FT : Danone to sell US dairy subsidiary to speed up WhiteWave deal

Danone is selling one of its US dairy subsidiaries to hasten the closure of its $12.5bn acquisition of WhiteWave, a US maker of high-end natural and health-focused foods.

The world’s largest yoghurt maker said on Friday that it has reached an agreement with the US Department of Justice on its WhiteWave transaction, which involves selling its Stonyfield dairy subsidiary in the months after the WhiteWave acquisition closes.

Stonyfield recorded around $370m in revenues in 2016.

The company said in a statement that selling Stonyfield “is expected to permit closing to occur shortly.”

For Danone, which last month unveiled plans for €1bn of cost cuts by 2020 to address a squeeze from higher milk prices and ‘volatile’ economic conditions, the WhiteWave acquisition – its largest in a decade – will help it tap into consumer demands for healthier eating.

Once it is completed, Danone will become the world’s biggest producer of organic food and it hopes to increase its like-for-like sales growth by an extra 0.5-1 per cent a year.

Emmanuel Faber, chief executive of Danone, said in a statement:

Through the WhiteWave acquisition [...] Danone will notably double the size of its North American business to more than $6bn in turnover, allowing the company to become a top 15 food and beverage company in the US and the number one in refrigerated dairy (excluding cheese) in this key strategic geography.

>>> Asian Update

Asia Mid-Session Market Update: China official PMIs strike multi-month highs; Japan jobless rate at 23-year lows
Fri, 31 Mar 2017 1:35 AM EST

**US Session Highlights***
- (US) INITIAL JOBLESS CLAIMS: 258K V 247KE; CONTINUING CLAIMS: 2.05M V 2.03ME
- (US) Q4 FINAL GDP PRICE INDEX: 2.1% V 2.0%E; CORE PCE Q/Q: 1.3% V 1.2%E
- (US) Q4 FINAL GDP ANNUALIZED Q/Q: 2.1% V 2.0%E; PERSONAL CONSUMPTION: 3.5% V 3.0%E
- (US) Fed’s Mester (hawkish, non-voter): reiterates support for starting to trim bond portfolio this year; supports further rate hikes but not at each meeting
- (US) Trump administration draft letter seeks changes to NAFTA, but not scrapping deal altogether - Washington Post
- (US) WEEKLY EIA NATURAL GAS INVENTORIES: -43 BCF VS. -41 TO -43 BCF EXPECTED RANGE

***US markets on close: Dow +0.3%, S&P500 +0.3%, Nasdaq +0.3%***
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Utilities
- Biggest gainers: COP +8.8%, FTR +5.5%, FCX +4.6%, STX +3.2%, COF +2.9%
- Biggest losers: AKAM -4.6%, CF -3.9%, CBT -3.7%, VF -3.7%, PRGO -3.1%
- At the close: VIX 11.5 (+0.1 pts); Treasuries: 2-yr 1.29% (+1bps), 10-yr 2.42% (+3bps), 30-yr 3.03% (+3bps)

***US movers afterhours***
- VJET: Reports Q4 net -€3.0M v -€2.4M y/y, Rev €6.3M v €8.3M y/y; Guides Q1 Rev €4.25-4.75M v €4.9M y/y; +3.9% afterhours
- EGLE: Reports Q4 -$2.96 v -$42.37 y/y, R$41.9M v $25.7M y/y; +2.9% afterhours
- NH: Reports Q4 -$0.18 v -$0.18e, R$24.1M v $29.5Me; +1.2% afterhours

***Politics***
- (ZA) South Africa Pres Zuma fires Gordhan appoints Malusi Gigaba as new Fin Min
- (US) White House advisor Navarro: Pres Trump to sign Executive Order on Friday to strengthen collections of anti-dumping and anti-subsidy duties on imports - press
- (US) Former National Security Advisor Mike Flynn makes an offer to FBI and Congressional investigators to testify in exchange for immunity from prosecution - press
- (US) US Pres Trump: Meeting with China to be a difficult one amid concerns over trade deficits and jobs; appealing Hawaii judge ruling who blocked his Executive Order travel ban - press
- (US) Commerce Sec Ross: hopes to trigger 90-day NAFTA consultation period before spring congressional recess; NAFTA negotiations could start in August - CNBC

