EDPR minority shareholders continue to resist EDP's tender offer
14 JUL 2017
[The fifth paragraph has been changed to reflect that EDP has until five calendar days before end of offer period to increase its offer price.]
Energias de Portugal's [ELI:EDP] bid for EDP Renovaveis [ELI:EDPR] continues to see resistance from shareholders who plan to reject the proposed offer, said two minority shareholders.
“The deal doesn’t sit well with us, (based on the) value of company,” said Murray Rosenblith of New Alternatives Fund, which does not plan to accept the offer as it stands. “We’d prefer to keep EDPR as we’ve held it for a while.”
EDP might do one or even two incremental increases in its proposed offer to appease shareholders, the fund manager said, adding that “for us, it’s not just about price, it’s about circumstances.” New Alternatives owns around 1.5m shares, or 0.17% of EDPR.
In March, 77% shareholder Energias de Portugal announced plans to make a EUR 6.80-a-share offer on the stake it does not own, valuing the company’s total equity at EUR 4.36bn. Shareholders expressed concern that the proposed offer’s 8.45% premium on the previous day’s closing price was inadequate on the deal’s announcement call. The offer period began 6 July and ends 3 August.
“The deal doesn’t sit well with us, (based on the) value of company,” said Murray Rosenblith of New Alternatives Fund, which does not plan to accept the offer as it stands. “We’d prefer to keep EDPR as we’ve held it for a while.”
EDP might do one or even two incremental increases in its proposed offer to appease shareholders, the fund manager said, adding that “for us, it’s not just about price, it’s about circumstances.” New Alternatives owns around 1.5m shares, or 0.17% of EDPR.
In March, 77% shareholder Energias de Portugal announced plans to make a EUR 6.80-a-share offer on the stake it does not own, valuing the company’s total equity at EUR 4.36bn. Shareholders expressed concern that the proposed offer’s 8.45% premium on the previous day’s closing price was inadequate on the deal’s announcement call. The offer period began 6 July and ends 3 August.
Another Lisbon-based minority shareholder told this news service that it also was not going to tender into the offer, and added that other Portuguese minorities are in the same position. The shareholder said that EDP has until five calendar days before end of offer period to increase its offer price, which is mentioned in the CMVM code.
The shareholder noted that EDP added a sort of “Plan B” in the prospectus last week in a clear sign that EDP saw that a lot of minorities were not going to sell. On 5 July, EDP released a prospectus stating that it could pursue a merger to acquire EDPR depending on the results of the takeover offer. Shareholders might only approve a merger proposal if it is on more attractive terms than the current, the shareholder said, speculating that EDP could offer a better premium in the share swap.
A source on the bidder side noted that EDP has given all the possible options to shareholders and that they are going to have to carefully evaluate what is better for them. The source added that the merger proposal would be subject to an evaluation made by an independent auditor and that the current offer price would be a reference point.
Though the merger option was added to the prospectus, the cash offer is friendlier, said the source, who noted that similar deals in the sector, for example those by Iberdrola [BME:IBE] and EDF [EPA:EDF], did not offer full cash.
The shareholder noted that EDP added a sort of “Plan B” in the prospectus last week in a clear sign that EDP saw that a lot of minorities were not going to sell. On 5 July, EDP released a prospectus stating that it could pursue a merger to acquire EDPR depending on the results of the takeover offer. Shareholders might only approve a merger proposal if it is on more attractive terms than the current, the shareholder said, speculating that EDP could offer a better premium in the share swap.
A source on the bidder side noted that EDP has given all the possible options to shareholders and that they are going to have to carefully evaluate what is better for them. The source added that the merger proposal would be subject to an evaluation made by an independent auditor and that the current offer price would be a reference point.
Though the merger option was added to the prospectus, the cash offer is friendlier, said the source, who noted that similar deals in the sector, for example those by Iberdrola [BME:IBE] and EDF [EPA:EDF], did not offer full cash.
In fact, EDF offered minority shareholders in EDF Energies Nouvelles EUR 40 a share in cash in 2011, representing a 9.2% premium on the share price a day before the announcement. Target shareholders could also elect to receive an equity alternative at a 11.2% discount to EDF Energies Nouvelle’s previous trading day close price, but shareholders were given the choice of either offer without limit.
