>>> Hewlett Packard Enterprise beats by $0.01, misses on revs; guides Q2 EPS bel

--> HPE -6.12% in after hours
Hewlett Packard Enterprise beats by $0.01, misses on revs; guides Q2 EPS below consensus; lowers FY17 EPS, in-line
  • Reports Q1 (Jan) earnings of $0.45 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $0.44; revenues fell 10.4% year/year to $11.41 bln vs the $12.05 bln Capital IQ Consensus.
    • Enterprise Group revenue was $6.3 billion, down 12% year over year, down 6% when adjusted for divestitures and currency, with a 12.7% operating margin. Servers revenue was down 12%, down 11% when adjusted for divestitures and currency, Storage revenue was down 13%, down 12% when adjusted for divestitures and currency, Networking revenue was down 33%, up 6% when adjusted for divestitures and currency, and Technology Services revenue was down 2%, up 4% when adjusted for divestitures and currency.
    • Enterprise Services revenue was $4.0 billion, down 11% year over year, down 6% when adjusted for divestitures and currency, with a 7.0% operating margin. Infrastructure Technology Outsourcing revenue was down 8%, down 7% when adjusted for divestitures and currency, and Application and Business Services revenue was down 17%, down 3% when adjusted for divestitures and currency.
    • Software revenue was $721 million, down 8% year over year, down 1% when adjusted for divestitures and currency, with a 21.4% operating margin. License revenue was down 9%, down 2% when adjusted for divestitures and currency, Support revenue was down 9%, down 2% when adjusted for divestitures and currency, Professional Services revenue was down 7%, down 5% when adjusted for divestitures and currency, and Software-as-a-service (SaaS) revenue was up 4%, up 6% when adjusted for divestitures and currency.
    • Financial Services revenue was $823 million, up 6% year over year, net portfolio assets were up 2%, and financing volume was down 10%. The business delivered an operating margin of 9.5%.
  • Co issues downside guidance for Q2, sees EPS of $0.41-0.45, excluding non-recurring items, vs. $0.45 Capital IQ Consensus Estimate.
  • Co issues in-line guidance for FY17, lowers EPS to $1.88-1.98 from $2.00-2.10, excluding non-recurring items, vs. $1.93 Capital IQ Consensus. Three significant headwinds have developed since Hewlett Packard Enterprise provided its original fiscal 2017 outlook at its Securities Analyst Meeting in October 2016: increased pressure from foreign exchange movements, higher commodities pricing, and some near-term execution issues. Given these challenges, the company is reducing its FY17 outlook by $0.12 in order to continue making the appropriate investments to secure the long-term success of the business.

>>> US Close Dow +0.17% S&P +0.04% Nasdaq -0.43% Russell -0.66%

Closing Market Summary: Dow Records 10th Consecutive Record Close

Investors hurdled news headline after news headline on Thursday, but still drove the Dow (+0.2%) to its tenth consecutive record close, a feat that has not been achieved since 1987, when the price-weighted average recorded 12 consecutive record closes. The benchmark S&P 500 (unch) finished flat while the Nasdaq (-0.4%) and the small-cap Russell 2000 (-0.6%) couldn't keep pace.

Early on Thursday morning, Treasury Secretary Steven Mnuchin said that he anticipates the new administration's tax reform plan to to pass through congress before the August recess.

Mr. Mnuchin's timeline may have cooled the recent bullish sentiment surrounding President Trump's upcoming "phenomenal" tax-related announcement, a promise which sent the stock market on its most recent rally. However, the financial sector (+0.1%), which has led post-election rally on promises of deregulation and tax reform, finished Thursday with a small gain.

On the earnings front, Tesla (TSLA 255.99, -17.52) disappointed investors with a wider than expected loss per share, but the automaker did announce that the mass-market electric Model 3 sedan is on track for initial production in July.

Similarly, L Brands (LB 48.94, -9.19) finished Thursday lower, plummeting 15.8%, after the company's below-consensus guidance overshadowed better than expected earnings. LB's slide weighed on the SPDR S&P 500 Retail ETF (XRT 43.10, -1.03), which ended lower by 2.3%, while the consumer discretionary sector (-0.7%) also underperformed.

