Hellman & Friedman executive criticises prices after Nets deal
Patrick Healy struck Europe’s largest buyout deal in nearly five years
The executive behind Europe’s largest buyout deal in nearly five years has hit out at the high prices the industry is paying in their pursuit of assets.
After Hellman & Friedman agreed to pay $5.3bn for Nets A/S, Scandinavia’s largest payments processor on Monday, Patrick Healy said: “Any time you buy something today it is at the highest price. We always focus on [so-called] winner’s curse.
“If you win, you obviously paid the highest price so how are you going to be able to deliver against that?”
H&F’s offer represents a roughly 30 per cent premium to the unaffected share price of Nets, or 24 times net income.
However, it is only a modest increase from the $4.5bn valuation Nets received when it when public nearly a year ago.
Buyout funds are sitting on a record amount of cash, fuelling pressure from their investors to deploy the capital. Industry insiders have cautioned that the amount of debt a company carries relative to its earnings has crept back up to all-time highs, meaning the deals could potentially go sour if the companies do not perform as expected or interest rates rise dramatically.
Addressing the terms of the deal, Mr Healy, deputy chief executive at H&F, said: “We paid the highest price and we paid the price we didn’t want to pay because that’s what was required to get the deal done.
“It’s a risk on environment . . . We are now in a market cycle where it is easier to raise money and it is easier to borrow money but it’s very difficult to find investment opportunities where you can execute.”
But he added: “Private equity firms are being selective about the risks they take.”
The agreed price for Nets surpasses a recently agreed €4.1bn takeover of German generic drugmaker Stada, which saw Bain and Cinven pay a 50 per cent premium to see off rival suitors.
Nets, which reported a 4 per cent year-on-year rise in revenues in the three months to June, will serve H&F as a platform to acquire other businesses outside its dominant Scandinavian region.
Payments companies have attracted the recent attention of private equity groups as banks, which traditionally have owned the bulk of these, do not regard them as core to their strategy.
Changing attitudes among consumers, who are increasingly moving away from cash and cheques, are also contributing to an interest in payment companies in Europe.
They are appealing to buyout funds because they can build scale and reduce costs.
Mr Healy expected hurdles along the way. “The biggest challenge is ensuring you stay ahead of the product development curve to be in front of adopting consumer behaviour,” he said.
AAPL stock is down slightly today due to a report from Digitimes that Apple has asked suppliers to slow down delivery of iPhone X components, and investor fears that iPhone 8 demand is weak.
On the other side of the spectrum, KGI today says that iPhone X demand could reach 40-50 million units due to strong interest …
Digitimes says that suppliers are only shipping about 40% of the volume originally planned for iPhone X production.
The same report says Apple used a similar strategy for the iPhone 7, asking for delivery of the remaining orders about 1 – 2 months later. It is likely the company is assessing iPhone 8 demand before dedicating production to iPhone X.
KGI’s Ming-Chi Kuo writes that pent-up demand for the new phone could hit 50 million units, via StreetInsider.
This initial backlog will take a long time to clear. KGI still believes that the iPhone X will be supply constrained through the first half of 2018, doubling down on comments first made last week.
Part of the reason for the limited production yields is the complexity of the TrueDepth camera system. It combines several more sensors than rival phones, which makes it harder to reach mass production.
Kuo believes that iPhone X production will be in full swing by October. Apple has already announced that the device will go up for preorder on October 27 with customers receiving the first units on November 3.
The iPhone 8 and iPhone 8 Plus launched last Friday. Whilst some models were out-of-stock, analysts believe sales at the launch were significantly lower than previous new iPhone releases.
Of course, the hardcore early adopter crowd are also those most likely to want the iPhone X, so lower initial sales for iPhone 8 is probably to be expected.
Regarding Apple’s stock, some investors worry that lower iPhone 8 sales will not be offset by iPhone X sales, in part because of the lengthy supply constraints.
Brent crude oil, the world’s international oil benchmark, jumped towards $58 a barrel on Monday – its highest level since January – and was on course to close at the highest level since 2015.