Spain's Iberdrola bought back its Iberdrola Renovables unit in 2011, after a 2007 IPO. That offer was for a mixed equity and cash consideration, including a EUR 1.20 special dividend, though the deal was valued at a 0.33% discount on the renewables group share price a day before the deal was announced.
CEO Antonio Mexia of EDP has already said it is not raising the offer price, the source concluded.
However, a lawyer not involved in the situation said it would be difficult for EDP to achieve a squeeze-out.
According to CMVM rules, EDP needs to secure more than 90% of EDPR's voting rights and 90% of the shares subject to the offer for a squeeze-out. This "90 plus 90" rule needs to change as it is very hard to achieve, the lawyer said.
EDPR’s largest minority shareholder MFS, with a 3.1% stake, would not comment beyond its letter issued in April.
The bid was initially expected to be registered in mid-May, though cross-border administration caused it only to be registered last week, as reported. EPDR, the target, is a Spanish legal entity, though it is listed in Lisbon. After discussions between stock market regulators in Spain and Portugal, it was decided that Portuguese rules would be followed.
EDPR and EDP did not reply to requests for comment.
Spain's Iberdrola bought back its Iberdrola Renovables unit in 2011, after a 2007 IPO. That offer was for a mixed equity and cash consideration, including a EUR 1.20 special dividend, though the deal was valued at a 0.33% discount on the renewables group share price a day before the deal was announced.
CEO Antonio Mexia of EDP has already said it is not raising the offer price, the source concluded.
However, a lawyer not involved in the situation said it would be difficult for EDP to achieve a squeeze-out.
According to CMVM rules, EDP needs to secure more than 90% of EDPR's voting rights and 90% of the shares subject to the offer for a squeeze-out. This "90 plus 90" rule needs to change as it is very hard to achieve, the lawyer said.
EDPR’s largest minority shareholder MFS, with a 3.1% stake, would not comment beyond its letter issued in April.
The bid was initially expected to be registered in mid-May, though cross-border administration caused it only to be registered last week, as reported. EPDR, the target, is a Spanish legal entity, though it is listed in Lisbon. After discussions between stock market regulators in Spain and Portugal, it was decided that Portuguese rules would be followed.
EDPR and EDP did not reply to requests for comment.
This London-based investor says Iran holds huge promise — and it's not just in energy
Iran is ready for business, but banks are not buying it
Iran has piqued financial interest throughout the world for its massive energy reserves, but the country actually has a host of other opportunities in less obvious areas, according to one global investor.
For Clemente Cappello, CIO of London-based Sturgeon Capital, Iran holds promise in part for its cheap labor, abundance of natural resources, and well-educated youth. Specific sectors that could benefit from this mix include glass, manufacturing and petrochemicals, he explained, but Iran could also grow its technology sector.
In fact, the country already has local versions of Uber, Amazon and eBay.
In addition, Cappello mentioned that he thinks "equity opportunity is the easiest and most profitable" option in the country. Stocks, he said, are trading on average of six times price-to-earnings ratio, dividend yields are "well into the double digits" and interest rates could soon be cut in half.
Iran's recent election in May could provide a strong mandate for President Hassan Rouhani to continue with a foreign policy of re-integrating Iran's economy with the rest of the world, and also with his domestic economic reforms, especially in the troubled banking sector.
Cappello, who launched Sturgeon Capital's Iranian fund, told CNBC's "Street Signs" that service providers such as banks are the "real obstacle" for foreign investors. Those banks, he said, "are not keen to do business with Iran."
The investor also highlighted the risk foreign investors run when they lack understanding about the changing Iranian business dynamics. Other risks associated with doing business in Iran include not understanding the stakeholder structure of entities, he said.
A week before the Iranian election, the U.S. signed a waiver extending sanction relief. That was followed by a statement from French energy giant Total, stating it will resume investments in Iran.
The United Nations Conference on Trade and Development has put Iran among successful countries in terms of attracting foreign investments in 2016. In its 2017 World Investment Report, Iran attracted $3.372 billion worth of foreign investments, which is a 63 percent increase from the previous year.
It is plausible that the prospect of new sanctions could scare off foreign investors, as President Donald Trump's administration has said it is "putting Iran on notice."
Nonetheless, Cappello said, the U.S. cannot legally alter the international agreement with Tehran on its own and "the continued aggressive rhetoric clearly does not help sentiment and makes perceived risks higher than what they actually are."
