuster drug Humira. 

Meanwhile, ABT shares climbed after the FDA approved a new Abbott device that is able to monitor blood sugar levels without drawing blood.

On the flip side, Gilead Sciences (GILD 80.91, -2.95) dropped 3.5% after COO Kevin Young announced his plan to retire on Wednesday evening and RBC said that the consensus HCV estimate likely needs to come down. Mr. Young will remain with the company through the first quarter of 2018 and in an advisory capacity thereafter.

Roku (ROKU 23.50, +9.50) had a solid first day trading on the Nasdaq exchange, settling 67.9% above its IPO price of $14.00 per share. The company makes devices that allow its customers to stream media from the internet to their TVs--similar to Apple TV, Amazon Fire Stick, and Google Chromecast.

On the earnings front, BlackBerry (BBRY 10.47, +1.24) surged 13.4% after beating both top and bottom line estimates and issuing above-consensus guidance for fiscal year 2018. Conversely, Rite Aid (RAD 2.03, -0.25) plunged 11.0%, hitting its lowest level in more than four years, after missing revenue estimates.

Out of the S&P 500's 11 sectors, only two finished in negative territory--consumer discretionary (unch) and industrials (-0.1%). As for the rest, seven finished with gains of no more than 0.3% while the lightly-weighted materials (+0.7%) and real estate (+0.6%) groups exhibited relative strength.

In the bond market, shorter-dated issues finished Thursday in the green, overcoming early weakness; the yield on the 2-yr Treasury note slipped two basis points to 1.45%, but traded around 1.48% in the early morning. Meanwhile, the benchmark 10-yr yield settled flat at 2.31% after hovering around 2.33% at the opening bell.

Reviewing Thursday's batch of economic data, which included the third estimate of second quarter GDP, weekly Initial Claims, and Advance International Trade in Goods for August:

  • The third estimate of second quarter GDP pointed to an expansion of 3.1%, while the consensus expected a reading of 3.0%. The second estimate came in at 3.0% last month.
    • The key takeaway from the report is that it was driven by a pickup in both consumer and business spending, which is typically a good mix for accelerating economic growth.
  • The latest weekly initial jobless claims count totaled 272,000 while the consensus expected a reading of 275,000. Today's tally was above the revised prior week count of 260,000 (from 259,000). As for continuing claims, they declined to 1.934 million from the revised count of 1.979 million (from 1.980 million).
    • The key takeaway from the report is that initial claims held below 300,000 despite the impact of the hurricanes. This points to continued tightness in the labor market and should ultimately translate into lower readings in the coming weeks as the hurricane impact diminishes.
  • The Advance report for International Trade in Goods for August showed a deficit of $62.9 billion (consensus -$65.1 billion), down from a revised deficit of $63.9 billion for July (from -$65.1 billion).

On Friday, investors will receive several pieces of economic data, including August Personal Income (consensus +0.2), Personal Spending (consensus +0.1%), and core PCE Prices (consensus +0.2%) at 8:30 ET, September Chicago PMI (consensus 58.0) at 9:45 ET, and the final reading of the University of Michigan Consumer Sentiment Index for September consensus 95.4) at 10:00 ET.

  • Nasdaq Composite +19.9% YTD
  • Dow Jones Industrial Average +13.3% YTD
  • S&P 500 +12.1% YTD
  • Russell 2000 +9.7% YTD

>>> Uniper/Fortum: Rival bidder seen unlikely – bankers

(MergerMarket)

Uniper/Fortum: Rival bidder seen unlikely – bankers
28 SEP 2017
  • High break-up fee likely to keep out rival bidders
  • Coal assets, Russia exposure likely to weigh on rival interest

