>>> Stada’s rumoured suitors Bain and CVC have yet to make formal approaches

Stada’s rumoured suitors Bain and CVC have yet to make formal approaches

  • Vinculated shares status change and AOC proxy fight seen as catalysts
  • Stada advised by Deutsche Bank and Perella Weinberg

Stada Arzneimittel's [ETR: SAZ] prospective suitors Bain and CVC have not yet made formal approaches for the acquisition of the company, according to a source and a person familiar with the situation.
Bain is not officially confirmed yet but is likely to be the third fund interested, the person said. CVC, which was also rumoured to be in talks to acquire Stada, has not yet expressed an interest, the source and person said.
The German company has so far received two formal approaches from Advent International Corporation and Cinven Partners, the person said. The company has not received any approaches from strategic players, the person added.
Stada has been a takeover target for years but the new management structure, the AOC activist proxy fight and the changes in the company’s vinculated shares status were certainly catalysts to recent approaches, the source and a sector banker said.
Last summer, Active Ownership Capital (AOC), a German activist shareholder which has a 7% stake in Stada, won a proxy fight, leading to the replacement of multiple members of the company’s Supervisory Board. In addition, Stada has changed the status of its so-called “vinculated” shares, which were a potential takeover hurdle. Under German securities trading laws these shares could only change hands with the consent of top managers or otherwise the shares would have lost their voting rights.
On 23 February, Advent made a binding offer of EUR 58 per share plus 2016 dividend limited only until Monday 27 February. Prior to this, Cinven had made a non-indicative bid at EUR 56 per share, subsequent to which Stada disclosed a EUR 58-per-share non-binding expression of interest from an unnamed bidder.
Investors are expecting a higher valuation than the EUR 58 figure that is being discussed, a Stada minority shareholder said. If you can increase the margin by 10 percentage points, then you can certainly offer more than that, he added.
There is always room to increase the current highest bid, should it be needed, the source said, describing the EUR 58 per share offer as a fair valuation, with high multiples.
It is unlikely that the private equity suitors would need to team up to finance the acquisition as most of them can handle the tickets, the source and first sector banker agreed. Approaches from smaller family funds have been dismissed by at least one of the private equity suitors, the source said.
Stada is receiving financial advice from Deutsche Bank and Perella Weinberg on the PE funds' approaches, the source and the person said.
Deutsche Bank declined to comment. Perella Weinberg did not respond to a request for comment.
The PE funds would likely keep Stada as it is after the acquisition, the source and first banker said. The company’s OTC unit is its crown jewel, and PEs would not likely break it up but would grow it and then sell it at a later stage, they added.
AOC called earlier today (24 February) for the German company to initiate a non-biased, transparent and structured sale process.
Advent’s EUR 58-per-share offer has a deadline of 27 February for the company to respond. If Stada declines the offer then it is understood Advent will walk away, but if it is accepted, the negotiations can start. However, as it is a listed company, there is always the prospect of a rival bid after the offer is accepted, it was said.
Stada declined to comment.

>>> Intesa Sanpaolo sees no opportunities in industrial combinations with Genera

Intesa Sanpaolo sees no opportunities in industrial combinations with Generali
25 FEB 2017
The management of Intesa Sanpaolo [BIT:ISP] has completed its assessment of options relating to possible industrial combinations with Assicurazioni Generali [BIT:G]. In the light of the analyses on the insurance group carried out on the basis of information currently available to the public, the management sees no opportunities that fulfil the criteria - in terms of creation and distribution of value for the Bank’s shareholders, in keeping with the objective of maintaining a leadership position in capital adequacy - against which it examines options for the Group’s internal and external growth on a regular basis.
Intesa Sanpaolo will improve the creation and distribution of value for its shareholders organically, while maintaining a leadership position in capital adequacy, through action lines that will drive the next Business Plan and will be in continuity with the 2014-2017 Business Plan – the commitment made in the 2014-2017 Business Plan to distribute EUR 10bn of cumulative cash dividends in the four years covered by the Plan has been confirmed – among which:
- further significant growth in wealth management, also considering the high switch potential stemming from other financial assets currently held by customers, with around 30 billion euro of retail bonds maturing in the 2017-2019 period, over EUR 30bn of deposit flow into the Banca dei Territori Division and the Private Banking Division since the last quarter of 2015, and over EUR 150bn of outstanding assets held under administration;
- a significant development of the non-life insurance business, raising the product penetration with the customer base to the same level as the life insurance business, through appropriate actions in synergy with the bank networks; - a strong boost to cross-selling, with the creation of the first “proximity bank” in Italy following the recent acquisition of Banca ITB, focused on instant banking through a lean network of around 20,000 points of sale representing around 25 million potential customers (of these, around 12 million are already Banca ITB customers);
- new initiatives to expand the multichannel and digital bank, which already has around 6.4 million customers with around 80% of products available via multichannel platforms, digitalisation involving all branches with 100% paperless transactions for the priority products, and the “Online Branch” with around 26,000 products sold in 2016;
- a high sensitivity of the net interest income to an interest rate increase, which is already affecting the longest-maturity part of the market yield curve, with around EUR 1.1bn of net interest income growth following 100 basis points of parallel upward shift in the market yield curve;
- maintaining an excellent level of cost/income ratio, with high efficiency as a result of the continuous cost management; - a significant improvement in the asset quality and the cost of risk, including through adequate investments in dedicated human resources and technologies, with a reduction of the NPL to total customer loan ratio, with no extraordinary transactions, which, to date, is expected to return in 2019 to the levels of 2011, namely to 10.5% gross of adjustments and 6% net, from 14.7% and 8.2%, respectively, at year-end 2016.