And when it comes to Iran developing a fruitful economic relationship with investors, it will depend on continued reforms, he said.
"Our hope is that ... deals such as the one Total signed will set a precedent that doing business with Iran is okay and encourage the global business community to re-engage the country."
Fei Yan, 31, was arrested in Massachusetts after federal prosecutors in Manhattan accused him of trading last year on inside information about South Africa's Sibanye Gold Ltd planned $2.2 billion acquisition of Stillwater Mining.
The U.S. Securities and Exchange Commission in a related lawsuit accused Yan of netting $120,000 by placing trades ahead of the Stillwater deal and another merger based on information he obtained from his wife, an associate at a corporate law firm.
The law firm was not identified in court papers, but in a statement, the London-based international law firm Linklaters confirmed it had employed the associate.
"We will continue to cooperate fully with the authorities on this matter, and the relevant associate has been suspended, pending further investigation, without access to the firm's systems and confidential information," Linklaters said.
Yan, a citizen of China, had been employed as a post-doctoral associate in MIT's Research Laboratory of Electronics, according to Kimberly Allen, a spokeswoman for MIT. She referred further comments to the U.S. Attorney's Office in Manhattan.
He was charged in a criminal complaint with securities fraud and wire fraud. Following a hearing in federal court in Boston, Yan was released on a $500,000 unsecured bond.
A court-appointed lawyer for Yan did not respond to requests for comment.
Authorities said that beginning in August, Yan's wife became involved in working on the Stillwater deal in her role as an associate in the New York offices of the law firm retained by Sibanye to represent it in the negotiations.
She continued to work on the deal through the time it was announced in December, the complaint said.
By then, Yan had made multiple profitable trades in Stillwater's stock using a brokerage account he established in the name of his mother in China, the criminal complaint said.
Shortly before the deal was announced, Yan conducted online research related to insider trading, searching for how the SEC detects unusual trading and accessing several articles about insider trading, the complaint said.
After the companies announced their proposed merger on Dec. 9, Yan began selling Stillwater call options he had purchased, making a profit of $109,420, the complaint said.
Hyperloop One, the Los-Angeles-based company developing the technology, is gearing up to send a 28-foot-long (8.5 meter-long) pod hurtling down a set of tracks in a test run in Nevada in the next few weeks, spokeswoman Marcy Simon said.
Hyperloop One is working to develop a technical vision proposed by Musk, the founder of rocket maker SpaceX and electric car company Tesla Motors. In 2013, he suggested sending pods with passengers through giant vacuum tubes between Los Angeles and San Francisco.
Hyperloop aims to achieve speeds of 250 mph (402 km/h) in its upcoming phase of testing.
As it gears up for that experiment, the company on Wednesday released the results from a May 12 test in the Nevada desert. A Hyperloop One sled on wheels for the first time coasted above a track using magnets, Simon said.
It levitated for 5.3 seconds in a vacuum-sealed tube and reached speeds of 70 miles per hour (113 km/h), the company said in a statement. By comparison, another test by Hyperloop One that made national headlines last year was done on an open-air track, not in the tube, a key to achieving high speeds.
Backers of the project envision the pods reaching speeds of 750 miles per hour (1,200 kph), but skeptics say the hyperloop idea faces real-world challenges ranging from obtaining construction permits to making turns at jet speed.
Hyperloop One has raised $160 million in funding and has touted the technology's potential as a rapid-transit option.
"Hyperloop One will move people and things faster than at any other time in the world," Shervin Pishevar, co-founder and executive chairman of Hyperloop One, said in a statement.
Squeezed Snap raises questions over bank research
Shares in the messaging app have fallen sharply after Morgan Stanley slashed target price
Reality caught up with Snap this week.
Shares in the owner of the Snapchat messaging service plunged through its $17 initial public offering price on Tuesday to below $16.
To the sceptical observer, it was all but inevitable that Snap’s share price would fall from its peak of $27, hit just days after its March float. The company has never made a profit. Its IPO prospectus warned of slowing user growth as well as stronger competition for advertising from well-funded rivals, notably Instagram’s stories feature.
Indeed, the stock has been a magnet for investors who bet that its price will fall: the short interest is equal to 28 per cent of the company’s free float. And that is after short sellers made profits of up to $396m in just under six weeks in June and July, according to estimates of S3 Partners, a financial analytics group.
