FT : Unilever urges changes to UK’s takeover code

Unilever urges changes to UK’s takeover code

Anglo-Dutch group calls on Westminster to safeguard national corporate champions

Unilever has urged the UK government to take steps to safeguard national corporate champions and questioned the strength of the country’s takeover code after Kraft Heinz’s audacious £143bn bid for the consumer goods group last month.

Although the US company has less than half of Unilever’s annual sales of €53bn, the Warren Buffett-backed bid threatened the survival of the century-old group.

The maker of Dove soap and Ben & Jerry’s ice cream said target companies should have more time in which to defend themselves and that takeover rules should be changed to consider the interests of stakeholders beyond shareholders.

Paul Polman, chief executive of Unilever, said on Tuesday: “We’re not talking about protection; we are saying that when you have a situation like this, with a national champion, there should be a level playing field.”

Theresa May, prime minister, has talked tough on foreign takeovers and pushed for a stronger industrial policy to protect UK jobs after the fall in the pound’s value prompted by last year’s Brexit vote. This has raised fears about some UK companies being sold on the cheap, though Unilever holds most of its assets outside the UK.

Mrs May ordered senior officials to examine Kraft Heinz’s proposed takeover to determine whether government intervention was necessary. But it is unclear how far the government would intervene in corporate dealmaking.

The 2002 Enterprise Act only allows ministers to prevent mergers on the basis of three issues: financial stability, media plurality and national security.

Ministers are drawing up proposals for a new framework which could add a fourth criteria, “critical national infrastructure”, including specific areas such as nuclear power.

Government insiders say they had a “lucky escape” when Kraft withdrew its bid for Unilever, because such an enormous deal would have brought huge scrutiny to bear on the gap between Mrs May’s protectionist rhetoric and her relatively modest proposals.

Unilever pointed to the Netherlands, where the group is also listed and where takeovers are subject to a broader stakeholder interest test. In the UK, company boards have a fiduciary duty to shareholders only.

That echoes calls from Sir Vince Cable, former business secretary, who wants a new public interest test to prevent a string of currency-induced takeovers.

The Anglo-Dutch group also said that the 28-day deadline to make a firm takeover offer, known as “put up or shut up”, gives little time for a target company to prepare its defences, whereas a potential acquirer might have spent a year or more preparing its bid.

However, the deadline, also known as the “Pusu”, was one of a series of reforms brought in to protect potential takeover targets after Kraft successfully bought Cadbury, the chocolate maker, in 2010.

Kraft, which later spun off its snack business into Mondelez, pursued Cadbury for five months and the Pusu was introduced to shorten the period of uncertainty hanging over a potential target.

The Takeover Panel, which is a self-governing body, declined to comment.

FT : Opec raises oil production estimates outside the cartel for 2017

Opec raises oil production estimates outside the cartel for 2017
US expected to lead non-cartel supply followed by Brazil and Canada this year

Opec has raised its 2017 estimates for oil production from outside of the cartel as US shale drillers boost activity in response to higher prices, underlining the threat to the group’s attempts to balance the market.

Non-Opec oil supply is now projected to grow about 400,000 barrels a day this year, from a previously estimated 240,000 b/d, to average at a higher level of 57.7m b/d, Opec said in its monthly market report.

The increased growth figure from just one month ago comes after a near 10 per cent drop in prices in the last week, as traders fret over the shale industry’s potential to overwhelm the cartel’s own supply cuts.

Hedge funds have reduced their bullish bets on the oil price given the renewed anxiety over excess supply. Brent crude, the global benchmark, has dropped nearly 7 per cent this month to $51.79 a barrel while US marker West Texas Intermediate has fallen almost 10 per cent to $48.73 a barrel.

“It seems that the oil supply recovery is gathering momentum in the world oil market, stimulated by gradually rising prices as well as improvements in drilling efficiency and well productivity in North America,” said Opec in its March report.


Despite Opec’s broad compliance with a global agreement to curb supplies, oil stockpiles remain well above their five-year average at more than 3bn barrels as production elsewhere rises and inventories remain bloated.

Among producers outside the cartel, the biggest contributor in 2017 is expected to be the US, which will add 340,000 b/d. Brazil and Canada will increase by a higher level of 260,000 b/d; Kazakhstan by 140,000 and smaller non-Opec countries in Africa will add several thousand barrels.

Opec’s collective production has fallen about 1m b/d since the deal late last year to about 32m b/d in February. This figure has been calculated by secondary sources, such as consultants and analysts, that submit assessments to Opec.

The drop — led by cuts from Opec kingpin Saudi Arabia — comes even as conflict-ridden Libya and Nigeria are exempt from the agreement and Iran has been given a special dispensation to increase its output slightly.


Although world oil demand this year has been revised higher, with growth at almost 1.3m b/d to average 96.3m b/d, and Opec forecasting no oil surplus in the second half of 2017, there are concerns about the pace of the inventory drawdown.