Reuters - Michael Kors, Coach in second round of Kate Spade auction: sources

Michael Kors, Coach in second round of Kate Spade auction: sources

Michael Kors Holding Inc (KORS.N) and Coach Inc (COH.N) are among the companies that have made it through to the second round of bidding for handbag and accessories maker Kate Spade & Co (KATE.N), people familiar with the situation said on Friday.

The interest in Kate Spade underlines the appeal of its young clientele to other retailers as handbag makers struggle to capture the interest of shoppers inundated with options.

Michael Kors and Coach face competition from other bidders, including a non-U.S. party, in the auction for Kate Spade, the people said, asking not to be identified because details of the sale process are confidential.

The process is still roughly a month away from an outcome, and there is no certainty a sale will occur, the sources added.

Kate Spade, which has a market capitalization of $2.9 billion, declined to comment. Michael Kors also declined to comment, while Coach did not immediately respond to a request for comment.

Affordable luxury brands such as Michael Kors and Coach have suffered after they expanded their retail presence too quickly and sold too heavily in outlet stores, diluting the exclusivity that once caused shoppers to line up for the next hot handbag.

These brands have been hurt as fewer shoppers in malls have led to fewer handbag sales, while a stronger dollar has made it difficult for them to maintain their popularity with tourists visiting the United States.

Kate Spade would offer Coach and Michael Kors greater pricing power with department stores as well a younger clientele.

Coach has been seeking to diversify its business beyond handbags, and it paid $574 million for designer footwear company Stuart Weitzman in 2015.

Michael Kors, which sells apparel, handbags, watches and other accessories, said in its most recent earnings call it was "actively looking" at potential acquisitions and that it probably would not do small deals. The company has been focused on a turnaround by improving its outlets and stores.

Kate Spade has been under pressure from a small New York-based hedge fund Caerus Investors. Caerus sent a letter to Kate Spade's board in November, stating it was "increasingly frustrated" by the inability of the retailer's management to achieve profit margins comparable with industry peers.

Separately, investor Barry Rosenstein's activist hedge fund Jana Partners LLC has revealed a 0.85 percent stake in the company.

Reuters - Fashion house BCBG Max Azria prepares for bankruptcy: sources

Fashion house BCBG Max Azria prepares for bankruptcy: sources

BCBG Max Azria Group LLC, whose form-fitting party dresses have been worn by celebrities Selena Gomez, Drew Barrymore and others, is making preparations to file for bankruptcy as soon as next week, people familiar with the matter said on Friday.

The fashion house is the latest casualty in the struggling U.S. retail sector, as shoppers abandon malls in favor of internet shopping. BCBG has already informed mall owners of its plans to shutter most of its approximately 200 U.S. stores.

BCBG is working with its financial and legal advisers to prepare the bankruptcy filing, the people said, asking not to be identified because the plans are confidential. It is possible that some companies, including brand licensing firms, may seek to buy BCBG's assets in bankruptcy, the people added.

BCBG declined comment. Its owner, investment firm Guggenheim Partners, did not respond to requests for comment.

Competing specialty retailers, including The Limited and American Apparel, have also filed for bankruptcy in recent months and are closing down their stores.

In a call with landlords in January, a recording of which was heard by Reuters, BCBG said it preferred an alternative to bankruptcy as it looked to slash its secured debt load of $485 million.

However, BCBG is behind on its rent, and bankruptcy would have the advantage of shielding it from legal action by landlords, which have been put under pressure by a wave of retail bankruptcies and shuttered stores.

