FT :Thyssenkrupp and Tata Steel sign MOU to merge European operations

Germany’s Thyssenkrupp and India’s Tata Steel have reached an understanding to merge their European operations to create the continent’s number two steel producer after ArcelorMittal.

After more than a year of talks, a memorandum of understanding was announced early Wednesday morning by Thyssenkrupp, just weeks after Tata removed a central obstacle by agreeing with UK regulators to hive off a pension scheme for its British business.

The MOU calls for a 50/50 joint venture that would produce annual synergies of between €400m and €600, Thyysenkrupp said.

After a period of due diligence to examine each other’s books, the two groups expect to sign a formal merger at the start of 2018, and complete the merger by the end of next year.

Combined, the new company would generate pro forma sales of €15bn and employ some 48,000 people at 34 locations. The group would ship 21m tonnes of steel per year.

Heinrich Hiesinger, Thyssenkrupp chief executive who has been pushing the deal and getting reluctant labour unions on board, said a merger would offer both companies a sustainable future and tackle the structural challenge facing a European steel sector suffering from overcapacity.

The announcement ends the uncertainty around Tata Steel’s UK business that began in March last year, when the company said it would seek a disposal of the business after a string of heavy losses. That decision was taken under Cyrus Mistry, who was sacked as chairman of group holding company Tata Sons in October.

His successor Natarajan Chandrasekaran said that the new business would be based on “very strong fundamentals”, while stressing that Tata Sons would now look to support Tata Steel’s expansion in its home market of India.

Koushik Chatterjee, Tata Steel’s executive director, said that the tie-up would yield annual cost synergies of about €400-600m, while enabling a “significant de-leveraging” of Tata Steel’s balance sheet.

(CS) Business Serivces : Sector Review (BVI, SGS, Aggreko, Experian, R.Walters,

BUSINESS SERVICES: This 1st edition of our annual accounting review, we take a deep dive into the audited accounts of 26 companies in our universe. We think this is timely, given the sharp share-price declines seen at G4S, Capita and Serco in the past few years following accounting re-statements. Companies that screen well are Experian, Robert Walters and Rentokil all benefit from flexible operating leases, with Experian and Robert Walters enjoying good cash conversion and a consistent approach to exceptionals. Companies that screen poorly include Bureau Veritas, SGS and Aggreko. We also note a lack of disclosure at Bureau Veritas and SGS.
Which stocks screen poorly? 
* Bureau Veritas – A lack of disclosure (auditor focus areas and accrued/deferred income), weak cash conversion and frequent use of exceptional charges are the key negatives. 
* SGS – Like Bureau Veritas, a lack of disclosure (auditor focus areas and accrued/deferred income) and frequent use of exceptional charges are the key negatives. 
* Aggreko – The company changed its depreciatin policy in the year (FY16) (which provided a 5% PBT tailwind), suffered from lengthening debtor days and subsequently FCF conversion, and recorded heavy exceptional charges and high accrued income levels.

Which stocks screen well? 
* Experian – A low pension deficit, positive operating lease exposure, good cash conversion and consistent exceptionals and provisioning policies enhance its accounting quality, in our view. 
* Robert Walters – Strong cash generation in the year, a flexible operating lease policy and a lack of exceptional charges enhance the earnings quality at Robert Walters, in our view. 
* Rentokil – Having undertaken a business review and implemented changes, Rentokil now benefits from flexible operating leases, a good average age of its assets and a strong pension surplus.