Oil has been boosted by signs the massive crude glut built up since mid-2014 is slowly being drawn down, as producers cut supplies and robust demand eat into the surplus.
BP’s top oil trader in Asia told an FT conference on Monday that the “rebalancing” was well underway.
“The market is in rebalancing mode,” said Janet Kong, speaking at the FT Commodities Asia Summit in Singapore on Monday. “We are at a juncture where we are going to see continued inventory draws.”
Prices were given an additional boost on Monday by threats from Turkey to Iraqi Kurdistan, which is holding an independence referendum.
President Tayyip Erdogan warned Erbil that Turkey controls the pipelines through which the autonomous region’s oil reaches international markets.
“We have the tap. The moment we close the tap, then it’s done,” President Erdogan said, though he stopped short of saying he had decided to block the roughly 550,000 barrels a day of Kurdish oil that flows to his country’s Mediterranean port of Ceyhan
At 12:30pm London time Brent was up 1.3 per cent at $57.60 a barrel, slightly off its high for the day of $57.64 a barrel. It has climbed more than 30 per cent since January.
Brent hit its year-high of $58.37 a barrel on January 3, the first day of trading for 2017, but closed that day at $55.47. The last time it closed above $57 a barrel was more than two years ago.
Brent’s premium over US rival West Texas Intermediate expanded on Monday to as wide as $6.78 a barrel, the largest since August 2015.
Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- AZZ -12.1%, (lowers FY 18 guidance)
- DHI -3.7%, (guidance update)
- PPG -1.6%, (guidance update)
Other news:
- AAPL -1.3% (following iPhone 8 launch weekend described as disapointing)
Analyst comments:
- DGX -5.1% (downgraded to Mkt Perform from Outperform at Raymond James)
- KMX -1.3% (downgraded to Neutral from Buy at Goldman)
- LSI -1.1% (downgraded to Underperform from Neutral at BofA/Merrill)
- ABBV -0.8% (downgraded to Neutral from Buy at UBS)
Gapping up
In reaction to strong earnings/guidance:
In reaction to strong earnings/guidance:
- NBL +0.5% (Guidance update)
M&A news:
- GPC +9.9% (will acquire Alliance Automotive Group from Blackstone and AAG's co-founders)
Other news:
- ARDM +33.6% (FDA has accepted for filing with Priority Review its NDA for Linhaliq), ABUS +9.8% (announces topline results of the bi-weekly dosing segment of Cohort 4 of the Phase II study of its RNAi agent)CBIO +7.9% ( granted orphan designation by the FDA for Subcutaneous recombinant human factor IX variant with three point mutations for the treatment of Hemophilia B), SVA +7.1% (announces prelim top-line data from its Phase III clinical trial assessing the efficacy, immunogenicity and safety of the Company's proprietary Varicella vaccine against Chickenpox), NVCR +7% (reports Phase 3 data for combination of Optune with Temozolomide), AMRN +6.4% (Amarin and HLS Therapeutics announce agreement between the parties to register, commercialize and distribute Vascepa capsules in Canada),NLNK +6.3% (enters into a clinical collaboration agreement with AstraZeneca (AZN) to evaluate the combination of indoximod), BLDP+4.4% (announced that the U.S. Army Program Executive Office Soldier has received signature approval for its Mobile Soldier Power Program),CTSO +3.7% (highlights recent publication of a study entitled "Extracorporeal cytokine elimination as rescue therapy in refractory septic shock: a prospective single-center study" in the Journal of Artificial Organ), EXEL +2.7% (reports ESAX-HTN pivotal study in essential hypertension met primary objective) GPRO +2.5% (Barron's profiles positive view on GoPro), PLUG +1.6% (in sympathy with BLDP),AGN +1.5% (Authorizes New $2 Billion Share Repurchase Program; reaffirms FY17 guidance), .
