FT : Macron and allies head for EU clash on foreign takeovers

Macron and allies head for EU clash on foreign takeovers
Leaders want powers to restrict buyouts in strategic sectors

French president Emmanuel Macron is heading for a clash with pro-free trade member states at his first EU summit over his push for a “protective Europe” that would give Brussels the power to restrict foreign takeovers of key industries.
In his campaign for the Elysée Palace Mr Macron backed a clamour by Paris, Berlin and Rome for a European mechanism against unwanted foreign takeovers in strategically important sectors.
Such demands reflect pressure to curb takeovers by Chinese state-backed groups of prized technology companies in Europe and the lack of equivalent opportunities in China’s market for European companies.
At a Brussels summit next week that will mark Mr Macron’s arrival on the European stage after his election in May, EU leaders will discuss whether steps should be taken to screen foreign takeovers on national security grounds.
Mr Macron has powerful allies in the form of Angela Merkel, German chancellor, and Paolo Gentiloni, Italy’s prime minister — even though any European intervention remains politically contentious and legally difficult.
A draft communiqué prepared for the summit, seen by the Financial Times, committed EU leaders to explore measures “to screen foreign investments where necessary in order to mitigate risks to national security”.
But pro-trade member states have pushed back strongly against the idea of a European mechanism against foreign takeovers. The Netherlands, the Nordic countries and the Baltic countries were swift to raise objections when the text was circulated, said a diplomat. “There was a fair amount of pushback.”
European trade advocates are fearful that such measures against foreign takeovers would bolster protectionism in the bloc and detract from any EU pushback against US president Donald Trump’s economic nationalism.
But officials said EU leaders also wanted to make a clear statement about the need for free trade to be balanced with fair trade.
Political debate is “moving towards more robust policy on the fair trade side,” said a senior Brussels official. “Clearly there is movement.”
Such steps would give the EU a mechanism similar to long-established powers in the US, where the Committee on Foreign Investment considers the national interest and security implications of overseas investment in US companies.

Still, a second European official said the parameters of any screening by Brussels of foreign takeovers on national security grounds remained unclear.
The question is under discussion but Brussels sidestepped proposals for specific steps when calling in a recent paper for tougher trade rules.
Some officials in Brussels are concerned about creating a tit-for-tat situation in which other countries would prevent acquisitions by state-controlled European companies. Others believe takeover curbs could curtail the flow of foreign direct investment into Europe.
Some trade experts have warned that the bloc has no power to deal with takeovers on national security grounds.
“The proponents and the commission need to deal with the fact that national security concerns are not within the scope of the EU,” said Hosuk Lee-Makiyama, director at the European Centre for International Political Economy think-tank in Brussels.
“Some [member states] have more or less concern about Chinese investment . . The reason in particular Germany is concerned about is not because of national security. There is an inherent view in Germany that if the German authorities decide not to do business with China then no one in Europe should.”

WSJ : Saudi Aramco IPO Plans Slowed Over Where to List

Saudi Aramco IPO Plans Slowed Over Where to List
The listing could be the biggest in history, valuing Saudi Arabia’s state oil company as high as $2 trillion

A divide between Saudi Arabia’s ruling family and executives of the kingdom’s oil company over where to list its shares is slowing the march toward a planned 2018 initial public offering, according to people familiar with the matter.
Executives at Saudi Arabian Oil Co., known as Saudi Aramco, are pushing Saudi Arabia’s king and his son, Deputy Crown Prince Mohammed bin Salman, on the merits of listing the state-owned oil company on the London Stock Exchange .
Those executives are concerned that listing in the U.S. would expose the company to greater legal risks, including from potential class-action shareholder lawsuits, according to these people.

