>>> Barrons weekend summary: Positive on Oil, APA, AVGO, FNSR, ADSK, ALXN, EA, S

Barrons weekend summary: Positive on Oil, APA, AVGO, FNSR, ADSK, ALXN, EA, SLAB, BWA; Cautious on Volatility, Macau, Steel, ORLY 
* Cover story: The active/passive debate in the investing world hasn’t focused on the issue of whether, or how, increased indexing will affect the market; “Indexing works because it can piggyback on the wisdom of the crowd, but its very rise shrinks the crowd whose decisions help make the market.” 

* Tech Trader: Positive on AVGO, FNSR: Rampant spending by tech giants such as GOOGL, AMZN, BIDU, FB, MSFT, and AAPL on streaming, artificial intelligence, and other technologies has led to the need for greater Internet infrastructure, boosting chipmakers and fiber-optic suppliers. 

* Trader: “With rates rising and multiples under pressure due to tighter monetary policy, it might take more than your run-of-the-mill earnings beat to send stocks higher,” says UBS strategist Julian Emanuel; Since the financial crisis, investors seem to have confused low volatility with low risk, but at this point volatility has become almost completely disconnected from fundamentals; During the first half, picks from the Trader column returned 6.9%, beating the S&P 500’s average gain of 3% during the same period. 

* Features: 1) “The price of crude oil could touch $60 a barrel before the end of the year, as demand exceeds supply”; traders have had difficulty interpreting the effect on price of recent events in the market, says Citigroup’s Eric Lee; 2) Positive on APA: Shares of Apache, one of the worst-performing stocks in the market this year, could double as the company’s value is realized by the market or a sale, and some institutional investors are buying; Positive on ADSK, ALXN, EA, SLAB: Companies look attractive on the metric of selling, general, and administrative expenses (SG&A), which academics have linked to future stock returns. 

* Mutual Funds Quarterly: 1) Evidence from the last proxy season indicates the largest passive investors are becoming more active; 2) Research carried out during the past several years suggests that companies scoring well on gender equality have a tangible edge over less-diverse peers; 3) Providers of so-called multi-factor exchange traded funds say they should replace funds based on broad-market indexes, but the jury is still out; 4) A look at leaders and laggards in the second quarter across a range of fund types. 

* Follow-Up: Cautious on ORLY: Auto-parts supplier still needs time to get back on track, and shares are down after poor quarterly performance, but investors should hold on to them; Positive on BWA: Company should see increased revenue as automakers sell a higher mix of gasoline models that need to meet fleet efficiency requirements. 

* European Trader: UBS chief Sergio Ermotti’s move to shrink the investment bank to focus on wealth management has “made the firm a strange beast in the financial-services jungle”—and difficult to value. 

* Asian Trader: “Investors have been all-in for Macau’s gaming stocks this year, but now it looks like a good time to take some money off the table.”

* Emerging Markets: As the U.S. and Mexico undertake the renegotiation of NAFTA, “the more complex subjects of labor mobility and taxes will prove vexing,” leading to a pause in the peso’s rise, some Mexican stock weakness, and an upside for some Mexican bonds. 

* Commodities: “China’s economic slowdown, a U.S. bid to halt imports, and a strong dollar are likely to stagnate steel’s price in the near term.” 

* Streetwise: The column asks four questions about the stock market: Who is afraid of rising yields? What do Q2 results say about future earnings power? Will earnings peak this year? Is bullish positioning excessive?

>>> Nets shareholders could unlock value via sale after disappointing post-IPO r

Nets shareholders could unlock value via sale after disappointing post-IPO run
07 JUL 2017
  • Private equity firms seen as most likely bidders
  • Current take-out premium in stock welcomed by investors

Nets’ [CPH:NETS] shareholders could seize the opportunity to exit in case of a bid at the right price, after a disappointing run post listing, according to investors and a banker familiar with the company.