Technology (-0.1%) was plagued by a poor showing from chipmakers, evidenced by the 1.6% decrease in the PHLX Semiconductor Index. The semiconductor industry was led lower by NVIDIA (NVDA 100.49, -10.27). The company plunged 9.3% after analysts from both BMO Capital and Instinet downgraded NVDA shares on Thursday morning. To be fair, NVDA shares skyrocketed 223.9% in 2016, so a pullback of this magnitude isn't really all that surprising.

However, a 8.6% jump in shares of HP (HPQ 17.60, +1.40) put a lid on the tech sector's loss. The company's spike followed its most recent earnings report, which showed better than expected top and bottom lines.

Industrials (-0.8%) finished Thursday at the bottom of the leaderboard amid growing speculation of a potential delay in the implementation of the Trump administration's infrastructure plan. Likewise, the materials sector closed lower by 0.6%.

On a positive note, the energy sector finished 0.5% higher thanks to crude oil's solid performance. The energy component finished up 1.6% at $54.47/bbl following Thursday's EIA crude inventory report, which showed a build of 0.6 million barrels while the consensus called for a build of about 3.475 million barrels. Today's EIA report confirmed yesterday's bullish API reading.

On the countercyclical side, health care (+0.7%) also closed in the green. Outside of the biotechnology industry, health care components showed broad strength. It is also worth pointing out that Former House Speaker John Boehner said a full repeal and replacement of the Affordable Care Act is "not going to happen." Considering that Mr. Boehner led Republican opposition to the Affordable Care Act for years, his comments are particularly notable.

The remaining sectors--consumer staples, utilities, telecom services, and real estate--all closed with gains between 0.3% and 1.1%.

U.S. Treasuries finished Thursday modestly higher. The benchmark 10-yr yield closed three basis points lower at 2.38%.

Today's economic data included Initial Claims and December FHFA Housing Price Index:

  • The latest weekly initial jobless claims count totaled 244,000 while the consensus expected a reading of 242,000. Today's tally was above the revised prior week count of 238,000 (from 239,000). As for continuing claims, they declined to 2.060 million from the revised count of 2.077 million (from 2.076 million).
    • The key takeaway from this report is that it covers the period in which the survey for the February Employment Situation report was conducted, and given the low level of claims, it will likely feed a belief that nonfarm payrolls are apt to increase by 200,000+ again.
  • The FHFA Housing Price Index for December rose 0.4%, which followed a revised increase of 0.7% in November (from 0.5%). The reading was in line with consensus (+0.4%).
    • The key takeaway from the report is that high prices and limited inventory continue to compress the affordability factor for prospective buyers, and have prevented existing home sales from being even stronger.

On Friday, Investors will receive January New Home Sales (consensus 566,000) and the final reading of the University of Michigan Sentiment Index for February (consensus 95.8). Both reports will be releases at 10:00 am ET.

  • Nasdaq Composite +8.4% YTD
  • S&P 500 +5.6% YTD
  • Dow Jones Industrial Average +5.3% YTD
  • Russell 2000 +2.8% YTD

>>> BioMarin Pharm misses by $0.08, beats on revs; guides FY17 revs below consen

--> BMRN

BioMarin Pharm misses by $0.08, beats on revs; guides FY17 revs below consensus
  • Reports Q4 (Dec) loss of $0.16 per share, excluding non-recurring items, $0.08 worse than the Capital IQ Consensus of ($0.08); revenues rose 31.6% year/year to $300 mln vs the $294.95 mln Capital IQ Consensus.
  • Co issues downside guidance for FY17, sees FY17 revs of $1.25-1.30 bln vs. $1.32 bln Capital IQ Consensus with $30-70 mln in non-GAAP net loss.
  • "our regulatory filings for approval of Brineura, for the treatment of Batten disease, were accepted and validated in both the U.S. and EU. With the Prescription Drug User Fee Act (PDUFA) goal date for an FDA approval decision of April 27, 2017, we hope to have an approved treatment option for this devastating childhood disease in the near future." Mr. Bienaimé continued, "In addition, in 2016 we moved our vosoritide program forward based on Phase 2 results in children ages 5-14 with achondroplasia. At the end of 2016, we initiated a one-year, randomized, placebo-controlled Phase 3 study in children with achondroplasia ages 5-14 using a daily 15µg/kg dose. We recently provided encouraging preliminary results with our earliest clinical-stage program BMN 250 for the treatment of MPS IIIB, or Sanfilippo Syndrome, Type B. We are now moving to the expansion phase of the development program that will assess the impact of treatment with BMN 250 on the neurocognitive function in this rapidly progressive pediatric brain disease. Finally, in addition to the filing of the BLA for pegvaliase for the treatment of phenylketonuria expected in the second quarter of 2017, we expect to start to turn the corner to profitability with the achievement of positive non-GAAP results for the full year 2017."
  • BMN 270 gene therapy product for hemophilia A: Today the Company announced that in the ongoing Phase 1/2 study, the three additional patients to be enrolled in the study will be dosed at the same 4 x 1013 vg/kg dose as the 3 most recently enrolled patients. Consistent with the dosing regimen of the 3 most recently enrolled patients, the 3 additional patients will be dosed without prophylactic corticosteroids. In October 2016, the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom approved continued enrollment into the open-label Phase 1/2 study of BMN 270 for severe hemophilia A. The agency also approved the Company's proposed amendments to the study, which included eliminating the requirement for prophylactic corticosteroids and increasing potential additional enrollment from up to three additional patients to up to six additional patients. In the fourth quarter of 2016, three patients were dosed at 4 x 1013 vg/kg with BMN 270.