But the Saudi Arabian royal court favors the New York Stock Exchange, which is owned by Atlanta-based Intercontinental Exchange Inc., according to the people familiar with the matter, in part because of the kingdom’s longstanding political ties to the U.S. and because the U.S. market represents the deepest pool of capital in the world.
The visit by President Donald Trump to Saudi Arabia last month helped to cement the prince’s preference for New York, according to one of the people familiar with the decision process.
“The deputy crown prince wants New York, and he has been pushing for it more and more in recent weeks,” the person said.
NYSE Group President Thomas Farley joined a group of U.S. executives to accompany Mr. Trump on his recent visit to Saudi Arabia. Similarly, London Stock Exchange Group PLC Chief Executive Xavier Rolet accompanied British Prime Minister Theresa May on her visit to Saudi Arabia in April, and they met with Aramco Chairman Khalid al-Falih.
A decision on where to list Aramco, which could value the company as high as $2 trillion, had been expected by some to come before the Islamic month of Ramadan, according to people familiar with the matter, but is now not expected until the end of July and could take longer than that.
During a cabinet meeting late Monday night in Jeddah attended by both the prince and King Salman, senior company executives pressed their case for London as the safer bet, according to two people familiar with the matter.

“London is definitely the front-runner for them and the legal team,” one of those people said of the Aramco executives who discussed the options at the cabinet meeting.
The indecision about the venue is fueling a contest between the New York and London exchanges. Along with other major global exchanges, the two have been pitching the merits of their trading venues, in some cases touting their existing crop of energy stocks and the breadth of their country’s energy sector to win the listing of what is likely to be the largest IPO in history.
A Saudi Aramco spokesman said that no decision on a venue beyond a listing on Saudi Arabia’s Tadawul exchange has been made, and that “all options continue to be held under consideration.”
A representative for the royal court didn’t respond to requests for comment.
For the venues, such a listing promises more than healthy fees. It is likely to attract international investors looking for a piece of the oil producer, and that interest would generate greater trading volumes, the lifeblood of any stock market.
Losing the battle for Aramco would mean forfeiting the bragging rights that it can use to compete against rivals for the next big IPO.

In recent weeks, the London exchange has signaled to Saudi Aramco that even though U.K. rules require 25% of the company’s shares to be held by public investors for a premium listing, which means a company meets the highest corporate governance and regulatory standards, it would consider lowering that threshold for the company or creating an international segment for some foreign companies, including Saudi Aramco. U.K. rules give the regulator the ability to lower the 25% requirement for such a listing.
“London is trying hard to accommodate Aramco,” said one of the people familiar with the matter.
The NYSE declined to comment, as did the LSE.
Some officials who attended Monday night’s meeting in Jeddah acknowledged that continuing to weigh the options and talking further with the two exchanges during the next month may yield better results for the company, according to one of the people familiar with the discussions.
According to another person familiar with the discussions, the choice of venue is complicated by the royal court’s reluctance to potentially put key economic relationships at risk by rejecting the exchanges of countries with which Saudi Arabia wants to court for investment or trade.

