TheChek News Flow

HOUSE BUILDERS - May RICS survey at 17 vs 20 est,price expectations at -1..-0.5%

AUTO TRADER - revs +9% £311.4m,op.profit +18%,EPS +22%,visits +16%...........+2%

CMC MARKETS - difficult yr but all known,fundamentals continue to improve....+3%

WORKSPACE - In talks over Finsbury Circus property for 158m.................UNCH

BOOHOO - Succesful £50m fundraise of 36.6m shares at 220p....................+3%

ULTRA ELECTRONICS - ULE's Ocean Systems business awarded $10m contract.....+0.5%

SCISYS - encouraging order intake,revs and profits in line,sees strong H2....+3%

VOLEX - revs -13%,takes $12m impairment change...............................-2%

IP GROUP - placing raising £207m @ 140p demand from new & existing holders...+2%

COMPASS - share consolodation 26 shares into 25 shares by 25th June.........UNCH

CS
AB Inbev -0.5% Peer Molson Coors -7%, disappointed on margin guidance

Allianz +1% Allianz considering buying out the 37% of Euler Hermes, BB

Autotrader +1% FY Revs 0.5% ahead, op profit 2% ahead, out look good

Euler Hermes +3-5% Allianz considering buying out the 37% of Euler Hermes, BB

Heidel Druck +1-2% Sees FY Ebitda margin 7-7.5% consensus at 7.21

Miners +0.5% Copper +0.70%, Brent -0.50%, Iron Ore +1.00%, China +0.30%

Oils -0.5-1% Weak in the US. 9 of 10 weakest S&P names were oil

Pernod +0.5% Positive read from Remy numbers

Remy +2% EBIT €226m vs cons €211m, Short interest at 7.8%

RWE M/P CS DOWNGRADE to NEUTRAL (Valuation), upgraded away from us

Thyssen +2% CS REITERATE OUTPERFORM (TP raised to 33 from 30)

Ultra Elecs M/P Awarded a contract valued at $10 million

Workspace M/P Confirms discussions about potential acq of Salisbury House

*ALLIANZ-Explores buying rest of Euler Hermes(37% worth €1.5b)......U/C

*DANSKE BK-CEO says Capital position strong, grth Norway/Sweden......+0.5%

*PERNOD-To acquire majority stake in Del Maguey(Sales $80m 2015)....U/C

*ELIS-Agress in principle on £2.2b offer for Berendsen(cash/stk)....-1%

*DRILLISCH-Board sees Utd Internet bid as adequate, c/saves 250m.....-0.25%

*HELVETIA-Fin targets remain unch, making good progress................+0.25%

*ACTELION-Impact 2 did not meet primary endpoint program............+3%

*REMY-FY Net 190m(128),OP 226m(209),Divi 1.65(1.64),SI 7.2%.........+1%

*ROCKET-Kinnevik sells 10.9m shs(remaining stake),price €20,SI 20%..-4%

TradeGate
RWE +1.4%

E.On +1.4%

RHM -0.9%

AB1 +3.1%

Macro :

- Elliott’s Singer Warns System May Be More Leveraged Than 2008

- U.S. April Consumer Credit Rose $8.2b; Est. Up $15b

- U.K. Conservatives 44%, Labour 34%: ComRes/Independent Poll

- U.K. May RICS House Price Index at 17 vs Est. 20

- CHINA REACT: Strong Exports Cushion Growth Slide

Keep an eye on :

- ABN NA : ABN Amro Probe Finds 114 Mortgage Advisers Copied 700 Signatures

- ATLN VX : Actelion Phase 3 Impact 2 Study Doesn’t Meet Primary Endpoint

- ANTO LN : Antofagasta Says It’s Slowly Restarting Mines After Chile Storms

- BAS GY : BASF to Build Automotive Application Center in APAC

- BAS GY : BASF to Build Automotive Application Center in APAC

- BRBY LN : Christopher Bailey Waives Bonus Again as Burberry Aims to Slash Pay

- CGG FP : announced today that the final products from its Encontrado multi-clientreprocessing project across the Gulf of Mexico's prolific Perdido fold belt havebeen delivered on schedule to the Comision Nacional de Hidrocarburos (CNH) andthe industry.