***Asia Key economic data:***
- (CN) CHINA MAR MANUFACTURING PMI (GOVT OFFICIAL): 51.8 (highest since Apr 2012) V 51.7E; NON-MANUFACTURING PMI: 55.1 (highest since May 2014) V 54.2 PRIOR
- (JP) JAPAN MAR TOKYO CPI Y/Y: -0.4% (biggest decline in 6 months) V -0.2%E; CPI EX-FRESH FOOD Y/Y: -0.4% (biggest decline in 3 months) V -0.2%E
- (JP) JAPAN FEB NATIONAL CPI Y/Y: 0.3% (5th consecutive increase) V 0.2%E; CPI EX FRESH FOOD (CORE) Y/Y: 0.2% (22-month high) V 0.2%E
- (JP) JAPAN FEB OVERALL HOUSEHOLD SPENDING Y/Y: -3.8% V -1.7%E; 12th consecutive decline, biggest decline in 6 months
- (JP) JAPAN FEB PRELIMINARY INDUSTRIAL PRODUCTION M/M: 2.0% V 1.2%E; Y/Y: 4.8% V 3.9%E
- (JP) JAPAN FEB JOBLESS RATE: 2.8% V 3.0%E; lowest since June 1994
- (NZ) NEW ZEALAND MAR ANZ ACTIVITY OUTLOOK: 38.8 V 37.2 PRIOR; BUSINESS CONFIDENCE: 11.3 V 16.6 PRIOR
- (NZ) NEW ZEALAND FEB BUILDING PERMITS M/M: +14.0% V +2.1% PRIOR (8-month high)
- (NZ) NEW ZEALAND Q1 WESTPAC EMPLOYMENT CONFIDENCE INDEX: 109.9 v 112.7 PRIOR
- (KR) SOUTH KOREA FEB INDUSTRIAL PRODUCTION M/M: -3.4% V -0.3%E; Y/Y: 6.6% V 7.2%E

***Asia Session Notable Observations, Speakers and Press***
- Asian indices are mixed following modest gains on Wall St, where rising interest rates and more gains in the oil patch sent Financials and Energy sectors higher. Nikkei225 is among the leaders, helped by weaker Yen, while Shanghai Composite has backed away from 2-week lows in the wake of multi-month highs in China manufacturing and non-manufacturing PMIs.
- In FX, USD/JPY pair was the most volatile among the dollar majors, rising to 1-week high above 112, as USD remained bid in US hours on higher US interest rates. In EM currencies, South African Rand fell over 2% through 13.60 late in Asia after Pres Zuma sacked the corruption-crusading Fin Min Gordhan, appointing Minister of Home Affairs Malusi Gigaba as his replacement. Focus will now fall on ratings agencies review of South Africa as it deals with its economic and political turmoil.
- In notable political news stateside, WSJ reported that former National Security Advisor Mike Flynn has reached out to FBI and Congressional investigators to testify in exchange for immunity from prosecution, though follow-up statement from his counsel did not suggest that he has incriminating information but rather wants protection given "a highly politicized, witch-hunt environment."
- PBoC has skipped open market operations for the full week now, claiming liquidity in the system is ample. There was also some tough talk from US President Trump ahead of his meeting with China leaders next week, expecting the summit to be "difficult in that we can no longer have massive trade deficit and job losses." China foreign ministry official response was that China will push for greater balance in trade. Separately, White House Advisor Navarro said Trump will sign an Executive Order on Friday to strengthen collections of anti-dumping and anti-subsidy duties on imports
- Economic data out of China and Japan were mostly positive. China official manufacturing PMI hit a 5-year high while non-manufacturing was a near 2-year high. Employment component of manuf PMI marked a notable bounce into expansion, even as input prices declined. In Japan, unemployment rate fell to a 23-year low, though labor force participation rate declind to 59.6% from 60.0% while total number of employed persons fell for 81 straight month. Japan National CPI was slightly hotter than expected on the headline, though the forward looking Tokyo region inflation fell deeper in the red.