A listing in New York, along with one on the Tadawul exchange, has long been the favored listing option for Prince Mohammed, who is driving the IPO as part of a broader push to overhaul and diversify the country’s economy.
Aramco also could decide to list on more than one exchange in addition to Tadawul as an alternative solution. Proceeds from the IPO are to be invested as part of the economic diversification plan.
The back-and-forth over where to stage the listing highlights the singular nature of the effort to sell shares in the world’s biggest oil-producing company. The involvement of secretive royal family in decision-making, and the tight interconnections between the family, the company and the kingdom’s government, combine to make the deal stand out from other efforts around the world to privatize government assets.
For some of the bankers involved, the slow pace of decision-making has been a frustration, because settling on the venue is a key step in moving the IPO process toward regulatory requirements for a listing.
The company’s size has also made the listing unique. The prince has pegged the value of the company at $2 trillion. While some officials working on the deal put its value closer to $1.5 trillion, even at the lower end of that range, Aramco would stand to raise at least $75 billion from the issue.
The NYSE and the LSE represent two of the deepest pools of capital and are both home to the largest publicly traded oil and gas companies. NYSE energy listings include Exxon Mobil Corp. andConocoPhillips , while LSE’s big-capitalized energy stocks includeRoyal Dutch Shell PLC and BP PLC. The NYSE has argued in its pitch to Aramco that Shell and BP trade more on NYSE than LSE through American depository receipts, a security through which foreign-listed company can trade on U.S. exchanges.
Any effort to relax U.K. rules for the Saudi listing may be met with investor protest. “We will be lobbying strongly against any concessions being granted should there be a formal attempt to IPO Aramco in the U.K.,” Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said last week.
“As long-term investors in the U.K. equity market we fear this precedent could lead to a slippery slope,” he said. Royal London oversees about £104.5 billion ($133 billion) in assets.
The indecision over the listing venue comes at a time when Saudi Arabia has severed diplomatic ties with Qatar, alleging the Persian Gulf emirate is harboring individuals and groups that support terror, an accusation Qatar has called baseless. Qatar Investment Authority, an investment arm of Qatar, is one of the LSE’s largest shareholders with a 10% stake.
Some observers have suggested that ownership could push Saudi Arabia to favor the NYSE over the LSE. However, two of the people familiar with the matter said the Saudi-Qatar diplomatic rift hasn’t become an issue for bankers following the IPO.
Aramco’s concerns about the U.S. center mostly around the more litigious climate. Last year there were 300 securities class-action lawsuits filed in U.S. federal courts, up 32% from 2015 and the most since 2001, according to NERA Economic Consulting.
Some officials have also expressed concern about a U.S. law that allows American terror victims to sue Saudi Arabia.

>>> Asian Update

Asia Mid-Session Market Update: Strong Aussie jobs dent RBA rate cut outlook; Trump under expanded probe for obstruction

***US Session Highlights***
- (US) MAY ADVANCE RETAIL SALES M/M: -0.3% V 0.0%E; RETAIL SALES EX AUTO M/M: -0.3% V 0.1%E
- (US) MAY CPI M/M: -0.1% V 0.0%E (2nd negative reading in last 3 months); CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI INDEX NSA: 251.329 V 251.580E
- (US) DOE CRUDE: -1.7M V -2.5ME; GASOLINE: +2.1M V -1ME; DISTILLATE: +0.3M V +0.5ME
- FOMC decides to lift key interest rates 1/4%, as expected, to 1%-1.25%, leaving room for one more rate hike in 2017. Fed Chair Yellen also said that starting this year the Fed would gradually start unwinding its $4.5 trillion balance sheet, and the lack of slowdown in the projected rate hike path suggests the Fed can both do balance sheet reduction and rate hikes concurrently.

***US markets on close: Dow +0.2%, S&P500 -0.1%, Nasdaq -0.4%***
- Best Sector in S&P500: Consumer Staples
- Worst Sector in S&P500: Energy
- Biggest gainers: ALXN +9.3%; HRB +7.9%; M +2.3%
- Biggest losers: URI -6.1%; SWN -5.4%; MUR -5.4%
- At the close: VIX 10.6 (+0.2pts); Treasuries: 2-yr 1.36% (+1bps), 10-yr 2.14% (-7bps), 30-yr 2.78% (-8bps)
***US movers afterhours***
- AVXS Announces alignment with FDA on GMP Commercial Manufacturing Process for AVXS-101 ; +6.8% afterhours
- JBL Reports Q3 $0.31 v $0.29e, Rev $4.49B v $4.41Be; Guides Q4 $0.50-0.74 v $0.61e, R$4.7-5.1B v $4.79Be - Guides FY18 ~$2.60 v $2.08e ; +3.3% afterhours
- PACB Announces proposed public offering of common stock; size not disclosed; -10.2% afterhours

***Politics***
- (US) Special Counsel Mueller investigating President Trump for possible obstruction; Probe has widened to include Trump after he fired FBI Director Comey - Washington Post