- CNP FP : CNP in Talks With Caixa Seguridade on Cooperation Beyond 2021

- CSGN VX : Credit Suisse Says 99.2% of Rights Exercised in Capital Increase

- DLG GY : Dialog Leads Europe Semis Higher Amid Positive Industry Signals

- DRI GY : Drillisch Boards Consider United Internet Bid as ’Adequate’

- EDF FP : French Nuclear Watchdog to Meet June 26-27 on Flamanville Vessel

- ELIS FP : Elis Agrees in Principle on Possible GBP2.2b Offer for Berendsen

- ELE FP : Allianz Said to Explore Buying Rest of France’s Euler Hermes

- ERICB SS : Ericsson Rated New Buy, Nokia New Neutral at Citi

- HDD GY : Heidelberger Druck Sees FY Ebitda Margin 7% To 7.5%

- LNZ AV : Lenzing Stock Decline Is Buying Opportunity, Berenberg Says

- TAP US : Molson Coors Erases Gains Amid Analyst Day; Alcohol Stocks Sink

- NOVN VX : Novartis Korea Fined 500m Won by FTC Over Illegal Sponsorship

- OR FP : L’Oreal’s Hoped-For Body Shop Price Tag Seen in Doubt: Sky

- RI FP : Pernod Ricard to Buy Del Maguey Mezcal

- UG FP : Reinforces CAPSA JV operation with ChangAn Automobile

- POP SM : Hedge-Fund Bet on Banco Popular’s Collapse Yields Maximum Return

- P US : Sirius XM Said to Be in Talks to Invest in Pandora: Reuters

- RCO FP : Remy Cointreau Lifts 2019-20 Outlook to Op. Margin 21.5%-22.5%

- REP SM : Repsol Said to Mull Entry Into Mexico’s Newly Opened Fuel Market

- RKET GY : Kinnevik to Sell Its Remaining Stake in Rocket Internet

- RWE GY : RWE Raised to Buy at Goldman, Bull-Case Implies 65% Upside

- SAN SM : UBS, Citi Said Set to Manage Santander Rights Issue: IFR

- UBSG VX : Ex-UBS Compliance Officer Among 2 Charged With Insider Trading

- UTDI GY : Drillisch Boards Consider United Internet Bid as ’Adequate’

ECB’s Next Moves on Stimulus in Focus at Meeting

Eurozone economy has exhibited strength, but central bankers remain concerned about below-target inflation

The eurozone economy is accelerating, but the European Central Bank seems reluctant to take its foot off the gas. That has set the bank on a collision course with officials in the euro area’s largest economy, Germany.

On Thursday, ECB chief Mario Draghi will announce the bank’s latest policy decisions in Estonia’s capital city, Tallinn. Investor expectations for changes are low, as top officials have stressed in recent days it is too early for any major moves.

Still, some officials have warned against the dangers of moving too slowly as the economy recovers, which could harm the bank’s credibility with investors. That suggests some change is in order, to pave the way for an exit from stimulus later in the year. Here are key questions ahead of the central bank’s policy release, due at 1145 GMT (7:45 a.m. EDT).

What is expected from the ECB on Thursday?

Baby steps. Policy makers are likely to express greater confidence in the economic recovery, an important signal that they are moving closer to reducing their monetary stimulus. They might also rule out any fresh interest-rate cuts. But changes to the stimulus itself—which includes subzero interest rates and €60 billion ($68 billion) a month of bond purchases—are unlikely.

How strong is the eurozone economy?

It is enjoying its longest growth spurt in almost a decade. Recent surveys suggest growth is accelerating and broadening to former weak spots like Finland and Portugal. Also, political uncertainties are fading following Emmanuel Macron’s victory in French national elections last month, though they haven’t disappeared: Germany and Italy both face national elections over the coming months.

So can the ECB’s stimulus soon be wound down?