>>> Cementir Holding to sell all assets and activities in Italy for enterprise v

Cementir Holding to sell all assets and activities in Italy for enterprise value of EUR 315m
20 SEP 2017
Today (19 September) Cementir Holding S.p.A. [BIT: CEM] has entered into an agreement with Italcementi S.p.A. [BIT:IT], a fully controlled subsidiary of HeidelbergCement AG [HEIX:GER] to sell 100% of the share capital of Cementir Italia S.p.A., including its entirely owned participations in Cementir Sacci S.p.A. and Betontir S.p.A. (Cementir Italia Group).
Cementir Italia’s business includes five integrated cement plants and two cement grinding centers as well as the network of terminals and ready-mixed concrete plants, all operating in Italy. The transaction has an enterprise value of EUR 315m on a cash and debt-free basis. Closing is subject to the approval of the Italian Antitrust Authority and the transaction is expected to be completed at the beginning of next year. In 2016, pro-forma sales revenue of Cementir Italia Group stood at EUR 136m, keeping into account Cementir Sacci for 12 months as it was acquired on July 29th, 2016.
Francesco Caltagirone, Chairman and CEO of Cementir Holding stated: “As a result of this transaction, Group net financial debt to Ebitda ratio will be close to 0.5x at the end of 2018. This will enable the Group to take the opportunities arising in the future, as it has happened during the last 12 months.”

>>> Tranchant expresses interest for FDJ privatisation (translated)

Tranchant expresses interest for FDJ privatisation (translated)
20 SEP 2017
Groupe Tranchant, the French family-owned casinos operator, has sent a letter to the French Economy and Finance minister Bruno Le Maire expressing its interest in the privatisation of the lottery and games specialist Francaise des Jeux (FDJ), French daily Les Echos reported. In the letter, Georges Tranchant, head of the eponymous group, said that a company would be created to acquire part or the entire 72% stake held by the government, company would group together a consortium of investors including gaming companies and financial player.
The report cited Georges Tranchant himself as confirming the information. While he did not disclose the names of the potential investors, he said that the deal could amount to between EUR 1bn and EUR 2.5bn.
Tranchant went on to say that the current monopoly FDJ exercises in France for lottery and betting games on the point of sales would “stay the same”.

>>> What to look at today - 20th of Sept. 2017 (Jewish New Year tonight)


Dow +0.18% S&P +0.10% Nasdaq +0.10% Russell -0.09%
US Market closed again higher, but conviction was weak ahead of the latest FOMC policy statement, which will be released this afternoon day of Roch Hachana. Wireless names were in focus on Tuesday following reports of renewed merger talks between Sprint(S 8.20, +0.52) and T-Mobile US (TMUS 65.42, +3.62). The two companies spiked 6.8% and 5.9%, respectively, and helped the S&P 500's telecom services sector (+2.3%). Financials continued to OP (7th win in * sessions...). US After Hours, CPRT +4.5% higher and BBBY -12%, ADBE -3%, FDX -2%, AIR / STLD -1% lower following earnings/guidance. Asian Market, markets opened moderately weaker, as markets and currencies shore up ahead of Fed meeting. Internationally US President Trump’s comments to UN vowing to destroy North Korea if necessary; large earthquake in Mexico and hurricane Maria made landfall in Puerto Rico (Jose decelerates to a tropical storm) dominated the headlines. Markets strongly anticipate that the Fed will get more specific about balance sheet unwinding. PBOC OMO had a significantly smaller injection after two consecutive large injections. The onshore yuan climbed the most in nearly two weeks as the USD gave up an early advance and the euro extended a rally to the fifth day in a row. Japan August trade balance had some notable components; exports to the US +21.8% y/y was the fastest rate since Dec 2014.

Nikkei -0.03% Hang Seng +0.32% CSI +0.43% Shanghai +0.32% Shenzen +0.63%

Eur$ 1.2010 CNH 6.5650 CNY 6.5651 JPY 111.47 GBP 1.3520 CHF 0.9611 RUB 58.1086 WTI$ 50.20 +0.60%

S&P -0.04% EuroStoxx -0.03% Dax +0.04% FTSE +0.05% SMI -0.04%

Macro :
- Trump Is Said to Have Warned Saudis Off Qatar Military Move
- May Declines to Rule Out Firing Johnson Over Brexit Dispute
- Fed Could Trigger Flood of Corporate-Bond Issuance: Markets Live