(Recode.net) A company that provides air traffic management for drones just rais

A company that provides air traffic management for drones just raised money from Microsoft and Airbus
Most major U.S. airports are already using AirMap’s drone software.

One of the biggest problems that still needs to be figured out before most people’s Amazon orders are delivered by a drone is managing how aircraft will coordinate and communicate with other drones and humans on the ground.

In other words, air traffic control for drones.

One company, AirMap, a drone mapping and alert platform, has made some serious strides. The company announced today it raised $26 million from Microsoft, Airbus, Qualcomm, Yuneec and Sony. Microsoft led the Series B funding round.

NASA and the U.S. Federal Aviation Administration are in the midst of a multiyear research project on safely integrating drone air traffic control into the national airspace. That research isn’t slated to be finished until least 2019.

AirMap, in the meantime, has rolled out a system that alerts air traffic controllers and other drone operators where unmanned aircraft are flying and for drone pilots to report flight plans. It is already in use at nearly every major airport across the country.

Eighty percent of the world’s drones — including aircraft made by DJI (the world’s largest drone maker), Yuneec and Intel — are using AirMap’s services for things like preventing drones from entering protected airspace, like near airports.

Drones flying out of line of sight from the operator need to be able to ensure that they won’t hit other drones or collide with buildings, and they’ll also need a way to know which areas to avoid and when, like if there’s a fire the drone shouldn’t fly into.

That is, drones need to share and receive real-time information with other drones, as well as operators and local authorities on the ground — especially considering how unmanned aircraft can land and take off anywhere, unlike airplanes.

Another difference between drones and manned aircraft is that, increasingly, drones will be flying themselves.

“The drones of today are primarily piloted,” said AirMap CEO Ben Marcus. “But the drones of tomorrow, the drones that will really deliver benefits to people in their daily lives, will be more and more autonomous.”

This reality is still years away. Drones in the U.S. won’t be allowed to fly without an operator watching until the FAA creates new rules that outline how that can be done safely and legally. But that timeline obviously wasn’t enough to dissuade major investors.

The FAA has said that the agency does not provide air traffic control services for low-altitude airspace, which is where drones are permitted to fly, and is looking for industry solutions. That’s where a company like AirMap might come in.

>>> Closing Commodities: Crude closes near Tuesday's 7-week high

Closing Commodities: Crude closes near Tuesday's 7-week high ahead of tomorrow's rig count; natural gas extends gains & closes near the midpoint of its early morning rally post-EIA