Not so fast. ECB officials still are concerned about inflation, which, at 1.4%, is some way below the ECB’s target of just below 2%. They also may be wary of repeating previous policy mistakes in 2008 and 2011, when the ECB raised interest rates only to quickly change course as economic troubles ensued. Most economists expect a few more months’ delay, until September or October, before the ECB signals a reduction of its bond-buying program, known as quantitative easing.

What else might the ECB do?

Clarify its next steps. Some investors are betting that the ECB will start raising interest rates before it has wound down QE, contrary to the bank’s current guidance. Mr. Draghi might clarify that sequence, and announce an internal review into different exit strategies. He might also drop a pledge to accelerate QE if the economic outlook darkens, although that is considered unlikely at this stage.

What about Germany?

As the ECB’s balance sheet has sprinted past that of the Federal Reserve, German officials have called ever more urgently for a policy change from Frankfurt. Chancellor Angela Merkel took the rare step last month of blaming the ECB for the nation’s vast trade surpluses. Increasingly, Germany is no longer a lone voice: The Organization for Economic Cooperation and Development, a rich-country think tank, argued this week that the ECB should start winding down QE next year. Mr. Draghi might seek to address such concerns.

American Eagle and Cerberus are seen making a combined offer, with Sycamore playing the field and looking also to Express and BCBG.

The rubber is about to meet the road for Abercrombie & Fitch Co. — and Express Inc. and BCBG Max Azria might be the next two to enter retail’s deal-making race.

Abercrombie, which acknowledged last month that it was in talks to sell itself, is set to accept bids in an auction today — and the specialty chain might just be going at a discount.

A source close to the situation said Abercrombie’s board started the process of looking to sell for $14.50 to $15 a share, but given the deepening secular shifts and weakness in retail, is resigned to accepting something closer to $13.50.

Shares of the firm slipped 2 percent to $12.07 Wednesday, about where they were trading before word of a potential transaction pushed the stock above $14. That price ended up being unsustainable as dark clouds continue to gather over retail and Abercrombie posted wider first-quarter losses on a 3.6 percent decline in sales.

Abercrombie has a market capitalization of $820.9 million.

Despite widespread worries about the future of mall-based businesses, especially those courting younger consumers, Abercrombie has sparked some interest.

Financial sources said the most prominent bidder is a team-up — competitor American Eagle Outfitters Inc. and private equity firm Cerberus Capital Management.

Private equity firm Sycamore partners and mall rival Express Inc. are also said to be weighing separate bids.

Led by Stefan Kaluzny, Sycamore has proven to be one of fashion’s most voracious acquirers, buying Belk Inc., Hot Topic Inc., Jones Apparel Group, Talbots, The Limited and others.

But Express is stuck somewhere betwixt and between. The retailer is said to have been contemplating a stock and cash offer for Abercrombie, but over the past month, Express’ shares have fallen from $9 to $6.70, making them a less-valuable currency in any transaction.

Express is also said to be a takeover target, with longtime suitor Sycamore again exploring an acquisition of the chain.

And that’s not all for Sycamore, which shouldn’t be too much of a surprise since the mall has become a playground for a deep-pocketed investor with a taste for retail and the stomach to do distressed deals, like Kaluzny. Sycamore is also said to been on eyeing BCBG Max Azria Group, which filed for bankruptcy protection in February after its debt load finally proved to be too heavy.

A spokesman for Sycamore and a spokeswoman for Cerberus declined to comment Wednesday, while representatives for Abercrombie, American Eagle and Express did not return queries.

A flurry of dealmaking can be a signal of strength or misfortune for a sector. The market is booming in beauty where indie brands are sprouting up and quickly find themselves targets, with strategic giants and private equity players fighting over who can grab growth with the latest name. But in retail, where e-commerce and changing Millennial preferences are still being seen more as challenges to be overcome than opportunities, companies are starting to look more like life rafts cast out to sea and looking to link up with another to stay afloat.

One retail dealmaker noted that an Abercrombie and American Eagle merger could create “huge overhead savings,” on the order of $100 million to $200 million a year.