China
- (CN) China vice foreign minister Zheng Zeguang : Trade and business relation with US good for both countries and win-win; Will push for greater balance in trade
- (CN) US Pres Trump: Meeting with China to be a difficult one amid concerns over trade deficits and jobs - press
- (CN) BoCom: China Mar CPI seen at 0.8% y/y, unchanged from 0.8% in Feb - Chinese press

Japan
- (JP) Japan ruling LDP security research commission recommends to PM Abe that Japan obtains capability of striking enemy bases - Nikkei
- (JP) Japan Fin Min Aso: Private banks have money but not willing to lend; North Korea situation more serious than portrayed in the press

Australia/New Zealand
- (AU) According to one survey, analysts are unanimous in expectation for RBA to leave rates on hold next week - press

***Asian Equity Indices/Futures (00:30ET)***
- Nikkei +0.5%, Hang Seng -0.5%, Shanghai Composite +0.3%, ASX200 -0.2%, Kospi flat
- Equity Futures: S&P500 -0.1%; Nasdaq -0.1%; Dax -0.1%; FTSE100 -0.2%

***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.0670-1.0690; JPY 111.70-112.20; AUD 0.7640-0.7660; NZD 0.6980-0.7005
- June Gold -0.4% at $1,244/oz; May Crude Oil -0.3% at $50.20/brl; May Copper flat at $2.67/lb
- SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 832.3 tonnes
- (CN) PBOC SETS YUAN MID POINT AT 6.8993 V 6.8889 PRIOR
- (CN) PBoC skips open market operations for 6th straight session; Said to drain CNY30B v CNY40B prior
- (AU) Australia MoF (AOFM) sells A$600M in 5.75% 2021 Bonds; avg yield: 2.077%; bid-to-cover: 6.89x

***Asia equities / Notables / movers by sector***
- Consumer discretionary: 670.HK China Eastern Airlines +0.7%, 1055.HK China Southern Airlines +2.5% (FY16 result); 1886.HK China Huiyuan Juice Group -1.6% (FY16 results); FXJ.AU Fairfax -3.6% (potential LBO difficult to justify)
- Consumer staples: 168.HK Tsingtao Brewery Co -1.3% (FY16 results); 3349.JP Cosmos Pharmaceutical Corp +2.1% (Mizuho initiates with buy)
- Financials: 6881.HK China Galaxy Securities +1.0%, 6818.HK China Everbright Bank -2.1%, 1398.HK ICBC -0.4%, 6886.HK Huatai Securities -0.7% (FY16 results); BOQ.AU Bank of Queensland +1.7% (JPMorgan raises rating)
- Industrials:7 53.HK Air China -1.0% (FY16 results); 390.HK China Railway Group -5.7%, 1157.HK Zoomlion Heavy Industry Science and Technology -4.9% (FY16 results); 7951.JPYamaha Corp +2.8% (Daiwa initiates with outperform)
- Technology: 1296.HK Guodian Technology & Environment Group +3.8% (FY16 results); NXT.AU Nextdc +3.7% (new buy at Canaccord); 6502.JP Toshiba Corporation +5.9% (Apple may be among bidders for chip unit)
- Materials: 3993.HK China Molybdenum +8.7% (FY16 results)
- Energy: 857.HK PetroChina Co -1.2% (FY16 results)

>>> US Close


Closing Market Summary: Financials Influence Averages Modestly Higher on Thursday

The financial sector (+1.2%) nudged the broader market into positive territory on Thursday as the bulls couldn't resist bank stocks in light of last week's dip. The three major U.S. averages settled with gains of 0.3% apiece while the small-cap Russell 2000 (+0.8%) outperformed.

In a day short on headlines, investors kept an eye on crude oil as the energy component moved back above the psychologically important $50.00 mark. WTI crude finished 1.7% higher at $50.30/bbl after Kuwait voiced support to extend OPEC/non-OPEC production cuts beyond June. In addition, Kuwaiti oil minister Essam al-Marzouq said that several other nations are in favor of the extension. However, despite crude oil's positive performance, the energy sector (+0.5%) struggled to stay ahead of the broader market. 

In addition to the financials and energy sectors, the industrial group (+0.5%) also outperformed the broader market as its components settled higher across the board. Most of the remaining cyclical sectors closed the day with modest gains while the countercyclical groups finished mixed.

The rate-sensitive utilities sector (-0.7%) settled at the bottom of the leaderboard as selling pressure within the Treasury market left yields in positive territory. However, the pressure wasn't applied equally across the yield curve with the front end holding up a bit better than the back end; the 10-yr yield (2.41%) finished four basis points higher while the 2-yr yield (1.28%) added only one basis point.

Elsewhere on the defensive side of the market, the consumer staples (-0.2%) and health care (unch) groups finished with the utilities sector in the red while the telecom services space (+0.4%) closed in the green. Biotechnology names weighed on the health care sector, evidenced by the 0.4% downtick in the iShares Nasdaq Biotechnology ETF (IBB 293.39, -1.03).