Keep an eye on :
- AIR FP : Airbus CEO: Getting Tighter to Hit 2017 A320neo Target: Echos
- ALV GY : Allianz Seeks to Regain Market Share From HUK-Coburg: BZ
- AAPL US : Bain Is Said to Seek $7b From Apple for Toshiba Chips Bid
- ATE FP : Alten First-Half Net Rises 20%; Co. Repeats FY Growth Outlook
- ASC LN : Fast Retailing Wants to Boost Online Sales, Yanai Tells EL Pais
- ATC NA : Buy Charter, Sell Altice USA Into Strength, UFP Says
- AVV LN : Aveva Strategic Appeal Back in Focus, Raised to Neutral: Goldman
- AXFO SS : Axfood CEO Sees ’Big Potential’ for Online Pharmacy: DI
- BAYN GY : Bayer-Monsanto EU Review Extended to Jan. 22, Commission Says
- BA US : U.S. Air Force: Boeing Tanker Has 3 Major Deficiencies to Fix
- CABK SM : CaixaBank, Sabadell Looking at Liberbank, Unicaja: Expansion
- CAP FP : Capgemini Plans Share Buyback of Max EU400M
- CEM IM : Heidelberg Cement to Acquire Cementir Italia
- CLN VX : Clariant AG: White Tale Holdings Raised Stake Above 15%
- DB1 GY : Deutsche Boerse Works Council Wanted CEO to Step Down: Platow
- DTE GY : SoftBank CEO Says T-Mobile-Sprint Deal Will Lift Competition
- FB US : WhatsApp Is Said to Reject U.K. Ask on Encrypted Messages: Sky
- FCA IM : Fiat Chrysler Recalling 443,712 Pickups, Trucks
- HEI GY : Heidelberg Cement to Acquire Cementir Italia
- IAG LN : British Airways Proposes New Pension Plan to Stem Deficit
- ITX SM : Inditex to Distribute EU0.34/Shr as Final Ord., Bonus Dividend, Inditex to Distribute EU0.34/Shr as Final Ord., Bonus Dividend
- KNIN VX : Kuehne + Nagel Says Acquisitions Remain ‘Important Option’
- MB IM : Mediobanca May Place Generali Stake in New Unit, Sell Part: Sole
- MDLZ US : Mondelez Put Options Among the Most Active In U.S. Trading
- NOVN VX : Novartis’s Rydapt Gets EU Approval for Types of AML, SM
- PNL NA : FedEx 1Q Adjusted EPS Misses Lowest Est.; Shares Fall 3.6%
- RNO FP : Renault Bought Nissan’s Share In JV Alliance Rostec Auto
- SGRE SM : Siemens Gamesa Wins 97 MW Supply Order in Argentina: Statement
- 9984 JP (SoftBank) : SoftBank CEO Says T-Mobile-Sprint Deal Will Lift Competition
- TELIA SS : Telia CEO Sees Uzbek Fine, Eurasia Exit Completed This Year: DI
- TEVA US : Teva Pharmaceutical Downgraded to ’BBB-’ From ’BBB’ By S&P
- TKA GY : Thyssenkrupp, Tata Steel Sign MOU for 50/50 European Steel JV
- TIT IM : Telecom Italia to Appeal Consob Ruling on Control by Vivendi
- VIV FP : Vivendi’s Canal Plus to Grow in 2017, Executive Tells Figaro
- VOW3 GY : Volkswagen Says Full Impact of Mexico Earthquake Being Assessed
- ZAL GY : Fast Retailing Wants to Boost Online Sales, Yanai Tells EL Pais

>>> Europe : Brokers Upgrades & Downgrades - 20th of Sept. 2017

>>> Up
* Aveva Raised to Neutral at Goldman, PT GBP24
* Bayer Raised to Buy at Baader-Helvea, PT EU140
* Deutsche Telekom Raised to Buy at Kepler Cheuvreux, PT EU17.50
* Ipsen Raised to Buy at SocGen, PT EU126
* Nordex Raised to Hold at Independent Research, PT EU10.40
* Nostrum Oil & Gas Raised to Outperform at RBC, PT 475p
* Pfizer Raised to Overweight at Morgan Stanley, PT $39
* Stagecoach Raised to Hold at HSBC, PT GBP1.60

>>> Down
* Allergan Cut to Equal-weight at Morgan Stanley, PT $228
* Clariant Cut to Hold at Baader-Helvea, PT CHF25
* Ibstock Cut to Equal-weight at Barclays, PT GBP2.45
* Interserve Cut to Hold at Cenkos Securities, PT 142p
* Suez Cut to Underperform at Credit Suisse
* Swiss Re Cut to Sector Perform at RBC, PT CHF91