Private equity firms are seen to be circling the Danish digital payments provider, according to two sector bankers and the banker familiar. Its size makes Nets a bit of a stretch for strategic buyers in Europe, while its geographical focus makes it a less strategic match for US-based trade buyers, the first sector banker said.

On 3 July, Bloomberg News reported that US-based firm Hellman & Friedman had indicated its interest. The company then confirmed it had received approaches and would review them. Local press reports say that JPMorgan has been mandated to advise on takeover interest.

Owners Bain and Advent, alongside pension fund ATP which held 5% of the equity pre-IPO, only took Nets public in September last year at DKK 150 per share for a market capitalisation of DKK 30bn (EUR 4bn). Since then, the stock has traded consistently below the IPO price, falling as low as DKK 105.9 on 15 March.

Shares now trade near the IPO level at around DKK 148.3, which is a reasonable price for the company, according to a minority shareholder.

It is no secret that the stock hasn’t done well since the IPO, so some investors would welcome the opportunity to get out, said a second investor who was invested until at least 31 December 2016. However, he declined to disclose his current position.

Nobody likes exposure to a bad IPO, so it would be a relief for some holders to let go, an investor who recently sold down its minority stake in Nets, concurred.

There are still some frustrated owners who bought in more recently, who will want to sell at the IPO price or higher, he noted.

Whether or not shareholders are happy with the approaches very much depends on their perspective of the future potential for improvement, the second shareholder said. This potential is debated by analysts, with some predicting better performance in the future, he added.

The first shareholder said that he is rather equivocal about a potential sale and delisting, saying that “these things happen”. The fund has not changed its position in Nets as a result of the news and takes a pragmatic stance on a potential delisting.

If bidders come at a premium to the current share price, he would be happy with that. If it all comes to nothing, the take-out premium on the stock would likely stay on for a while, which also serves the shareholder.

Criticism of the IPO process

The turnaround on Nets from Bain and Advent was extremely fast, as they only bought Nets in March 2014 for DKK 17bn, the second investor said.

The owners have more time and patience to review their options, while having already made nice returns in only a few years’ time, he said.

At that time, the price was seen as very elevated as the sale process attracted many bidders, which drove up the price, he said. Digitalisation of payments developed faster than anticipated, creating a tailwind for fintech companies, he said.

The way the IPO was run drew criticism from the second and the former shareholder, however. Bookbuild was not well-run, with many hedge funds piled into the book, they said. The banks and management were seen as too greedy, the second shareholder added.

Negative press on extremely generous management incentive pay packages after the IPO has not helped the perception of the company, he added.

Banks will always make the company look good, “it’s the name of the game”, the first shareholder countered. The company has delivered on all of its IPO promises and more, he added.

A spokesperson for Nets said that they were looking at how firm the offers are, but declined to comment further on the process.

>>> Africa Israel suitor Saidoff raises offer to ILS 505m

Africa Israel suitor Saidoff raises offer to ILS 505m
07 JUL 2017
Saidoff Group, which Naty Saidoff leads, announced it improved its offer to buy the Israeli real estate company Africa Israel Investments, as requested by the bondholders' trustees of Africa Israel, according to a report in Globes. Saidoff Group has raised its offer to ILS 505m (USD 144m) from ILS 485m, while reducing its early repayment offer that would be done by the end of the first year of the bond arrangement, but otherwise kept most other terms the same.
The bondholders will see around 25% of their bonds written off, and receive ILS 1.6bn in new series of Africa Israel bonds, besides benefits worth ILS 125m in exchange of their existing bonds.
The report noted that the group is coming closer to buying the target, especially as the rival bidding group of Lev Leviev and Moti Ben Moshe withdrew earlier this week