“The problem is you get a wasting asset and what’s there at the other end of this?” the source said. “It’s like a roach motel deal: Easy to get in, difficult to get out. Those companies are really more in the bull’s eye than anything else because their demographic is shopping more and more on the phone.”

Others have said that American Eagle was at least a much better fit for Abercrombie among the strategic players in the process since a combination with Express would amount to “putting two problems together for one bigger problem.”

American Eagle has a similar demographic to Abercrombie, as well as price points, the analyst noted. The two companies could also benefit from supply chain and real estate synergies.

CL King analyst Steven Marotta, who has a “neutral” rating on shares of Express, wrote in a recent research note about a potential Abercrombie and Express combination and noted negative trends at both businesses.

“Out of the gate, we are somewhat skeptical of a successful transaction and even more skeptical of a practical (i.e., multiyear accretive) outcome,” he said.

Marotta also said “similarly successful specialty retail deals are a scant few in recent memory,” and noted that “efforts to cobble together multiple domestic retail brands under one corporate umbrella have often proven more problematic than effective for the surviving company.”

Victor Luis Talks M&A, China & An $80B Global Market Opportunity

Luis said there is a global cyclical shift away from apparel toward accessories.

Whether it’s categories or markets, Coach Inc. sees vast opportunity.

Speaking Wednesday at a Robert W. Baird & Co. conference, Coach chairman and chief executive officer Victor Luis spoke about the $41 billion global handbag and accessories market, and how “there’s not a more exciting place in the fashion world than handbags and accessories.”

He also discussed how Coach could play an important role in both innovation and the creation of the “emotional connection” with consumers in a purchase category that “most closely identifies with their personality.”

Coach on Tuesday priced its $1 billion senior unsecured notes, consisting of $400 million at 3 percent for notes due 2022 and $600 million at 4.125 percent for notes due in 2027. The offering is expected to close on June 20, 2017. The proceeds will be used to help fund the Kate Spade acquisition.

Luis said that in the short-term, the company likely would not be eyeing another large transaction, but it could in the same period look at smaller deals such as buying back a distributor in certain markets.

As for future growth, Luis said: “We see an opportunity for it within the Stuart Weitzman brand [and] in the deal that we’ve just announced with Kate Spade….It’s a very emotional category, where obviously women, and increasingly men, still invest their dollars. And we see a continuance of the cyclical shift away from apparel towards accessories globally.”

Luis noted the work of the past three years from elevating the core Coach brand to investing in 70 percent of its store fleet. “If some of our competitors decide they need to pull back, whether that be on distribution or whether that be on pricing, a lot of actions that we’ve already undertaken, we feel that any actions that anyone takes to drive more overall health of the category is a good thing,” the ceo said.

He also spoke about growth overseas, in both developed and developing markets. One example he cited was the mainland Chinese consumer, noting that Coach has been working on developing the brand in the domestic market as the consumer has been doing more shopping close to home.

“We have a market, which is one of the largest in the world in terms of new consumers coming into the middle class, [where] we’ve had tremendous success continuing to grow our distribution there as we look at Tier 3, Tier 4 cities, with more than 200 cities [having] the population of one million or more. We’re not even close to being in approximately 30 percent of those cities at the moment,” the ceo said.

As for other parts of Asia, Luis noted “tremendous opportunity across Southeast Asia, and we’re focused on capturing that opportunity today through distribution partners.” He said Europe represents a $9 billion opportunity, and it is one where consumers are just “discovering the more approachable luxury brands.” Luis added: “One of our U.S. competitors has had great success there, and we’re in the very early stages of developing that opportunity for us.”

Luis also said Coach is on track to introduce a footwear line developed internally within a couple of months. Footwear is an opportunity for the firm because the category is a $28 billion global market, he said. And designer Stuart Vevers is developing an outerwear business for the Coach brand. Luis said the outerwear category is a $10 billion global market.

Combined with the $41 billion handbag market, Luis said there is an “$80 billion global opportunity that, obviously across our three brands, we’re looking to lever against.”