***Key economic data***
- (AU) AUSTRALIA MAY EMPLOYMENT CHANGE: +42.0K (3rd straight increase) V +10.0KE; UNEMPLOYMENT RATE: 5.5% (4-year low) V 5.7%E
- (AU) AUSTRALIA JUNE CONSUMER INFLATION EXPECTATION: 3.6% V 4.0% PRIOR (6-month low)
- (NZ) NEW ZEALAND Q1 GDP Q/Q: 0.5% V 0.7%E; Y/Y: 2.5% V 2.7%E

***Notes and Observations***
- Asian markets taking the latest FOMC rate hike mostly in stride, with the exception of Hong Kong property names coming under pressure from a matching rate increase by HKMA.
- Moderate USD strength weighing on precious metals, leading to losses among Australian gold producers.
- AUD/USD rallied about 50pips on much stronger than expected Aussie jobs data, as unemployment rate fell to 4-year low despite the rise in participation rate; Conversely, NZD under pressure after a miss in Q1 GDP, falling some 60pips from the highs toward 0.72
- Risk-off flows materializing after a Washington Post report claimed Special Counsel Mueller is looking directly at President Trump for obstruction in relation to firing of FBI Dir Comey and pressure to end investigation of Michael Flynn. Mueller to interview Head of Intelligence Coats, NSA head Coats, and others as soon as next week.

***Speakers and Press***
China
- (CN) PBOC injected funds through open market operations (OMO) today to counter liquidity stress from tax payments and maturing repos - press
- (CN) China Academy of Social Sciences (CASS): House prices in Beijing fell 4.1% m/m - Shanghai Daily
- (CN) China NDRC: out 43.4Mt of crude steel capacity and 97Mt of coal capacity as of the end of May

Japan
- (JP) Junichi Fukuda said to replace Shinichi Sato as Japan Administrative Vice Minister - Japan press

Australia/New Zealand
- (AU) CBA: Australia pace of employment growth clearly accelerated; Recent run of strong data takes RBA rate cut off the table for now - press
- (NZ) Stats NZ: Investment in plant, machinery and equipment has been the strongest in almost seven years, reflecting higher domestic production and greater imports of machinery - NZ Press

Korea
- (KR) South Korea Fin Min Kim: Job creation is a top priority of President Moon's administration

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.4%, Hang Seng -1.1%, Shanghai Composite -0.1%, ASX200 -1.3%, Kospi -0.7%
- Equity Futures: S&P500 -0.3%; Nasdaq -0.5%, Dax closed, FTSE100 -0.3%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1205-1.1230; JPY 109.30-109.80; AUD 0.7580-0.7630; NZD 0.7210-0.7270
- Aug Gold -0.7% at 1,267/oz; July Crude Oil -0.1% at $44.69/brl; July Copper +0.5% at $2.58/lb
- SPDR Gold Trust ETF daily holdings fall 12.1 tonnes to 854.9 tonnes; lowest since June 5th and first decline since May 23rd
- (CN) PBOC SETS YUAN MID POINT AT 6.7852 V 6.7939 PRIOR; 2nd straight firmer Yuan fix; Strongest Yuan fix since Nov 9th
- (CN) PBOC to inject combined CNY150B v CNY90B prior in 7-day, 14-day and 28-day reverse repos

***Asia equities notable movers***
Australia
- Watpac (WTP) -11.4%; Guides FY17 underlying Net to be broadly breakeven y/y (implies ~A$8.5M)
- Oil Search (OSH) -2.8%; Affirms FY17 production 28.5-30.5 MMBOE; closed upsized refinancing of $500M debt facility to $600M - investor slides
- Tox Free (TOX) -0.6%; Guides FY17 underlying EBITDA of A$82-83M v A$83Me; H2 trading has improved on H1 meeting budget expectations

Japan
- Kobe Steel (5406) -3.7%; targeting FY20 pretax profit ¥20B (v ¥12B FY16/17) - Nikkei
- Toshiba (6502) -1.1%; On track to select preferred bidder for chip unit in the second half of June; To be demoted to the second section of Tokyo Stock Exchange (TSE) amid financial statement delay
- TEPCO (9501) -1.1%; Plans for restructuring of nuclear power business do not impact forming capital ties with other power utilities - Nikkei