>>> Initiation
* Coach New Equal-weight at Barclays, PT $45
* Com Hem New Buy at Kepler Cheuvreux, PT SEK140
* Metro New Reduce at Equinet, PT EU9
* Metro Bank New Underperform at Macquarie, PT GBP27
* Midsona New Buy at SEB Equities, PT SEK63
* Trigano New Buy at Kepler Cheuvreux, PT EU140

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: Markets remain quiet ahead of Fed, Japan exports surprise to the upside

***Asia Summary***
- Asian equity markets opened moderately weaker, as markets and currencies shore up ahead of Fed meeting. Internationally US President Trump’s comments to UN vowing to destroy North Korea if necessary; large earthquake in Mexico and hurricane Maria made landfall in Puerto Rico (Jose decelerates to a tropical storm) dominated the headlines. Currencies overall were muted with the USD weaker. Markets strongly anticipate that the Fed will get more specific about balance sheet unwinding. PBOC OMO had a significantly smaller injection after two consecutive large injections. The onshore yuan climbed the most in nearly two weeks as the USD gave up an early advance and the euro extended a rally to the fifth day in a row. Onshore yuan rose 0.25%, the most since Sept. 7th , halting a 2- day decline.

- Japan August trade balance had some notable components; exports to the US +21.8% y/y was the fastest rate since Dec 2014. Headline exports had their fastest rise since Nov 2013 and the 9th consecutive rise. Japan MoF said exports were supported by semiconductors and autos. Australia and New Zealand banks were under pressure after RBNZ announced new regulations in order to ensure that a bank can continue to operate in a situation where a key service provider fails.

***Key economic data***
- (NZ) NEW ZEALAND Q2 CURRENT ACCOUNT BALANCE (NZ$): -0.62B V -0.9BE
- (JP) JAPAN AUG TRADE BALANCE: ¥113.6B V ¥108.7BE; ADJ ¥367.3B V ¥404.5BE
- (AU) AUSTRALIA AUG SKILLED VACANCIES M/M: 0.3% V 0.7% PRIOR

***Speakers and Press***
China/Hong Kong
- USD/CNY (CN) China Securities Journal: Yuan's one way depreciation trend has ended
- (CN) PBoC supports a move by some banks to increase lending rates on mortgage loans in the Beijing market – CCTV
- (CN) China corn farmers expected to hoard their crops, waiting for prices to rise - Chinese press
- (CN) China considering a plan to allow foreign electric-car business in free-trade zones – press
- (CN) According to John McAfee: China has banned bitcoin exchange heads from travelling overseas - speaking in HK

Korea
- (KR) US President Trump: If US is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea – UN speech
- (KR) South Korea President Moon: Trump's comments to "totally destroy North Korea" were in line with previous remarks for pressure and sanctions

Japan
- (JP) Japan PM Abe said to delay FY20 primary balance target – Nikkei
- (JP) Japan Chief Cabinet Sec Suga: Trump speech was important due to its mention of abduction; nothing decided on primary balance surplus target year

Australia
- (AU) RBA Assistant Gov Ellis: Household debt an exacerbating factor is shock occurred

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.0%, Hang Seng +0.2%; Shanghai Composite +0.2%, ASX200 -0.1%, Kospi -0.0%
- Equity Futures: S&P500 -0.0%; Nasdaq100 -0.0%, Dax +0.0%, FTSE100 +0.0%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.2019-1.1987; JPY 111.65-111.45; AUD 0.8022-0.7999;NZD 0.7342-0.7311
- Dec Gold +0.4% at $1,315/oz; Nov Crude Oil +0.7% at $50.25/brl; Dec Copper +0.1% at $2.98/lb
- GLD SPDR Gold Trust ETF daily holdings +2.07 tonnes at 846.0 metric tonnes
- (AU) Australia sells A$600M in 2% 2021 bonds; avg yield 2.3225%; bid-to-cover 7.48x (went to 1 bidder)
- (CN) PBoC OMO: injects CNY30B in 7 and 28-day reverse repos v injected combined CNY150B in 7 and 28 day reverse repos prior
- USD/CNY (CN) China PBOC sets yuan reference rate at 6.5670 v 6.5530 prior (weakest setting since Sept 12th)
- (KR) Bank of Korea (BOK) Sells KRW2.1T v KRW2.1T indicated in 2-yr bonds; avg yield 1.73% v 1.69% prior