This week’s sell-off was prompted in part by a change of heart at Morgan Stanley, the investment bank that led Snap’s IPO. Analysts there had gushed in March about the company’s potential to monetise its engaged, young audience through advertising. This week, they slashed their target share price from $28 to $16, writing “we have been wrong about Snap’s ability to innovate and improve its ad product this year”. Analysts at Citi, which also participated in the float, rated Snap a buy until mid-June, well after the company’s first, disappointing results as a public company.
S&P Capital IQ, which tracks Snap research from 30 analysts, calculates the average rating on Snap is still “Buy”, with a price target of $20. One analyst continues to predict the shares will rise to $31.
Some tech groups do pull themselves into profit after post-listing teething problems. While Facebook leads that list, there are plenty of counter-examples. GoPro shares are down by three-quarters since their first day of trading in 2014. Twitter’s share price has dropped by nearly 60 per cent since its 2013 IPO.
But the early hype and continuing enthusiasm in some quarters for Snap reignites longstanding questions about sellside analyst research. Many — but not all — analysts seem to have misfired on the most basic questions: how unique is this company’s product, how will it make money and how does that translate into a share price.
The question is why. The cynics will remember the dotcom era when 12 Wall Street banks paid more than $1.5bn to settle allegations that they had slanted their research to favour investment banking clients. Though the banks claimed to have learnt their lesson back then, incidents keep cropping up.
In 2014, US regulators fined 10 banks that “offered favourable research coverage” to gain work on an IPO. This week, the French markets regulator disciplined Société Générale for failing to disclose how it arrived at a price target, and disclose that the bank had previously worked on an IPO. Then again, sometimes bank analysts simply get it wrong.
Whatever the reasons, new European rules may finally tip the balance in favour of no-holds-barred research. Starting in January, fund companies must tell investors how much they are paying for research, rather than bundling with other costs. That means they will expect to get value for their money. Overly sympathetic analysis is unlikely to survive the inevitable cull. Reality is catching up with investment banking research, too.
One of China’s Most Aggressive Deal Makers Slams on the Brakes
HNA Group puts much M&A on hold for now, following a Chinese crackdown on capital outflows and debt
One of China’s most prolific overseas acquirers, the airlines-and-hotels conglomerate HNA Group Co., is drastically slowing its deal making, suggesting that a government crackdown on debt might be crimping its global ambitions.
HNA has recently told people involved in its deals that it is putting mergers-and-acquisitions activity on hold for now, said some people familiar with the discussions. The group is looking at fewer targets and engaging in fewer discussions about potential acquisitions, another person familiar with HNA’s plans said.
The people said, however, that HNA is still discussing investments in asset-management firms and financial institutions—a high priority for the group—and that there are a range of deals in the pipeline that could be ready to go when HNA wants to execute them. The deals HNA has already announced are likely to go through, some of the people said.
The conglomerate didn’t immediately respond to a request for comment.
HNA’s deals hiatus sidelines one of the last big Chinese companies that was still aggressively pursuing deals overseas this year, after a push by the country’s regulators to curb a massive flow of money abroad in 2016. Outbound investments by Chinese companies, which hit a record last year, had already fallen sharply this year after mainland officials tightened scrutiny of big purchases abroad.
Then in June, China’s banking regulator began examining leverage at several highflying Chinese conglomerates, including HNA—in an extension of a wide-ranging regulatory campaign to rein in ballooning debt levels.
One of those conglomerates, Anbang Insurance Group Co.—which caught global attention with the purchase of New York’s Waldorf Astoria for nearly $2 billion—had already reined in the pace of its deal making. Another, Dalian Wanda Group—which bought Hollywood producer Legendary Entertainment for $3.5 billion—said earlier this week that it was selling most of its domestic theme parks and hotels, in a deal that would slash its debt levels.
HNA has announced $5.66 billion worth of overseas deals so far this year. Among recent investments, it spent $6.5 billion to acquire a stake in Hilton Worldwide Holdings Inc. and $446 million to buy a stake in OM Asset Management PLC, the U.S. money-management arm of British insurer Old Mutual PLC. Earlier this year, it borrowed roughly $3 billion to help build a big stake in Deutsche Bank AG . HNA is now the bank’s biggest shareholder with nearly a 10% share.
The group is trying to expand in the financial-services sector, hoping to capitalize on changes the industry is undergoing, Guang Yang, a top executive, told The Wall Street Journal earlier.