Hong Kong
- Meitu (1357) -6.4%; shareholder to sell 66M shares at HK$8.50/shr
- China Southern (1055) -0.5%; Reports May passenger traffic +13% y/y
- Oriental Watch (398) -1.7%; Reports FY16/17 (HK$) Net 16.1M v loss 15.8M y/y; Rev 3.14B v 3.03B y/y
- Rykadan Capital (2288) -11.9%; Reports FY17 (HK$) Net 54.4M v loss 91.6M y/y; Rev 602.3M v 153.1M y/y
- Besunyen Holdings (926) +6.6%; Guides H1 Net CNY25-35M
- China Life Insurance Co (2628) -2.0%%; Reports May YTD premium income CNY298.5B, +19% y/y

>>> US After Hours Summary: LAKE +8.9%, JBL +4% following earnings/gui

After Hours Summary: LAKE +8.9%, JBL +4% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ROX +9.9%, LAKE +8.9%, JBL +4%

Companies trading higher in after hours in reaction to news: HTGM +33.3% (HTGM entered into a statement of work with QIAGEN Manchester for Master Assay Development, Commercialization and Manufacturing Agreement), IDXG +13.8% (still checking; was down more than 20% on the week), ADMP +10.7% (Adamis Pharma rebounding in after hours trade ahead of tomorrow's PDUFA date for Epinephrine Pre-filled Syringe), AVXS +6.1% (announces alignment w/ the FDA on its Good Manufacturing Practice commercial manufacturing process for AVXS-101 following the receipt of minutes from the Type B CMC meeting; expects to have the data ready to submit to the FDA in the August timeframe), PSDV +5.7% (modestly rebounding from this week's decline; Pres/CEO disclosed the purchase of 56,700 shares at avg price of $1.763/share), HAIN +2.4% (confirms will conduct a call to discuss its financial results on Thursday, June 22, 2017 at 8am ET and expects to file Annual Report and Quarterly Reports on that day)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: JRJC -5.8% (thinly traded)

Companies trading lower in after hours in reaction to news: WRLD -8.8% (ticking lower; files to delay 10-K due to internal investigation of its operations in Mexico; expects to file the Form 10-K by June 29), PACB -8.7% (to offer and sell shares of its common stock in an underwritten public offering), LNTH -5.8% (announces public secondary offering of 3 mln shares of common stock by selling stockholders), ARNA -5.2% (stockholders approve 1:10 reverse split), OAKS -5.1% (commences 4 mln common stock offering),

>>> US Dow +0.22% S&P -0.10% Nasdaq -0.41% Russell -0.63%

Closing Market Summary: Averages Settled Mixed Following Rate Hike

Equity indices finished Wednesday's session mixed after the FOMC voted to raise interest rates for the second time this year, as expected. The S&P 500 and the Nasdaq settled lower by 0.1% and 0.4%, respectively, while the Dow closed higher by 0.2%.

The Fed's decision to raise the fed funds target range by 25 basis points to 1.00%-1.25% was nearly unanimous with Minneapolis Fed President Neel Kashkari being the lone dissenter. The rate hike was attributed to realized and expected labor market conditions. In other words, it sounds as if the Fed is still expecting tight labor market conditions to produce stronger wage inflation that will presumably drive broader price inflation.

According to the Fed's dot plot, the median FOMC member expects one additional rate hike in 2017. However, the market doubts that a third rate hike will happen before the year's end with the CME FedWatch Tool assigning an implied probability of 47.0% to said event. In addition, the U.S. central bank plans to begin implementing a balance sheet normalization program sometime this year.

Going into the Fed's decision, equities were fairly flat as big losses from the financials, energy, and materials sectors were mitigated by modest gains from the remaining eight groups. The materials (-1.1%) and energy (-1.8%) groups never recovered, eventually settling the session at the bottom of the leaderboard.