Analyst comments:
- RIG +4.5% (upgraded to Buy from Neutral at UBS)
- ESV +4% (upgraded to Buy from Neutral at UBS)
- AOBC +3.3% (upgraded to Outperform from Neutral at Wedbush)
- ROST +2.5% (upgraded to Overweight from Neutral at JP Morgan)
- BOX +1.7% (upgraded to Outperform from Mkt Perform at Raymond James)
- GM +1.6% (upgraded to Buy from Hold at Deutsche Bank)
- CMP +1.6% (upgraded to Overweight from Neutral at JP Morgan)
- UAA +0.9% (upgraded to Overweight from Sector Weight at KeyBanc Capital Mkts)
- CL +0.8% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
Early premarket gappers
Gapping up:
- FRSX +8.3%, NLNK +7.5%, AMRN +6.4%, BLDP +5.2%, VSAR +4.7%, RIG+3.8%, HMNY +3.4%, GPRO +3.3%, ESV +3.1%, ORMP +2.8%, AOBC+2.6%, EXEL +2%, ROST +1.8%, GM +1.7%, PLUG +1.6%, NVCR +1.6%,GPC +1.2%, DBVT +0.8%, MU +0.6%, TSLA +0.6%, UAA +0.5%
Gapping down:
- AZZ -11.6%, PETZ -4.3%, DHI -3.7%, VUZI -3.3%, NICE -1.1%, WB -1%,VOD -0.9%, AAPL -0.7%, MOMO -0.6%, JD -0.6%, BIDU -0.5%
Exclusive: Toshiba tells banks chip deal delayed as Apple yet to approve
TOKYO (Reuters) - Toshiba Corp (6502.T) told its main banks on Monday it has not signed the $18 billion sale of its semiconductor business because Apple Inc (AAPL.O), a member of the buyer group, has not agreed on key terms, two people involved in the deal said.
The struggling Japanese conglomerate announced on Wednesday that it had chosen a consortium led by U.S. private-equity firm Bain Capital LP to buy the prized chip unit, a move that would end a nine-month sale process and plug a huge hole in Toshiba’s finances, preventing it from being removed from trading on the Tokyo Stock Exchange.
But the signing of the deal, initially expected to be the next day, has dragged on, forcing Toshiba to explain the predicament to its bankers on Monday and, the sources told Reuters, ask the lenders to roll over 680 billion yen ($6.1 billion) in credit lines set to expire on Sept 30.
The lenders have been demanding that Toshiba sign a definitive agreement as a condition for the funding.
Details of the issues with Apple couldn’t immediately be ascertained.
Toshiba said in a statement to Reuters, “While we cannot comment on the detail of the deal procedure, we aim to sign the agreement with the purchaser as early as possible.”
Apple didn’t immediately reply to an emailed request for comment.
Press representatives for Sumitomo Mitsui Banking Corp and Mizuho Bank, the biggest of Toshiba’s seven main lenders, couldn’t immediately be reached outside office hours.
ICPT - JMP Securities Reiterates ICPT with Market Outperform, price target: $150
- Firm notes that last Friday, they interviewed Dr. Rohit Loomba, a leading expert in NASH and a professor at UC San Diego, in light of the recent development on the Ocaliva Dear Doctor letter and the FDA safety warning.
- In line with firms view, Dr. Loomba believes that any drug, when over-dosed, can induce liver injury, especially in patients who already have severe liver impairment to begin with. As an example, he referred to the similar concerns of using interferon in HCV patients with cirrhosis many years ago. Therefore, he remains comfortable prescribing Ocaliva to PBC patients who do not have Child-Pugh B and C (very sick patient populations), stressing that dosing needs to be closely monitored. Meanwhile, Dr. Loomba thinks the read-through to NASH F2-3 patients is yet to be determined and so far there are no red flags from the previous FLINT data or the ongoing Phase 3 study, which is under active DSMB monitoring. Lastly, regarding the bile acid vs. non-bile acid debate, he is hesitant to draw any comparisons until further clinical validation of different assets in development. Net-net, firm continues to recommend shares of ICPT on the recent dip as Ocaliva is still the only novel drug approved in PBC.