On the corporate front, lululemon athletica (LULU 50.76, -15.54) plunged 23.4% after reporting worse than expected earnings and issuing disappointing guidance. The negative influence seeped into the broader athletic apparel market, leaving Nike (NKE 56.04, -0.64) and Under Armour (UAA 20.09, -0.53) with respective losses of 1.1% and 2.6%.

On the data front, investors received the third estimate of fourth quarter GDP and Initial Claims:

  • The third reading of fourth quarter GDP pointed to an expansion of 2.1%, while the consensus expected a reading of 2.0%. The third estimate of fourth quarter GDP Deflator came in at 2.0%, which is in line with the consensus.
    • The key takeaway from the report is that despite the upward revision, growth trends remains subdued amid soft business spending.
  • The latest weekly initial jobless claims count totaled 258,000 while the consensus expected a reading of 245,000. Today's tally was below the unrevised prior week count of 261,000. As for continuing claims, they rose to 2.052 million from the revised count of 1.987 million (from 2.000 million).
    • The key takeaway from this report is that while claims have increased notably from this year's low of 223,000, they are still at encouraging levels, having held below 300,000 for 108 weeks in a row.

Tomorrow, investors will receive a slew of economic reports, including February Personal Income ( consensus 0.4%), Personal Spending (consensus 0.2%), and PCE Price Index ( consensus 0.1%) at 8:30 ET, March Chicago PMI ( consensus 55.8) at 9:45 ET, and the final University of Michigan Consumer Sentiment reading ( consensus 97.6) at 10:00 ET.

  • Nasdaq Composite +9.9% YTD
  • S&P 500 +5.8% YTD
  • Dow Jones Industrial Average +4.9% YTD
  • Russell 2000 +1.9% YTD

FT : Beijing considers merger to create $230bn energy group, say reports

Beijing considers merger to create $230bn energy group, say reports

Friction over coal contracts prompts talk of tie-up between Shenhua and Datang

Contract negotiations between Chinese coal group Shenhua and power generators have led to reports that Beijing will force the miner to merge with one of its largest electricity companies as rising prices create friction within China’s state-owned economy.

A merger of state-owned Shenhua with power group Datang would, if completed, result in a utility company with an estimated Rmb1.6tn ($232bn) in assets.

Shenhua, which earlier this month posted its first profit in four years, has threatened to cut coal supply if state-owned power plants do not agree to higher prices for the second quarter. Seven power generators in the coal-dominated province of Ningxia were so irate that they sent a letter to the regional government demanding that Shenhua should instead be forced to lower prices.

The proposed merger between Shenhua and Datang “creates a company that has no coal price risk”, said Laban Yu, analyst for Jefferies in Hong Kong. “As long as power prices are set at a level that covers the coal price then there is no change in revenues or profits.”

The State-owned Assets Supervision and Administration Commission, or Sasac, has a political mandate to merge China’s centrally owned companies and create internationally competitive champions. But many of the mergers have resulted in bloated behemoths that are, in the Chinese phrase, “big but not strong”. Some powerful state-owned companies, including oil groups Sinopec and PetroChina, have successfully fought Sasac’s efforts.

Hong Kong-listed shares in Datang Power closed up almost 7 per cent on Thursday following the reports in Chinese media. Datang said in a statement to the exchange that it had no information about a proposed deal. Shenhua’s Hong Kong-listed shares fell 1 per cent. Sasac has not confirmed the reports.

The dispute comes as coal prices recover from a four-year slump. An employee with the Huaneng power plant in Ningxia, another of the disputants, said on Thursday that the contract had not been signed. The Ningxia government was helping with negotiations, he said.


The Chinese power sector relies on government-brokered supply contracts with state-owned coal miners and, in return, generates power at government-set prices. The arrangement led to electricity shortages when the Chinese economy began to boom, opening the door to private investment in both power and coal. Soaring spot prices were kept aloft by the limited supply provided by state-owned miners under term contracts.

However, restrictions on loans to private miners and falling prices as economic growth has slowed in the past few years has reconsolidated much of the sector in state hands. 

In the past two years, as coal prices slumped, Beijing ordered mines to reduce operating days in an effort to prop up returns for groups such as Shenhua. It also ordered power generators to source more of their coal supply through term contracts, in effect freezing the spot market. The output restrictions helped fuel a spike in the futures market beginning in August.