Crude oil weighed on the energy group, dropping 3.5% to $44.79/bbl, after the Energy Information Administration (EIA) reported a smaller than expected draw of 1.7 million barrels (consensus -2.5 million barrels) in crude stocks and a build of 2.1 million barrels in gasoline inventories for the week ended May 9. The energy component settled at its lowest mark since mid-November.

Conversely, the heavily-weighted financial sector (+0.2%) retraced its earlier loss of 1.3% following the FOMC decision, settling higher for the sixth-consecutive session. However, a flattening of the yield curve, which is seen as a negative for the financial industry's bottom line, didn't make things easy on the sector.

Treasuries moved solidly higher following a weak batch of economic data, which included May CPI and May Retail Sales. Total CPI declined 0.1% (consensus 0.0%) in May while core CPI, which excludes food and energy, increased 0.1% (consensus 0.2%). On a year-over-year basis, total CPI is up 1.9% and core CPI has increased 1.7%.

Separately, May retail sales decreased 0.3% (consensus +0.1%) while the prior month's reading was left unrevised at 0.4%. Excluding autos, retail sales decreased 0.3% (consensus +0.2%) while the prior month's reading was revised higher to 0.4% from 0.3%.

The 10-yr and 2-yr yields traded at 2.11% and 1.29%, respectively, ahead of the Fed's policy statement, but ticked up from that level in the aftermath. The 2yr-10yr spread declined by four basis points with the 10-yr yield settling six basis points lower at 2.15% and the 2-yr yield dropping two basis points to 1.35%.

Back on Wall Street, the equity market was a little jumpy in the afternoon session, but eventually settled at the level it took into the FOMC rate decision. As noted above, the heavily-weighted financial sector flipped from negative to positive in the afternoon, however, the top-weighted technology sector did the opposite, exchanging a modest gain for a notable loss. 

In conclusion, regardless of how Wednesday's session began, it ended with a risk-off tone as countercyclical sectors generally outperformed their cyclical peers, especially following the Fed's policy statement; the health care, consumer staples, utilities, telecom services, and real estate groups finished with gains between 0.3% and 0.6%.

Reviewing today's economic data, which included May CPI, May Retail Sales, April Business Inventories, and the weekly MBA Mortgage Applications Index:

  • Total CPI declined 0.1% (consensus 0.0%) in May while core CPI, which excludes food and energy, increased 0.1% (consensus 0.2%). On a year-over-year basis, total CPI is up 1.9% and core CPI has increased 1.7%.
    • The key takeaway from this report is that it shows a softening trend in consumer inflation, which should presumably be some cause for concern among Fed members.
  • May retail sales decreased 0.3%, which is below the consensus of +0.1%. The prior month's reading was left unrevised at 0.4%. Excluding autos, retail sales decreased 0.3% while the consensus expected an increase of 0.2%. The prior month's reading was revised higher to 0.4% from 0.3%.
    • The key takeaway from this report is that consumers clearly remain guarded with their discretionary spending activity, which is likely the result of seeing little, if any, wage growth.
  • Business Inventories declined 0.2% in April while the consensus expected a downtick of 0.1%. The prior month's reading was left unrevised at 0.2%.
    • The key takeaway from the report is that business inventories remain elevated relative to sales, which is standing in the way of restoring pricing power.
  • The weekly MBA Mortgage Applications Index rose 2.8% to follow last week's 7.1% increase.

Tomorrow, investors will receive a slew of economic reports, including Initial Claims (consensus 240,000) at 8:30 ET, June Philadelphia Fed (consensus 26.0) at 8:30 ET, June Empire Manufacturing (consensus 6.0) at 8:30 ET, May Import/Export Prices at 8:30 ET, May Industrial Production (consensus 0.0%) and Capacity Utilization (Briefing.com consensus 76.7%) at 9:15 ET, and June NAHB Housing Market Index (consensus 70) at 10:00 ET.