Opec had expected excess stockpiles to ease at a quicker rate than they have in the first few months of 2017, said Khalid al-Falih, Saudi Arabia’s energy minister last week.

Secondary source data, from which targets for each producer are calculated, show the kingdom decreased its production in February from the previous month to under 9.8m b/d. But the Saudi government data submitted to Opec, however, shows an increase in production to above 10m b/d.

Nonetheless, it is still a steep drop from almost 10.5m b/d the kingdom produced in December. Mr Falih last week warned other participants of the deal that the steep production cuts must be shared by all. “Saudi Arabia will not allow itself to be used by others,” he said.

FT : First-time buyers increase share of UK mortgages

First-time buyers increase share of UK mortgages

Total value of property loans falls amid weakness in buy-to-let market

The share of first-time buyers taking out new mortgages has reached its highest level since the Bank of England began keeping a record in 2007.

In the final three months of 2016, 22 per cent of new home loans were granted to first-time buyers, the second consecutive quarter when the share hit a new record.

The total value of new mortgages in the final quarter was £62.8bn, a 2.6 per cent fall from the previous quarter and a 0.4 per cent year-on-year fall.

The proportion of buy-to-let loans rose to 13.9 per cent in the quarter, up from 13.0 per cent during the previous three months. But both of these figures are far below the 21.4 per cent share in the first quarter of 2016, when many purchases were brought forward to avoid the introduction of higher stamp duty.

Separate data from the Council of Mortgage Lenders painted a similar picture. The trade body found that the volume of new mortgages in January 2017 fell 28 per cent compared to December and was virtually unchanged since the same month during the previous year.

Mortgages for first-time buyers increased 9 per cent compared to January 2016 but buy-to-let was down by 16 per cent compared to one year ago.

Weakness in the buy-to-let market, as well as caution from lenders, “suggests that mortgage lending will make only modest gains this year,” said Hansen Lu, a property economist with Capital Economics.

While there was a rise in loans worth more than 95 per cent of the value of the property in the Bank of England data, it was “more than offset by a drop in loans extended at between 90 per cent and 95 per cent [loan to value],” Mr Lu said.

The BoE statistics mirror data from estate agents Countrywide, which found that rents in Britain fell for the first time in six years in February due to a surge in new rental properties appearing on the market.

This surplus of rental properties was due to the spike in new buy-to-let mortgage purchases last year and some temporary cooling in London’s property market, BoE data suggests.

“It will take a while for landlords to adjust to the new environment of increased stamp duty, tougher stress tests and the imminent curtailment of tax relief,” said David Whittaker, chief executive of Mortgages for Business.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • CIE -14.4%, TLYS -12.5%, PN -12.3%, AMPH -10.1%, RYI -8.4%, PETX -6.5%, APRI -6.4%
  • GBT -4.5%, PPHM -3.1%, TPVG -2%, COUP -1.9%, HDS -1.7%, BLCM -0.6%
Select EU financial related names showing weakness:
  • RBS -4.5%, LYG -3.5%, BCS -2%, PSO -1.4%, DB -1.6%, HSBC -1.4%, SAN -0.9%
Select metals/mining stocks trading lower:
  • MT -1.6%, RIO -1.4%, VALE -1.3%, BHP -1%, HMY -0.9%, FCX -0.9%, AU-0.8%, AUY -0.8%, GFI -0.6%
Select oil/gas related names showing early weakness:
  • WLL -1.9%, SWN -1.7%, ESV -1.4%, MRO -1.3%, TOT -1.2%, RDS.A -1.1%,DVN -1.1%
Other news:
  • ANTH -32.3% (To offer and sell shares of its common stock and warrants to purchase shares of its common stock in an underwritten public offering)
  • AUPH -23.3% (Commences common stock offering)
  • ADPT -20.3% (Amends credit agreement, hires chief restructuring officer and financial advisor to advise the Board and management as they explore various strategic alternatives)
  • CBIO -16.4% (Files for $12 mln offering of Class A Units consisting of common stock and warrants and Class B Units consisting of shares of Series A Preferred Stock and warrants)
  • VRX -11% (Ackman's Pershing Square sells its stake)
  • KNDI -10.3% (Determines that some previously issued financial statements should no longer be relied upon)
  • LNTH -9.6% (To sell 3 mln shares of its common stock to be offered by certain of its existing stockholders)
  • DOC -3.8% (prices offering of 15 mln shares of common stock at $18.20 per share)
  • CORT -3.6% (Files for $200 mln mixed securities shelf offering, as well as 349k share offering by selling stockholders)
Analyst comments:
  • GLW -1.5% (downgraded to Neutral from Buy at Goldman)