The upcoming bankruptcy is a fall from grace for BCBG, an acronym for the French phrase "bon chic, bon genre," which means good style, good attitude, and originally referred to stylish, well-to-do Parisians. Reuters reported in 2013 that it was exploring a potential sale that could have fetched as much as $1 billion.

In 2015, BCBG restructured its debt and received a $135 million cash infusion from investors including affiliates of Guggenheim.

BCBG was founded by Tunisian fashion designer Max Azria in 1989 and grew through its retail shops and distribution in department stores including Saks Fifth Avenue and Bloomingdale's. It also acquired Herve Leger, maker of skin-tight dresses, and started a lower-cost line called BCBGeneration.

Azria is no longer at the helm of the company.

In the call with landlords last month, one of BCBG's advisers said the company's retail store business declined by 20 percent over the past three years. The company reported consolidated net sales of just over $600 million in the 12 months to December, according to the call.

Retail accounted for 71 percent of its revenue, while wholesale accounted for 18 percent, according to the call. The percentage share for licensing and e-commerce sales were in the single digits.

>>> Weekly Update

Weekly Market Update: Stocks Continued to Climb the Wall of Worry, Waiting for Trump to Deliver

Early on this week, US stocks looked poised for a fifth consecutive week of record high closes. The economic data generally remained robust globally. A hotter than expected print for US CPI figures and a FOMC minutes release that pointed to a committee inclined to pull the trigger sooner rather than later kept the reflation narrative intact. President Trump continued to meet with high-profile business leaders and talk up his soon-to-be-announced tax and regulatory reforms. By Friday, the Dow was riding a 10-day winning streak.

The second half of the week though, saw the tone reach an inflection point, and investor appetite for risk began to wane. Polls out of Europe drummed up populism/nationalism concerns ahead of key elections in France and Germany later this year. President Trump doubled and tripled down on many of his most controversial campaign promises/tactics, while his Treasury Secretary laid out a timeline for growth reforms that underwhelmed. The narrative shifted its focus onto the growing number of obstacles that stand in the way of his administration and Congress reaching a deal on substantial fiscal reforms. The markets seemed to reflect this in rising bond and gold prices, while stock gains were notably more subdued. Trading may have also hit a bit of a dead spot; with earnings season nearing an end and a relatively sparse economic calendar, markets have become beholden to headlines out of Washington ahead of Trump's congressional address next week. The Dow S&P and the NASDAQ finished a fifth consecutive week at all-time highs, but the Russell 2000 lost ground. For the week the Dow rose 1%, the S&P added 0.7% and the NASDAQ eked out a gain.

Fixed income markets continued to rally and yields fell throughout the week, leading to a lot of hand-wringing over the divergence in sentiment being projected by exuberant stock and stubborn fixed income markets. Treasury yields were further pressured by a decline in German government bond rates. Political concerns and talk of an ECB-induced short squeeze sent the German 2-year yield towards -1%. The US benchmark 10-Year yield peaked for the week at 2.43% to slide lower to 2.32% today. The Feb FOMC minutes appeared to pull forward hopes for the next rate hike, but the market is not yet behind a move at the next meeting. Futures prices suggest most believe the best bet could be May or more likely June, when the Fed is currently scheduled to hold a post-meeting press conference.

As earnings season plows on, it was retailers’ turn to report this week, and the results were mixed. Nordstrom beat on top and bottom line, and investors were pleased despite its outlook coming in below street estimates. Gap reported a strong end to its year and sees next year same store sales flat to up slightly. Discount giant TJX topped analyst expectations, and its outlook also saw a slight increase in same store sales for next year. Macy’s beat street estimates on earnings, but posted its eighth quarterly same-store sales decline in a row. JCP shares slid on its results and a restructuring announcement. Walmart beat and guided initial FY18 rev above consensus, and Home Depot posted a solid end to the year. On the M&A front, Kraft Heinz slumped and Modelez rose after Unilever's offer from late last week was rescinded, and Yahoo came to an amended agreement with Verizon for a reduced asset sale price.