>>> Whole Foods deal tough to beat, sector advisors say

Whole Foods deal tough to beat, sector advisors say - MergerMarket

Amazon’s [NASDAQ:AMZN] offer for Whole Foods Market [NASDAQ:WFM] may have boxed out rival bidders, sector advisors and a former Whole Foods shareholder said.
The e-commerce juggernaut struck a surprise deal last month to acquire the Austin, Texas-based organic grocery chain for USD 42 per share in cash or USD 13.7bn. Whole Foods has largely traded through the bid since the 16 June announcement. The company's shares closed at USD 42 Friday afternoon after trading up to USD 42.19 earlier in the day.
The bid values the company at 10.6x TTM EBITDA, above EBITDA multiples for past grocery transactions, according to a preliminary proxy filed on Friday. Smaller and faster growing organic grocer Sprouts Farms Market [NASDAQ:SFM], though, trades at around 12.5x TTM EBITDA.
Whole Foods announced the Amazon deal a day after industry leader Kroger [NYSE:KR] announced disappointing results that sent its stock and the rest of the grocery store sector plunging.
Russ Piazza, a fund manager at Front Street Capital, said he considered the offer fair given current industry dynamics. If Whole Foods had outperformed other grocers, the bid could be considered light, said Piazza, but he said he still considered USD 42 a “decent price.”
Front Street started buying Whole Foods stock in 2007 and elected to sell once Whole Foods started trading through the Amazon.com offer price in the wake of the deal announcement, Piazza said. He discounted the chances of a rival bid given the strong cultural fits between the companies.
Neuberger Berman, a large Whole Foods investor that urged the company to explore a sale in April following a similar public push by activist Jana Partners, told media outlets in the aftermath of the deal that Amazon’s offer was not a “big check” and that a rival bidder could emerge.
“Deals like this bring a sense of urgency to strategic conversations that exist inside board rooms,” Charles Kantor, a portfolio manager at Neuberger Berman, told this news service in June. “Fear and greed create the lubricants necessary to spur deal making,” he added, which could create a “strategic imperative” for other firms to consider going after Whole Foods and similar firms.
Sector advisors said they did not see an interloper emerging to take on Amazon. Rival suitors would face antitrust risk and would be pursuing Whole Foods at a time when its premium and organic offerings have become easier to replicate, one of the sector advisors said.
A second sector advisor agreed that Amazon offers a higher level of speed and certainty in terms of antitrust review, which is attractive compared to other sector players.
“Other major retailers with established supply chain infrastructures could be attracted, but right now Amazon certainly seems best placed and it has tremendous financial resources,” added Angus Grierson, head of corporate finance at LGB Corporate Finance.
Any challenger would have trouble justifying its offer to its investors, two of the sector advisors said, as Whole Foods has been a rumoured target long enough that interested buyers should have already kicked its tires.
European grocer Ahold Delhaize [AMS:AD], which has been expanding in the US through deals, is an unlikely bidder, the third advisor said. It trades at a lower valuation than Whole Foods, making any deal likely dilutive, and has been focused on integrating past acquisitions, the advisor said.
Amazon, Whole Foods and Ahold did not respond to requests for comment.

Reuters - Vivendi asks Telecom Italia boss to cool broadband row with Rome - sou

Vivendi asks Telecom Italia boss to cool broadband row with Rome - sources


* Row focuses on state broadband tenders in rural areas
* CEO Cattaneo won praise for turnaround of TIM
* Vivendi frets about fallout from row with minister
* Italian minister says plans to meet TIM's CEO