China’s nonfinancial outbound direct investment dropped 45.8% to $48.19 billion in the first half of the year from the same period a year earlier, according to state-run Xinhua News Agency, which cited data from the Ministry of Commerce.
Richemont top watchmaking executive resigns
Swiss luxury group Richemont has announced the surprise resignation of its top watchmaking executive. Georges Kern, who was only appointed to the job last November, had “been offered an interesting opportunity to become an entrepreneur,” Johann Rupert, Richemont’s chairman, said in a statement, without giving further details.
Mr Kern was head of watchmaking, marketing and digital at Richemont, and was previously the chief executive of IWC Schaffhausen. His departure is a setback for the Swiss group at a time when the luxury watch industry remains in a downturn as a result of heavy overstocking, shifts in tourist spending patterns and the rise of “smart” watches led by Apple.
Mr Kern’s appointment was part of a revamp by Mr Rupert of his top management team which has also seen his son, Anton, join Richemont’s board, along with Nikesh Arora, the technology investor who worked for a decade at Google.
As part of an increased focus on the group’s underperforming assets, Richemont earlier this month announced it had sold Shanghai Tang, its Chinese fashion brand, to an Italian businessman.
Dow +0.10% S&P +0.19% Nasdaq +0.21% Russell +0.09%
US Market closed higher again, technology (+0.3%) and financials (+0.6%)--leading the charge. Yellen stated today that it's premature to conclude that the underlying inflation trend is falling well short of the Fed's 2.0% target. In addition, the Fed chair noted that the Fed will consider the yield curve when setting rates, which created a sense that the central bank would like to see a steepening of the curve predicated on rising inflation expectations. the yield curve did steepen a bit on Thursday as the Treasury market gave back a good portion of Wednesday's advance. The 2-yr yield climbed two basis points to 1.36% while the 10-yr yield jumped three basis points to 2.35%. the consumer discretionary (+0.1%), energy (+0.4%), real estate (+0.2%), and consumer staples (unch) groups settled in the green while the industrials (-0.1%), materials (-0.1%), utilities (-0.4%), and telecom services (-0.6%) spaces finished in the red. TGT +4.8% after raising forecasts. USAfter Hours MDXG +5.5%, CYBR / ATEN -17% following guidance, cybersecurity names lower. Asian equity markets have generally traded with a slightly positive tone, in line with what was seen with US bourses. Trading has, however, been cautious ahead of upcoming US data (including CPI and retail sales) and bank corporate earnings (JPMorgan, Citigroup and Wells Fargo). the Nikkei has underperformed the Topix index, as Fast Retailing has declined by over 4% amid its 9-month results and accompanying broker downgrades. Taiwan Semi has traded slightly lower amid weaker than expected Q2 results and some disappointment in the market regarding its outlook. Infosys has gained over 2% on better than expected quarterly results.
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Macro :
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Keep an eye on :
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>>> Up
*Aberdeen Raised to Buy at HSBC, PT GBP3.50
*ArcelorMittal Raised to Buy at ING
*B&M European Raised to Buy at Goldman, PT 400p
*Boeing Raised to Overweight at JPMorgan, PT $240
*Derwent London Raised to Outperform at Exane, PT 3,100p
*Evonik Raised to Neutral at Goldman, PT EU28
*Fincantieri Raised to Neutral at MedioBanca, PT EU1.13
*Standard Life Raised to Buy at HSBC, PT GBP4.60
*Vidrala Raised to Hold at Kepler Cheuvreux, PT EU64.70
>>> Down
*BHP Cut to Hold at HSBC, PT GBP13.20
*Boliden Cut to Underweight at Morgan Stanley, PT SEK222
*DNA Cut to Hold at Danske Bank, PT EU15.30
*Euskatel Cut to Hold at Ahorro Corporacion, PT EU11.54
*Norwegian Air Cut to Sell at DNB Markets, PT NOK170
*Salzgitter Cut to Neutral at Citi
*Stentys Cut to Hold at SocGen, PT EU2.50
>>> Initiation
*Allianz New Underperform at Macquarie, PT EU153
*Euskatel New Underweight at Barclays
*Helvetia New Market Perform at KBW, PT CHF585
*Provident New Hold at Berenberg
*Wolseley New Positive at Susquehanna, PT 5,960p
>>> Call