  • Crude closed just under Tuesday's 7-week high after EIA reported a smaller-than-expected build in crude & a larger-than-expected draw in gas inventories, compared to Consensus
    • April crude oil futures rose $0.86 (+1.6%) to $54.47/barrel
    • Reminder: Baker Hughes rig count data will be released tomorrow at 1 pm ET.
    • EIA highlights:
      • Crude oil inventories had a build of +0.6 mln barrels (consensus called for a build of about +3.475 mln barrels).
      • Gasoline inventories had a draw of -2.6 mln barrels (consensus called for a draw of -0.888 mln barrels).
      • Distillate inventories had a draw of -4.9 mln barrels.
  • Natural gas extended last session's gains & closed near the midpoint of its early morning rally after EIA reported a draw roughly in-line with expectations
    • April natural gas closed $0.05 higher (+1.9%) at $2.75/MMBtu
    • EIA highlights:
      • Natural gas inventory showed a draw of -89 bcf vs expectations for inventory to be a draw between -85 to -93 bcf.
      • Working gas in storage was 2,356 Bcf as of Friday, February 17, 2017, according to EIA estimates.
      • Stocks were 261 Bcf less than last year at this time and 156 Bcf above the five-year avg of 2,200 Bcf.
      • At 2,356 Bcf, total working gas is within the five-year historical range.
  • In precious metals, gold & silver erased all of yesterday's losses on continued weakness in the dollar index
    • April gold ended today's session up $17.90 (+1.5%) to $1251.60/oz
    • Mar silver closed today's session $0.19 higher (+1.1%) at $18.13/oz
  • The dollar index was -0.2% around the 100.99 level, provided support to precious metals
    • Commodities, as measured by the Bloomberg Commodity Index, were -0.2% around the 87.37 level
  • Base metal copper dropped 3.3% & closed down $0.09 around the $2.64/lb level

WSJ : Renault-Nissan’s Problem: There’s Only One Ghosn

Renault-Nissan’s Problem: There’s Only One Ghosn
Carlos Ghosn steps down at Nissan to focus on broader alliance with Renault and Mitsubishi

Carlos Ghosn solved one succession issue at his global auto alliance, tapping a longtime lieutenant to run Nissan Motor Co., but it may take a Ghosn clone to address the rest of the challenges.

Mr. Ghosn said Thursday he would step down as chief executive of Nissan Motor Co. to spend more time looking after the long-term health of the Renault-Nissan Alliance, which faces a revitalized European competitor in Peugeot and a stubborn French government as the largest shareholder of Renault SA.

The alliance, anchored in cross-shareholding between the Japanese and French auto makers, has helped them compete with even larger rivals. In 2015, it reported some $4.5 billion in synergies through shared purchasing and costs, a success that encouraged Mr. Ghosn to add a new alliance member last October by having Nissan take a 34% stake in Mitsubishi Motors Corp.
The expanded three-way alliance will require even more attention now to ensure it works as intended, Mr. Ghosn said in an interview, explaining his decision to hand the reins at Nissan after nearly two decades to lieutenant Hiroto Saikawa.
“We need to make sure the synergies are working and the opportunities are being acted on and it is benefiting each one of the companies,” Mr. Ghosn said. “That’s why I’m concentrating on the alliance.”

He said he would spend more time in Amsterdam, where the alliance headquarters is located.

Nissan, Renault SA and Mitsubishi together sold nearly 10 million cars last year, putting them firmly in the ranks of the world’s largest auto makers.

Concerns about finding a replacement, or replacements, for the 62-year-old Mr. Ghosn become more pressing with each passing year.

“He’s a very special person in a challenging job,” said Julie Boote, an auto analyst at Pelham Smithers Associates in London. “The ultimate target is, at one point, the two groups will merge. That was difficult under Mr. Ghosn and will be even more difficult with someone else.”

Mr. Ghosn said a merger of Nissan and Renault could happen someday if the sides find it mutually advantageous. But he reiterated one condition that could be insurmountable so long as French officials see Renault as a national champion. “Nissan has been very clear during discussions with the French state that they are not going further in terms of a merger, or anything else, with the French state as a shareholder of Renault,” Mr. Ghosn said.

Mr. Ghosn’s personality and workaholic schedule have kept the Renault-Nissan Alliance together over distant time zones and clashing priorities.

He logs hundreds of hours aboard his private jet every month, shuttling between Paris, Yokohama, Japan, and the rest of the world. At Renault’s and Nissan’s headquarters, he compresses a month of work into each week he spends there.

He is meticulous about maintaining the independence of each company he commands, going so far as to keep separate briefcases for Renault and Nissan work, said a Nissan spokeswoman. At the same time, he is an aggressive advocate for the benefits of the partnership structure, pushing the two companies to work together ever more closely.

Among the hardest parts of his job—and the one where he puts his background as a product of elite French education to work—is dealing with politics in France. A boardroom battle at Renault in 2015 nearly upended the alliance after the French government increased its stake in Renault to 20% from 15% to become the largest shareholder in the company and invoked a French law to boost its voting rights. The move spooked Nissan, since Renault owns 43% of the Japanese company.