Uniper [ETR:UN01] is unlikely to find a white knight bidder to fend off a takeover offer from Fortum [HEL:FORTUM], which has struck a deal to buy out largest shareholder E.ON's [ETR:EOAN] stake, three bankers and two investors said.
E.ON agreed to sell its 46.65% stake in Uniper to Fortum yesterday (28 September), valuing all of Uniper at an enterprise value of EUR 9.7bn. Fortum will launch a voluntary takeover bid for 100% of Uniper in connection to the deal, but has no acceptance threshold attached to its offer.
A high break-up fee for the deal between Fortum and E.ON would make it expensive for a rival bidder to step in, said the first banker.
If E.ON were to decide against selling its stake to Fortum, it would have to pay the company at least 20% of the equity value of its Uniper stake, Fortum said on Tuesday. That would imply a break fee of at least EUR 750m on the E.ON’s Uniper stake, which the deal values at about EUR 3.8bn.
The first investor - Dimitri Willems, a portfolio manager at Kempen Capital Management – agreed with the banker, saying that it would be “too much to ask” a bidder to compensate for the break-up fee and then pay a premium on top of that. Kempen was Uniper’s 15th largest shareholder as of July-end.
“[I’m] puzzled by what Uniper’s management can do to fend off Fortum’s offer,” Willems said.
Moreover, it is unlikely that many companies that would be interested in buying all of Uniper’s assets, the first banker said, adding that Fortum’s bid for Uniper was “surprising” in itself. The company generates power and owns coal, gas, oil and combined gas and steam power plants, hydroelectric power plants, nuclear power stations in Sweden, a biomass plant in France, as well as solar and wind power facilities.
The second banker indicated that Uniper’s equity story would be a hard sell, remarking that the company has declining assets.
E.ON spun off Uniper in 2016 after writing down billions of dollars of assets due to weak wholesale power prices and losses in conventional power generation. But wholesale power prices have improved this year, benefiting Uniper. Uniper’s sales revenue grew 12% to EUR 37.3bn in the first half of the year. The company raised its dividend on higher operating profit last month.
There is limited buyside interest in Europe for conventional power assets, a third sector banker said, so the sale of Uniper was always going to be tough. Fortum is one of the few potential investors with both the appetite for conventional power and the funds, arising from the sale of its networks business, to pursue acquisitions in the space, he said.
There are few potential candidates that could emerge as rival bidders, the third banker said, bar a limited number of strategic investors focused on conventional power generation.
The second investor, Thomas Deser, a fund manager at Union Investment, also said he would be surprised if there were rival bidders for Uniper, adding that any acquirer would have to weigh the prospect of investing in Russia at a time when the Rouble is weak. A potential rival would also have to take into account Europe’s carbon policy, besides coal prices, he added.
Union Investment is a shareholder in both E.ON and Uniper.
Dividend yield was the only the aspect that made Uniper an attractive investment, Deser said. Even so, with yields increasing in other asset classes, Uniper might become a less interesting investment for yield seekers, he said.
Willems also said that the increase in Uniper’s share price on takeover rumors over the past few months had lowered the divided yield on the stock, making it a less attractive investment.
Still, he said Uniper’s trading price on Thursday, which is about EUR 1 above offer price, represents fair value for the stock more than Fortum’s EUR 22 offer price. Uniper closed at EUR 23.15 on Thursday (28 September).
There is scarcity value in Uniper’s stock, he said, explaining that nuclear assets may become valuable in five to six years following the phase out of nuclear power plants in Germany by the end of 2022.
Fortum would have to raise its offer if it wants to acquire Uniper’s free float, he said. Deser agreed that a higher offer from Fortum could not be ruled out.
However, Fortum has publicly stated it has no plans to raise its offer. A person briefed on the matter said there was no room for a higher offer.
In the event Fortum’s takeover offer attracted unanimous shareholder support, the acquisition would take Fortum’s net debt/EBITDA to 3.96x excluding any synergies, according to Dealreporter analytics. The Finnish company’s target 2.5x net debt/EBITDA would require estimated disposal proceeds of EUR 4.4bn, assuming no synergies. Alternatively, with no disposal, hitting the target gearing ratio would require synergies of EUR 1.8bn.
Uniper, a subsidiary of E.ON, is an energy generation and energy trading company. Uniper also has energy trading activities and equity investments in energy generation companies in Russia, the Czech Republic and Brazil, and a US energy trading subsidiary based in Chicago.