>>> US Early premarket gappers

Early premarket gappers
Gapping up: DRWI +43.5%, TDW +27.4%, ETRM +19.8%, SBOT +17%, WAC +9.3%,EARS +7.1%, CIE +7%, CBR +6.9%, RTTR +4.7%, YY +4.5%, EGY +3.8%, COKE+3.5%, DSW +3.4%, REN +3%, SCYX +2.3%, PUK +2.2%, F +1.2%, ATRS +1.2%,GRBK +1.2%, GEO +1%, ENOC +0.9%, TRHC +0.8%, VALU +0.8%, HDS +0.7%

Gapping down: ANTH -31.5%, ADPT -22.4%, AUPH -16.5%, CBIO -16.4%, VRX-12.9%, TLYS -12.5%, LNTH -11%, PPHM -8.9%, RYI -8.4%, KNDI -8%, PETX-7.9%, APRI -6.4%, AMPH -5.2%, DOC -4.5%, RBS -4%, CORT -3.6%, BLCM -3.5%,GBT -3.2%, LYG -2.9%, PSO -2.2%, TPVG -2%, ON -1.7%, HMY -1.7%, BCS -1.7%,DB -1.6%, AU -1.2%, RIO -1.2%, HSBC -1%, GFI -1%, MT -0.9%, SAN -0.9%, TWTR-0.9%, COUP -0.9%, AUY -0.8%, BHP -0.8%

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • WAC +9.3%, EARS +7.1%, YY +4.5%, ALBO +4%, EGY +3.8%, DSW +3.3%,REN +3%, SCYX +2.3%
  • PUK +2.2%, ATRS +1.2%, GRBK +1.2%, ENOC +0.9%, VALU +0.8%, TRHC +0.6%
M&A news:
  • MGI +23.5% (Euronet Worldwide (EEFT) has made competing proposal to acquire MGI for $15.20/share)
  • CBR +10.2% (confirms receipt of non-binding letter of interest from Ameri Holdings to acquire co for $0.75 per share)
  • LCUT +5.8% (receives takeover offer for $20.00 per share from Mill Road Capital)
Other news:
  • DRWI +34.8% (Signs new Master Sales and Services Agreement with Ingram Micro Australia)
  • TDW +27.4% (Receives additional limited waiver extensions from its lenders and noteholders)
  • ETRM +21.5% (Announced that its vBloc Neurometabolic Therapy for the treatment of obesity will be featured on the March 14 episode of the Emmy Award-winning syndicated daytime talk show The Doctors)
  • SBOT +17% (Enters into a technology transfer and purchase agreement with Matrivax Inc related to Stellar's proprietary Clostridium difficile technology)
  • TNXP +7.8% (announces that the U.S. Patent and Trademark Office has issued a Notice of Allowance for U.S. Patent Application covering composition and manufacture of tnx-102 sl)
  • RTTR +4.7% (Discloses holding a a Type C informational meeting with the FDA)
  • COKE +3.5% (To join the S&P SmallCap 600)
Analyst comments:
  • ARRS +5.1% (upgraded to Buy from Neutral at Goldman)
  • OPK +1.3% (initiated with a Buy at Guggenheim; tgt $25)
  • LADR +0.9% (upgraded to Outperform from Market Perform at Wells Fargo)
  • WMT +0.6% (added to US 1 List at BofA/Merrill)

FT : Ocado: short shrift

Ocado: short shrift
The online supermarket is among the most shorted stocks in London

Any company touting artificial intelligence, big data and robotics should thrill the average trader. Ocado, the UK’s online supermarket, ticks all these boxes. Its distribution centres are filled with specialised “bots” ordered about by specially written algorithms parsing customer data. Yet speculators have increasingly sold its shares short. Despite a healthy jump in earnings in recent years, the market clearly thinks it will need more money soon.

Ocado has the second-largest proportion of short positions in the UK market — 18 per cent of issued shares, according to the Financial Conduct Authority. Although that proportion has been higher, the short selling has resumed since the turn of the year. Bears proffer a number of theories on Ocado. Two key ones are that it will never make any money partly because of the threat from margin-killer Amazon. Another reason: Ocado has repeatedly promised it could license its AI, robotics-driven distribution systems to other supermarkets internationally. To date it has failed to do so.

To all this supporters say: so what? Trading volumes have consistently climbed at a rate in the low teens, as Tuesday’s trading statement reiterated. Operating profits have quadrupled since 2012 and free cash flow turned positive two years ago, although not if one includes the costs of software licenses. And that may be the rub. The company does still leak cash, a lot less than years ago but still some. Meanwhile, Amazon Fresh has arrived in the UK delivering to just over 200 postcode areas. A company with plenty of pre-paid customers (Prime) and cash could do a lot of damage to the supermarket sector. On the other hand Amazon could leapfrog its development time by buying Ocado.

The fact that its shares have travelled nowhere over nearly four years suggests Ocado’s chances are slim. Yet any good news would send shorts scurrying to buy back. Its 4 per cent rally on Tuesday may be telling. Only robots stick blindly to their scripts.