MILAN/PARIS, July 7 Telecom Italia's top shareholder Vivendi has asked the Italian firm's CEO to ease up in a row with Rome that threatens a breakdown in relations between the former state monopoly and government over the rollout of ultrafast broadband, sources close to the matter said.
Flavio Cattaneo took over as chief executive at Telecom Italia (TIM) a little more than a year ago, earning praise from France's Vivendi and other investors for cutting costs at the heavily indebted firm.
But in recent weeks Cattaneo has engaged in a heated exchange with Italian Industry Minister Carlo Calenda and other government officials over the ultrafast broadband rollout across Italy, ruffling feathers at Vivendi.
"There is a problem, a real one," a source close to the matter told Reuters. "Either TIM continues with Cattaneo, but in a different way, or it will have to be someone else."
The source said discussions were ongoing to figure out the best solution.
Several managers at Vivendi, including CEO Arnaud de Puyfontaine, told Cattaneo to soften his tone, stressing it was Vivendi, the top investor with a 24 percent stake, that was driving policy at the Italian firm, another person added.
"Flavio is like a thoroughbred that is difficult to tame," the second source said. "He must understand that Vivendi now has a say on every subject."
TIM strongly denied any tension between its CEO and Vivendi. The French media giant also denied any tension with Cattaneo.
The 54-year old manager was appointed last year after his predecessor resigned over strategy clashes with Vivendi.
The French firm backed Cattaneo's promotion to CEO from board member, but "that does not give him a blank check", one of the people said.
TIM has been at loggerheads with Rome over rolling out superfast Internet in so-called non-economically viable areas.
The government says TIM undermined the state tender process by going back on its word not to invest in broadband in the rural and sparsely populated areas.
In a parliamentary hearing last week, Cattaneo said TIM would not be involved in the tenders because of the way the government handled the process.
"If they are already constructed in an ad hoc way, there's no point wasting time," the CEO said in comments that the industry minister called "serious and unacceptable".
The minister also said he would meet Cattaneo to discuss the issue, although sources said no date had been set.
This week, Italy's antitrust watchdog launched an inquiry to see if TIM had tried to obstruct the tender process.
Souring relations between TIM and Rome took a turn for the worse last year when the government, keen to bring ultrafast Internet to all Italians to boost growth, drafted in state-controlled utility Enel to help with the broadband rollout after claiming TIM was dragging its feet.
TIM's decision not to invest in areas where it said it could not guarantee a return on its investment forced Rome to step in with state subsidised tenders.
But in March TIM said it would invest its own money in some of those areas, arguing the market had changed. This shift angered Rome, which claimed it undermined the state tenders.
Vivendi, which plans to use Italy to build a southern European media empire, has supported TIM's acceleration of the broadband rollout. It has also backed aggressive cost cutting.
But the French, already under scrutiny for their growing influence over Italy Inc, do not want to antagonise the government any further, several sources said.
The group, led by tycoon Vincent Bollore, is also aware of growing political pressure to put TIM's copper network - a key source of revenue - back into state hands.
"Cattaneo has an A side that Vivendi likes and a B one that Vivendi likes less," one of the people said. "Vivendi is getting tired of having to clarify things with him so frequently ... now Vivendi wants action, not words."
Other investors remain on the fence for now, saying Cattaneo has been the driver behind TIM's turnaround.
"We like Cattaneo who's been crucial to getting TIM's costs in order and finally kick-starting the turnaround," said Tommaso Iaquinta, the CEO of New York-based Once Capital Management.
"Obviously we are watching how the fallout with the government unfolds and whether it will impact TIM."

>>> Aveva major shareholder favours takeover as Schneider plans new bid

Aveva major shareholder favours takeover as Schneider plans new bid - report
09 JUL 2017
A major shareholder in Aveva [LON:AVV] has said they would back a takeover of the UK-based software company by Schneider Electric [EPA:SU] of France, The Sunday Times reported. The unidentified investor would prefer a full takeover to a merger and said such a deal would have obvious industrial logic. Schneider remains keen to acquire Aveva, the source said, and the report added that Schneider is making plans to launch a new approach.
Sources said Schneider has been pressed on the matter by its shareholders in meetings recently and signalled that it is interested in making another bid for Aveva, the item reported.
The two groups held unsuccessful merger negotiations last year and in 2015 considered a complicated reverse takeover deal, the report noted.
The original article appeared in The Sunday TImes, Business & Money section, page 1