Some deft political maneuvering by Mr. Ghosn and a threat from Nissan to increase its own stake in Renault resolved the issue, extracting an agreement from France not to exercise its outsize influence on most matters. But with a new president of France set to be elected this spring, the government’s role in the alliance may again be up in the air.

Dealing with a shareholder whose interests go beyond financial performance demands delicacy, Mr. Ghosn said. “We have a market logic, they have a state logic, which is different,” he said. “Obviously, it requires a lot of attention.”

Renault’s profit rose by a fifth in 2016 to €3.4 billion ($3.6 billion) after a large loss booked the previous year from its holding in a Russian car maker was almost entirely erased and European new car sales improved.

Renault doesn’t break out profitability by region, but half its profit came from its stake in Nissan and many car makers struggle to stay in the black in Europe. General Motors Co.’s Opel unit in Europe, which GM wants to sell to Peugeot, has lost on average $1 billion a year for 15 years.

Asked whether he has plans to eventually retire, Mr. Ghosn said: “Not yet. There is only one certainty, that every year you get older. That’s the only certainty in business.”

FT : US prime property is magnet for illicit wealth, warns Treasury

US prime property is magnet for illicit wealth, warns Treasury
Probe unearths string of dubious cash buyers in New York, Miami and other cities

US real estate’s reputation as a favourite destination for international money launderers has grown after a Treasury investigation confirmed fears that top-end property in New York, Miami and other cities is being used to channel illicit wealth.

The Financial Crimes Enforcement Network (FinCEN), a Treasury unit, found that one in three buyers who used shell companies for cash purchases of luxury property in leading cities had had the alarm raised about their financial dealings.

The role of US mansions, penthouses and beachside residences as a haven for tainted wealth has been under increasing scrutiny in recent years as it emerged that buyers had included figures such as Colombian drug lord Pablo Escobar and the son of Equatorial Guinea’s president.

FinCEN said on Thursday it had unearthed a string of dubious buyers using a new disclosure rule to probe all-cash deals undertaken through shell companies. The purchasers included some suspected of being involved in corruption in Asia and South America and one who engaged in $160m of suspicious activity, officials said.

The US market in existing housing alone — which excludes commercial and newly built property — turns over $1.6tn a year, according to the National Association of Realtors. About a quarter of buyers pay cash, with the proportion rising to half of foreign buyers. These account for only 4 per cent of all purchases, but this means some $32bn a year flows into US real estate from abroad in cash transactions that, until a year ago, could be conducted anonymously.

Since the Patriot Act was introduced after the September 11 2001 terror attacks, mortgage lenders have been subject to “know your customer” rules designed to stop terrorists and other criminals using agents, shell companies and other subterfuges to move illicit money into the US. But cash purchases were excluded.

A year ago FinCEN, which collates information reported by banks and others on their clients and makes it available to law enforcement agencies, moved to plug what it believed was a major conduit for dirty money.

It introduced a rule requiring identity disclosure for cash buyers using shell companies to purchase top-end property in Manhattan and Miami. The rule was later extended to the whole of New York City, more of Florida and Los Angeles, San Francisco, San Diego and San Antonio.

The information gathered “corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in ‘all-cash’ transactions”, the unit said on Thursday.

Some 30 per cent of top-end all-cash transactions using shell companies for which FinCEN received data were found to involve either an owner or owner’s representative who had been the subject of a “suspicious activity report”. These are reports that banks must lodge with the authorities when they have concerns about the source of a client’s funds.

Some anti-corruption activists had feared the disclosure rule would be allowed to lapse when it came up for renewal on Thursday, part of wider concerns about the fate of regulation under Donald Trump’s administration. During his presidential campaign, Mr Trump described the Foreign Corrupt Practices Act as “horrible”.

However, the disclosure rule was extended for another six months on Thursday. A FinCEN spokesman said the decision had been taken with the “full support” of Steven Mnuchin, Mr Trump’s Treasury secretary.

Mr Trump’s fortune is based on US real estate. As the Financial Times revealed in October, an alleged Kazakh money-laundering network used the all-cash transactions now in the spotlight to buy and sell apartments in the Trump Soho tower in Manhattan.