***Equities notable movers***
Australia/New Zealand
- SVW.AU Acquires remaining 53.3% stake in Cotes Hire for A$517M; +7.5%
- WLD.AU Reports 1st shipment of beef cattle to China; +10.3% (reported yesterday)
- STO.AU Australia ACCC: moves to boost local gas supply not enough to help market; -1%

Japan
- 6502.JP Said to have chosen to sell chip unit to Innovation INCJ group (Japan/South Korea alliance); +2%

Korea
- 023530.KR , Lotte Shopping, (KR) South Korea govt considering law that would raise required closed days of hypermarkets to four per month from two; -3%

Hong Kong/China
- 175.HK Expects to reach sales target of 2.0M units by 2019 - HK press; +3.5%
- 1211.HK BYD, China considering a plan to allow foreign electric-car business in free-trade zones – press; +10%

>>> US After Hours Summary: CPRT +4.5% higher and BBBY -12%, ADBE -3%,


After Hours Summary: CPRT +4.5% higher and BBBY -12%, ADBE -3%, FDX -2%, AIR / STLD -1% lower following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: KOOL +12.4% (thinly traded), CPRT +4.5%

Companies trading higher in after hours in reaction to news: WAC +53.8% (Barclays agreed to increase available financing), GEMP +11.5% (plans to advance its product candidate gemcabene into Phase 3 development in 2018 and is preparing for end of Phase 2 meeting w/ the FDA and EMA in early 2018), MBII +4.6% (light volume - ÉLÉPHANT VERT will develop and market two of MBI's products in Morocco, Tunisia and Algeria), PULM +2.5% and S +1.8% (continued strength), AUPH +1.6% (will host an R&D Day on October 20 at 8:00am ET), EVH +1.3% (ticking higher; initiated after the close with Overweight and $23 tgt at KeyBanc Capital Mkts), AOBC +1.2% (continued strength following President Trump comments on gun exports), CX +1.2% (offers to purchase for cash any and all of CEMEX Finance LLC's outstanding 9.375% Senior Secured Notes due 2022), RESI +1.1% (ticking higher; provides update on impact of Hurricane Irma; inspections so far indicate limited damage relative to overall portfolio), BPL +0.5% (to sell limited partnership units for approx $210 mln; expects this offering to be sufficient to fund a portion of its growth capital projects, eliminating the need for additional equity offerings through mid-2018)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: BBBY -12.3%, ADBE -3.2%, FDX -1.6%, AIR -1.2%, STLD -0.8%

Companies trading lower in after hours in reaction to news: MXWL -3% (amends/restates Viex agreement; proposes offering of $50 mln convertible senior notes due 2022 in a private offering), WSM -2.3% (following BBBY results), MDXG -0.8% (to host call on September 21 at 10:30am ET to update progress on strategic initiatives and respond to topics requested by shareholders), F -0.6% (reports that Ford plans to cut production at 5 North American plants), UPS -0.5% (following FDX results)

>>> Dow +0.18% S&P +0.10% Nasdaq +0.10% Russell -0.09%

Closing Market Summary: Wall Street Ticks Up Ahead of FOMC Policy Statement

Equities moved higher once again on Tuesday, but conviction was weak ahead of the latest FOMC policy statement, which will be released on Wednesday afternoon. The S&P 500 (+0.1%), the Nasdaq (+0.1%), and the Dow (+0.2%) closed at new record highs, but the small-cap Russell 2000 (-0.1%) lagged a bit, settling just below its unchanged mark.

Wireless names were in focus on Tuesday following reports of renewed merger talks between Sprint (S 8.20, +0.52) and T-Mobile US (TMUS 65.42, +3.62). The two companies spiked 6.8% and 5.9%, respectively, and helped the S&P 500's telecom services sector (+2.3%) finish at the top of the day's sector standings--by a comfortable margin.