MONDAY, FEB 20
(UK) FEB CBI INDUSTRIAL TRENDS TOTAL ORDERS: 8 V 4E
(JP) JAPAN FEB PRELIMINARY PMI MANUFACTURING: 53.5 V 52.7 PRIOR (6th month of expansion and highest level in 35 months)
HSBC Reports FY16 Adj pretax $19.3B v $20.3Be; Adj Rev $50.2B v $51.4B y/y; Launches $1.0B share buyback program (0.6% of market cap) to be completed in H1

TUESDAY, FEB 21
BHP.AU Reports H1 Net profit $3.2B v loss $5.7B y/y, underlying Pretax $3.24B v $2.9Be, Rev $18.8B v $18.5Be
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 52.3 V 53.5E (5th month of expansion)
(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 57.0 V 56.0E (27th month of expansion and highest since May 2011)
(EU) EURO ZONE FEB PRELIMINARY MANUFACTURING PMI: 55.5 V 55.0E (44th month of expansion and highest since Apr 2011)
HD Reports Q4 $1.44 v $1.33e, R$22.2B v $21.8Be; raises dividend 29% to $0.89/shr (implied yield 2.5%); announces new $15B share repurchase program (8.5% of market cap)
M Reports Q4 $2.02 v $1.97e, R$8.52B v $8.58Be
(US) FEB PRELIMINARY MARKIT MANUFACTURING PMI: 54.3 V 55.3E
(UK) DRAFT BREXIT BILL PASSES HOUSE OF LORDS FOLLOWING ITS 2ND READING (without a vote); Bill moves onto its next stage
(CN) CHINA JAN PROPERTY PRICES M/M: RISE IN 45 OUT OF 70 CITIES VS 46 PRIOR; Y/Y: RISE IN 66 OUT OF 70 CITIES V 65 PRIOR

WEDNESDAY, FEB 22
AIR.FR Reports FY16 Net €995M v €2.70B y/y, Adj EBIT €3.96B v €3.80Be, Rev €66.6B v €65.4Be
BAYN.DE Reports Q4 Net profit €453M (adj) v €690Me, EBITDA adj €2.18B v €2.07Be, Rev €11.8B v €11.7Be
LLOY.UK Reports Q4 PBT £973M v £1.3Be, Underlying Profit €1.79B v €1.91B y/y, Total Income £4.35B v £4.28B y/y
(DE) GERMANY FEB IFO BUSINESS CLIMATE: 111.0 V 109.6E (matches high from Feb 2014); CURRENT ASSESSMENT: 118.4 V 116.6E
(UK) Q4 PRELIMINARY GDP Q/Q: 0.7% V 0.6%E; Y/Y: 2.0% V 2.2%E (lowest annual pace since Q1 2013)
(EU) EURO ZONE JAN CPI M/M: -0.8% V -0.8%E; Y/Y (final reading): 1.8% V 1.8%E; CPI CORE Y/Y (final reading): 0.9% V 0.9%E
TJX Reports Q4 $1.03 v $1.00e, R$9.5B v $9.47Be; Raises dividend 20% to $0.3125/shr (1.64% yield); To buyback between $1.3-1.8B of stock (2.4-3.7% of market cap)
(US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)
(US) Association of American Railroads weekly rail traffic report for week ending Feb 18th: 531.1K carloads and intermodal units, +6.8% y/y (sixth straight week of gains)
(US) FOMC MINUTES FROM FEB 1 MEETING: FOMC TO START BALANCE SHEET DEBATE AT UPCOMING MEETINGS
TSLA Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED
(US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED

THURSDAY, FEB 23
ORA.FR Reports FY16 EBITDA €12.68B v €12.6Be, Rev €40.9B v €40.7Be; Raises dividend 8.3% to €0.65/shr
(DE) GERMANY Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E; GDP NSA Y/Y: 1.2% V1.2%E
BA.UK Reports FY16 EPS 40.3p v 40.2p y/y, Underlying EBITA £1.91B v £1.68B y/y, Rev £19.0B v £17.9B y/y
BARC.UK Reports Q4 Net £99M v loss £2.42B y/y, adj Pretax £284M v £646Me, Core Net Rev £4.99B v £4.45B y/y; cuts FY dividend from 6.5p to 3.0p/shr; Provides update on Barclays Africa sell down & Seperation
(US) Treasury Sec Mnuchin: number one committment is to growth and passing significant tax reform - CNBC
(US) INITIAL JOBLESS CLAIMS: 244K V 240KE; CONTINUING CLAIMS: 2.06M V 2.07ME
(US) DOE CRUDE: +0.6M V +3.5ME; GASOLINE: -2.6M V -1ME; DISTILLATE: -4.9M V -0.5ME
(MX) Mexico Foreign Min Videgaray: US-Mexico relationship took steps in the right direction today
BIDU Reports Q4 $1.91 v $0.93e, R$2.62B v $2.51Be (2 est)