FT : Safran hits back at TCI’s campaign to stop Zodiac takeover

Safran hits back at TCI’s campaign to stop Zodiac takeover
French group says fund’s attempts to stop deal would destroy long-term value

French jet engine maker Safran has accused one of Europe’s largest activist hedge funds of wanting to “destroy value” in the long term in its attempt to scupper an agreed €8.5bn takeover for rival Zodiac Aerospace.

Last week, The Children’s Investment Fund, run by Sir Chris Hohn, launched a campaign to block the aerospace deal, saying it had “no strategic rationale” and demanding cash be returned to shareholders instead.

TCI argued that Safran would be worth €100 per share if it ditched its offer for Zodiac, the maker of aircraft seats and cabin interiors, compared to €66 that it was trading at this week. It said the company was “massively overpaying” for Zodiac for “questionable synergies”.

Safran’s management struck back on Thursday, claiming TCI was making “baseless” claims, and it cast doubt on the fund manager’s understanding of both French corporate governance laws and the aerospace industry.

In a letter by the Safran board sent to Mr Hohn on Thursday, the company said TCI’s proposal for a share buyback instead of the deal “results from a partial and incomplete view likely to destroy value for shareholders in the long term”.

The claim that Zodiac was of “inferior” quality to Safran “overlooks certain fundamentals” in the cabins and seats business, said Safran in the letter, adding that while Zodiac had production problems in the past it was now on track with its latest financial targets.

Speaking to the Financial Times, Ross McInnes, chairman of Safran, added that “the management and the board of Safran did not need to take lessons from anyone on how we manage our portfolio”.

He particularly criticised TCI for pushing them in 2012 to sell their 23 per cent stake in Ingenico, the payments company, for about €470m. “By waiting, we ended up receiving €900m,” he said.

The comments will add to the bad blood between Safran and TCI, which has built a reputation as an activist investor following high-profile campaigns in Europe, Asia and the US.

One of TCI’s main criticism of the Safran deal was that shareholders will not be given a vote at the upcoming annual meeting on the initial part of the Zodiac deal, which is a tender offer of €29.47 per Zodiac share.

Safran shareholders will only get a vote on the subsequent merger, which will offer 97 Safran shares for 200 Zodiac shares, but by which point most of Zodiac will already likely be owned by Safran.

Mr McInnes said Safran had no obligation under French law to hold a vote on the initial tender and that TCI — as a “sophisticated investor” — should have known this when buying its shares in the first place.

FT : Surge in M&A raises concerns over market peak

Surge in M&A raises concerns over market peak
The absence of a huge surge in deal activity might be more worrying

Does the recent spate of large-scale M&A signal that a top in the market is being reached? That is what some prominent investors are worried about after the surprise $143bn bid by Kraft Heinz for Unilever last week, which was later abandoned.

Jeff Ubben, founder of ValueAct and leading player in the world of hedge fund activism, this week raised worries that companies are getting too active.

Mr Ubben, an investor who prodded Towers Watson and Willis to merge and Valeant to roll up lots of smaller drug companies, told a Reuters Newsmakers panel on Wednesday night: “You can see it in the risk-hungry nature of corporations. At these extremes the stock market is usually baiting you to do the wrong thing. The private equity guys made the top in ‘07. They were buying everything and they learned their lesson. The corporations didn’t play the ‘07 game and now they are going to make the top.”

But is he right? There are several counter arguments to this, not least that deals numbers are not running red hot.

The number of M&A transactions involving US companies in 2016 was the lowest of any year since 2005, bar the crisis-nadir year of 2008. Activity has been concentrated among larger companies so the value of deals is hardly depressed, but last year’s deal total of $2tn was lower than 2015’s $2.4tn even after a spike in the fourth quarter of 2016.

Absent Unilever, the first quarter of 2017 does not seem on course to break any record, either. A few megadeals would send the numbers soaring, and it is true that news of last week’s bid approach caused Kraft Heinz shares to leap by almost as much as Unilever’s, suggesting the market would welcome the deal. But whatever you think of the cultural mismatch between the two companies, there was a cost-cutting rationale.

That is a far cry from 2007, when cheap financing, unchecked leverage and tax favours led private equity bidders to drive up stock market valuations. Ironically, it is the absence of a huge surge in M&A activity that might be more worrying. Both private equity and strategic buyers will tell you they are wary about valuations, and high valuations do not bode well for future stock market performance.