Financials also outperformed, sending the influential financial sector (+0.8%) to its seventh win in eight sessions, thanks in part to a slight steepening of the yield curve--which bodes well for lenders. The yield on the 2-yr Treasury note finished flat at 1.39% while the benchmark 10-yr yield climbed one basis point to 2.24%.

Conversely, health care stocks sold off on Tuesday with providers like UnitedHealth (UNH 194.65, -3.54) and Aetna (AET 156.04, -4.96) getting hit the hardest; the two companies dropped 1.8% and 3.1%, respectively. The health care sector (-0.8%) finished near the bottom of the sector standings, surpassed only by the real estate group (-1.0%).

On the earnings front, AutoZone (AZO 535.19, -28.21) plunged 5.0% after its better-than-expected bottom-line results failed to justify its recent four-week rally; AZO shares advanced over 10.0% from August 18 to yesterday's close. The S&P 500's consumer discretionary sector (-0.1%), which houses automotive retailers, finished lower for the fourth session in a row.

Also of note, firearm stocks spiked in late-afternoon action following a Daily Mail report the President Trump is looking to ease industry export restrictions. Names like Sturm Ruger (RGR 54.35, +6.55), American Outdoor Brands (AOBC 15.70, +1.44), and Vista Outdoor (VSTO 23.00, +0.70) settled higher by 13.7%, 10.1%, and 3.1%, respectively.

In politics, President Trump made his U.N. debut on Tuesday, taking a hard stance against North Korea and the Iran nuclear deal. Also, reports indicate that Senate Majority Leader Mitch McConnell (R-KY) is seriously considering a Senate vote on a new health-care reform bill.

Reviewing Tuesday's batch of economic data, which included August Housing Starts, August Import/Export Prices, and the Current Account Balance for the second quarter:

  • Housing starts decreased to a seasonally adjusted annualized rate of 1.180 million units in August (consensus 1.170 million), down from a revised 1.190 million units in July (from 1.155 million). Building permits increased to a seasonally adjusted 1.300 million in August (consensus 1.212 million) from a revised 1.230 million in July (from 1.223 million).
    • The key takeaway from the report is that the pace of single-family starts isn't quick enough to alleviate the supply pressures in the housing market that are crimping affordability for prospective homeowners. That isn't expected to improve next month either when the force of the impact from Hurricanes Harvey and Irma weighs on housing starts activity.
  • Import prices excluding oil rose 0.3% in August after declining 0.1% in July. Export prices excluding agriculture increased 0.7% in August after rising 0.3% in July.
    • The key takeaway from the Import-Export Price Index report for August is that it will keep the possibility of a December rate hike on the table.
  • The current account deficit for the second quarter totaled $123.1 billion (consensus -$115.1 billion). The first quarter deficit was revised to $113.5 billion from $116.6 billion.

On Wednesday, investors will receive just two economic reports--the weekly MBA Mortgage Applications Index and the August Existing Home Sales Report (consensus 5.42 million)--at 7:00 ET and 10:00 ET, respectively. In addition, the FOMC will release its latest policy directive at 14:00 ET.

  • Nasdaq Composite +20.0% YTD
  • Dow Jones Industrial Average +13.2% YTD
  • S&P 500 +12.0% YTD
  • Russell 2000 +6.1% YTD

>>> Marriot Vacations commences $200 mln private offering of convertible senior

Marriot Vacations commences $200 mln private offering of convertible senior notes due 2022 (112.10 -2.00)
The Company expects to use (i) up to approximately $60 million of the net proceeds from the offering to repurchase shares of the Company's common stock from purchasers of notes in the offering in privately negotiated transactions effected through one or more of the initial purchasers or their affiliates conducted concurrently with the pricing of the notes, (ii) a portion of the net proceeds from the offering to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to the Company from the warrant transactions described below) and (iii) the remaining net proceeds for general corporate purposes, which may include repayment of debt, acquisitions, working capital, inventory, share repurchases and capital expenditure