FRIDAY, FEB 24
BAS.DE Reports Q4 Net €689M v €688Me, EBIT (before items) €1.18B v €1.16Be, Rev €14.9B v €14.1Be
RBS.UK Reports FY16 Net loss £6.96B* v loss £1.98B y/y, adj Op profit £3.67B v £3.30Be, Rev £12.4B v £12.0Be
STAN.UK Reports FY16 Statutory Pretax profit +$409M v -$1.5B y/y, adj Pretax $1.09B v $1.42Be; Underlying Op Rev $13.8B v $13.7Be
(US) JAN NEW HOME SALES: 555K V 571KE
(US) FEB FINAL MICHIGAN CONFIDENCE: 96.3 V 96.0E
(US) White House Econ Adviser Cohn says White House doesn't support House GOP version of border adjustment tax - Axios
(US) Weekly Baker Hughes US Rig Count: 754 v 751 w/w (+0.4%) (6th straight rise)
(US) White House reportedly blocks CNN, NY Times, LA Times, Politico and BuzzFeed correspondents from White House press gaggle - Politico

>>> US Close Dow +0.05% S&P +O.15% Nasdaq +0.17% Russell -0.01%


Closing Market Summary: Afternoon Rally Leaves Averages with Modest Gains

The stock market held a modest loss throughout the majority of Friday's session, but the cautious sentiment was just an illusion as bulls bought the dip and pushed the stock market into the green during the final minutes of the session. The S&P 500 (+0.2%) and the Nasdaq (+0.2%) eked out slim gains while the Dow (+0.1%) finished just above its flat line to record its 11th consecutive record close.

Outside of an opening dip, today's session was rather range-bound as the market cut its initial loss in half and traded in sideways fashion until an afternoon charge into the green.

Equity indices did show some life around noon following a report that Gary Cohn, who is the chief economic adviser to President Trump, indicated that the White House does not support the House GOP version of a border adjustment tax. This was construed as a positive for retailers given that they import so much of their merchandise for sale in the United States; hence, their earnings prospects would be likely to suffer.

Retail stocks surged to new highs following the initial report, but gave back a portion of those gains after the White House denied the report's validity, saying Mr. Cohn's comment was taken out of context. Still, the SPDR S&P 500 Retail ETF (XRT 43.73, +0.63) closed Friday 1.5% higher as earnings news provided a sturdy backstop.

Nordstrom (JWN 46.46, +2.52) jumped 5.7% after its better than expected earnings overshadowed a miss on revenues and below-consensus guidance. Foot Locker (FL 75.01, +6.43) and Gap (GPS 24.70, +0.73) also finished higher, adding 9.4% and 3.1%, respectively. FL's strength stemmed from its better than expected earnings while GPS overcame below-consensus earnings guidance with an otherwise in-line report.

Consumer discretionary (+0.4%) and consumer staples (+0.4%) rode the bullish retail sentiment to finish Friday higher.

The industrial sector (+0.5%) closed with a similar gain, drawing strength from aerospace & defense names after President Trump vowed to implement one of the "greatest military buildups in American history" on Friday morning.

On the downside, financials (-0.8%) and energy (-0.9%) finished the day at the bottom of the leaderboard. Financials saw some pressure amid the continued uncertainty around the scope and the timing of a tax reform plan while energy's downtick was influenced crude oil's 0.9% slide. The energy component closed the week at $53.97/bbl.

U.S. Treasuries finished the week on a positive note, closing Friday near their three-month highs. The benchmark 10-yr yield finished six basis points lower at 2.31%.

The rate-sensitive utilities (+1.4%) sector closed at the top of the day's leaderboard as investors relished the slip in interest rates. The remaining sectors--technology, materials, health care, telecom services, and real estate--closed with gains between 0.2% and 0.7%.

Today's economic data included January New Home Sales and the final reading of the University of Michigan Sentiment Index for February:

  • New Home Sales in January hit an annualized rate of 555,000, which was above the revised December rate of 535,000 (from 536,000), and less than the 566,000 that was expected by the consensus.
    • The key takeaway from the report is that high prices continue to impede stronger sales activity at the lower end of the new home market. That point is borne out in the fact that homes priced $299,999 or less accounted for 44% of new homes sold in January 2017 versus 53% in January 2016.
  • The final reading of the University of Michigan Consumer Sentiment Index for February rose to 96.3 (consensus 95.8) from 95.7 in the preliminary reading.
    • The key takeaway from the report is that overall consumer confidence is high, yet there are clear splits along party lines with respect to the economic outlook. That understanding, it was noted, creates an expectation that there will be greater volatility and discretionary spending differences across subgroups.

On Monday, investors will receive January Durable Orders (consensus 1.8%) and January Pending Home Sales (consensus 0.9%). The two reports will cross the wires at 8:30 am ET and 10:00 am ET, respectively.