FT : Audi to buy luxury car rental startup Silvercar

Audi has offered to purchase premium US car rental service Silvercar as it seeks to expand its presence in mobility services and apply the start-up’s software expertise to other platforms for car-sharing.

Silvercar, founded in 2012, is an airport car rental service exclusively featuring silver Audi A4 models. The Austin, Texas-headquartered company now operates in 15 US cities.

The two companies declined to give details on the transaction size, but said the deal is expected to close in the first half of this year.

Audi has had a partnership with Silvercar since its founding and last year it purchased a minority stake for $28m in a series C funding round. Other investors have included Facebook co-founder Eduardo Saverin.

The purchase follows a long line of investments by car companies in recent years, including GM buying a stake in Lyft, as manufacturers turn to providing services in a market being upended by the prospect of self-driving cars and a proliferation of ride-hailing apps. Analysts at Barclays have predicted that vehicle ownership could decline by 50 per cent before 2040.

Luke Schneider, Silvercar chief executive, said the car market is “on the verge of the most profound changes in the 120-year history of modern personal transportation.”

Moritz Drechsel, an Audi spokesman, said the company has no interest in the rental car business per se, but that Silvercar had developed impressive technology for simplifying the customer experience of sharing vehicles. One programme in particular held Audi’s interest: Dealerware, a digital service of managing dealer fleets.

Audi, a unit of Volkswagen, has already been experimenting with five different car-sharing concepts. These comprise on-demand concierge services (Audi on demand), a small circle of friends ownership model (Audi Unite), a leasing model with access to multiple vehicles (Audi Select), a car-hiring option for business (Audi shared fleet), and a sharing rental programme for select residences (Audi at home).

Unlike luxury rival BMW, which hopes to launch an “Airbnb for cars” service allowing car owners to rent out their own vehicles, all of Audi’s mobility services are based on Audi owning the vehicles it rents out.

“Audi and Silvercar share the same vision,” Dietmar Voggenreiter, Audi boardmember, said in a press release. “We want to open up a new, flexible way to access mobility for our customers while offering premium quality in every respect.”

>>> Fed’s Mester (hawkish, non-voter): supports starting to trim bond portfolio

Fed’s Mester (hawkish, non-voter): supports starting to trim bond portfolio this year; supports further rate hikes but not at each meeting 
- Fully supported raising rates in March; further interest rate hikes will be needed
- Economic expansion is sound; weak Q1 was only transitory
- Inflation has picked up over last year and is moving in the right direction
- Firmer inflation data, stable inflation expectations, labor market strength and economic growth supports return to 2% inflation

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • CRTN -25.2%, LULU -20.1%, GEVO -16.2%, FRTA -8.4%, WOR -6.3%, WRD -4.7%, SIGM -3.4%, EXFO -3.4%, SAIC -0.5%
M&A news:
  • CVE -9.2% (Cenovus Energy acquires ConocoPhillips' 50% interest in the FCCL Partnership and also purchases the majority of ConocoPhillips' Deep Basin conventional assets in Alberta and British Columbia for a total consideration of $17 bln; immediately accretive; enters into a bought-deal financing agreement)
  • AKAM -0.8% (to acquire SOASTA in an all-cash transaction for an undisclosed sum; co expects the SOASTA acquisition to be slightly dilutive to its adj FY 17 EPS in the range of $0.06-0.07 and to become accretive in 2018)
Other news:
  • TNXP -13.8% ( commences common stock offering)
  • SA -6.8% (announces CAD$14.3 million bought deal offering of common shares and concurrent CAD$20.0 million bought deal offering of flow-through shares )
  • OFS -5.2% (commences an underwritten offering of 3,500,000 shares of its common stock)
  • CARA -4.5% (commences $80 mln common stock offering)
  • PGNX -4.1% (Phase 2b trial of AZEDRA has achieved its primary endpoint)
  • CBIO -2.9% (New Enterprise Associates increases active stake)
  • CRBP -2.8% (positive topline data from its Phase 2 study evaluating multiple doses of anabasum)
  • CAB -2.2% (coming off of late spike on reports that it may sell its finance unit to Synovus)
  • UAA -1.1% (LULU sympathy)
Analyst comments:
  • CY -2.7% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
  • FSC -2.1% (downgraded to Underperform from Mkt Perform at Raymond James)
  • UTHR -2% (initiated with a Sell at UBS)
  • RH -1.6% (downgraded to Neutral from Buy at Goldman)
  • GT -0.7% (downgraded to Neutral from Buy at Goldman)