  • Nasdaq Composite +15.1% YTD
  • S&P 500 +8.9% YTD
  • Dow Jones Industrial Average +8.2% YTD
  • Russell 2000 +4.5% YTD

>>> Gemalto/Atos rumours played down on strategic fit issues

MergerMarket

Gemalto/Atos rumours played down on strategic fit issues - sources
14 JUN 2017
Rumours that Gemalto [EPA:GTO] has been approached by Atos [EPA: ATO] lack foundation and are undermined by strategic fit issues, two sources following the situation and a person familiar said.

Speculation that Gemalto had been approached by Atos has been circulating in the market for over a month, the sources said. But, the companies’ usual external advisers have not been asked to look into a deal, they said. Atos management has also privately denied that there are deal talks when pressed by potential advisers, the first source added.

While the recent pitching of such a deal by bankers cannot be ruled out, Atos has not approached Gemalto, the person familiar said.

Atos declined to comment.

The takeover talk was likely stoked by a sharp drop in Gemalto's share price following a profit warning in March that warned 1Q revenues would be down year-on-year, the sources and sector bankers said.

The list of bidders for Gemalto is short, with Atosbeing the most likely strategic, sector bankers said. Even so, Atos would only be interested in certain parts of Gemalto, the bankers and sources said.

Atos’s payment division Worldline [EPA:WLN] would have synergies with Gemalto’s banking and payment division, bankers said. Specifically Worldline’s payment terminal services would complement Gemalto’s smart card chip business, the first banker said.

On paper a deal would therefore make sense, but in reality the extent of the overlaps between these two businesses could be problematic when it comes to integrating them, the second source said.

Gemalto’s security technology would also be of interest to Atos’s wider non-transactional business, the second source said. Atos, which provides cloud, data management and online platform solutions, claims it is the European ‘number one’ in cybersecurity.

But, Gemalto’s SIM card business would be of less interest to Atos, the first source and first banker said. Atos does have a smartphone business, which could be complementary, but concerns over the longevity of SIM cards has put pressure on Gemalto’s share price, the banker said. Gemalto’s 1Q results show 62% of its revenues come from payment and identity services, and 38% from mobile products. SIM sales were down 14% year-on-year.

Gemalto’s diverse collection of technologies means there are few strategic suitors who would want the whole business, this banker said.

A large-cap private equity firm such as KKR or Blackstone could be a better fit, a second sector banker said. PEs could be potential bidders but might need reassurance on the lifespan of some of Gemalto’s core business, such as contact payment cards, the first banker said.

Any bidder may have to take into account potential French government scrutiny for takeovers in ‘strategic’ sectors, bankers said. But this is unlikely to be a significant stumbling block, the second source said.

In any case, Gemalto is not expected to make any big M&A decisions at least until its strategic plan is announced in 4Q17, a second person familiar with the situation said. Gemalto is due to disclose a three-year plan, which could give details of its M&A strategy, such as expansion in the US, the person added.

The payments space generally has been the subject of several rumours recently. In March, Atos was forced to deny its Worldline division was preparing to bid for Ingenico [EPA:ING]. Bankers briefed have also said a tie-up between Ingenico and Wirecard [ETR:WDI] was being pitched, as reported.

Gemalto declined to comment.

>>> Glencore mandates King & Wood Mallesons on bid for Rio Tinto's Coal & Allied

Glencore mandates King & Wood Mallesons on bid for Rio Tinto's Coal & Allied - report
14 JUN 2017
King & Wood Mallesons (KWM) has been retained by Glencore [LON: GLEN] as legal adviser on its bid for Rio Tinto’s [ASX:, LON: RIO] Hunter Valley coal assets, the Australian Financial Review reported, without citing sources.
According to the report in the paper’s Street Talk column, KWM previously advised Glencore on its 2012 merger with Xstrata, on the 2016 sale of its Ernst Henry mine, and on the 2016 sale of its rail business to Genesee & Wyoming.
Glencore has offered USD 2.55bn to buy Coal & Allied, rivaling an existing bid from Yancoal [ASX: YAL].
Deutsche Bank is advising Rio Tinto on the asset sale, the item noted.