>>> Unilever/Kraft Heinz takeover obstacles too numerous to surmount

Unilever/Kraft Heinz takeover obstacles too numerous to surmount - MergerMArket

Kraft Heinz’s [NASDAQ:KHC] fruitless offer to Unilever [LON:ULVR, AMS:UNA] last Friday (17 February) faced a litany of obstacles from the start, sector bankers told this news service.
The USD 49.61-per-share (GBP 40.09) offer was fair following Kraft Heinz's initial approach in recent weeks, a source familiar with the situation said. Despite discussions between the parties, the price announced on Friday was ultimately determined by Kraft Heinz alone, a second source familiar said. Kraft Heinz’s price was likely flexible, one of the sector bankers said.
Kraft Heinz walked away from the proposed acquisition on Sunday (19 February). Unilever did not feel USD 49.61 per share was high enough for a meaningful adjustment of the cash (USD 30.23 per share) or equity (USD 19.38 per share), it is understood.
The equity component was valued higher after the offer was announced as Kraft Heinz's stock price moved up, boosting the total premium from 18% to 25%, the first source noted.
Unilever’s other concerns included the two companies’ contrasting corporate cultures and Kraft Heinz’s cost-averse business approach, which would have run against Unilever’s focus on investment for the top line, it is understood.
Kraft Heinz could have had deep cuts in store for Unilever, this news service reported. Not every division of Unilever presented the same opportunities for cost savings, as its foods would have meshed better with Kraft Heinz’s portfolio than its non-food brands, a second sector banker said. Unilever’s food division constituted 23.8% of 2016 revenues.
This margin-enhancing strategy — as practiced by Kraft Heinz minority owner 3G Capital — can be a dangerous long-run proposition, the second banker said. A target company has its costs run down for three or four years, sees little investment in research and brand development, and winds up a husk, he said. Its owners are likely to have realised impressive margins along the way, but risk low growth in the long run, he said.
The deal also faced a potential obstacle in Unilever’s shareholder structure that gave its two constituent Netherlands and UK listings separate investor bases, potentially increasing the number of shareholders and regulatory regimes that could weigh in on the deal.
By UK takeover law, Kraft Heinz cannot approach Unilever for another six months unless another company makes an offer to Unilever in the meantime.
Kraft Heinz did not respond to request for comment and Unilever declined to comment.

>>> US Close Dow +0.58% S&P +0.60% Nasdaq +0.47% Russell +0.75%

Closing Market Summary: Another Record Close on Tuesday

Last week's bullish sentiment carried over into the first session of the new week as investors decidedly pushed the stock market to new record highs on Tuesday. The S&P 500 (+0.6%) and the Dow (+0.6%) led the advance with the Nasdaq (+0.5%) closing just a step behind.

Equity indices came out of the gate strong this morning, rallying on an uptick in crude oil and the highest eurozone composite PMI reading in nearly six years. But the stock market hit a speed bump in front of the 12:00 pm ET speech from Philadelphia Fed President Patrick Harker who is a voter on this year's FOMC. The speech turned out to be a non-event as Mr. Harker didn't provide any new information, reiterating his belief that three rate hikes are appropriate for 2017.

After trending sideways in the wake of Mr. Harker's comments, the major averages regained their momentum late in the afternoon session to hit fresh session highs going into the close.

The lightly-weighted real estate sector (+1.3%) led the afternoon advance, stealing the top spot on the day's leaderboard from the energy space (+0.7%). The energy group's performance depended upon crude oil, which stunted the sector's advance after slipping from its session high. The energy component still closed with a solid gain, up 1.1% at $54.37/bbl, as strong OPEC supply cut compliance overshadowed record high U.S. inventories.

Consumer staples (+1.0%) finished just behind the real estate sector following Wal-Mart's (WMT 71.45, +2.08) upbeat earnings report. WMT shares jumped 3.0% after the company reported better than expected earnings per share and raised its dividend.

On the consumer discretionary (+0.6%) side, Home Depot (HD 145.02, +2.02) also had a solid showing after beating top and bottom line estimates. In addition, HD increased its quarterly dividend and authorized a $15.0 billion share repurchase program.

The remaining sectors finished in the green, posting gains between 0.4% (materials) and 1.1% (utilities). Health care's (+0.5%) advance was particularly notable given the underperformance in biotech names that sent the iShares Nasdaq Biotechnology ETF (IBB 293.04, -1.27) lower by 0.4%.

The Treasury market began Tuesday with a sizable loss, but dovish comments from Minneapolis Fed President Neel Kashkari (FOMC voter) brought Treasuries back to their flat lines. In the morning session, Mr. Kashkari stated that the U.S. labor market has "more room to run," suggesting that he believes there is no hurry for the Fed to raise rates.

The benchmark 10-yr yield finished the day one basis point higher at 2.43% after showing a four basis point gain earlier in the session.

Investors did not receive any notable economic data on Tuesday.

Wednesday will see several economic reports, including the MBA Mortgage Application Index at 7:00 am ET, January Existing Home Sales (consensus 5.57 million) at 10:00 am ET, and FOMC Minutes at 2:00 pm ET.

  • Nasdaq Composite +9.0% YTD
  • S&P 500 +5.7% YTD
  • Dow Jones Industrial Average +5.0% YTD
  • Russell 2000 +3.9% YTD

>>> Deutsche Wohnen Primary Shares Offered in Placement: Terms

Deutsche Wohnen ordinary shares, all primary, offered through accelerated bookbuilding managed by Deutsche Bank, Goldman, UBS as joint global coordinators and joint bookrunners and Exane BNP Paribas as joint bookrunner, terms show.
  • Offering size ~EU500m, ~5% of the registered share capital
  • Proceeds from the capital increase will be used in most part to finance the convertible bonds tender offer
  • Banks also managing offering of EU800m convertible bonds due July 2024, convertible into ordinary shares of Deutsche Wohnen: terms
    • Issue price: 100% of principal amount
    • Redemption price: 100% of principal amount
    • Coupon: 0.20%–0.45% per annum
    • Conversion premium range: 48%–58% above reference share price

>>> S; T-Mobile US: Potential Strategic Combo -- Gabelli & Co.

T-Mobile US: Potential Strategic Combo -- Gabelli & Co. (63.92)

Gabelli believes that T-Mobile US should command a 7.5-8.5x EBITDA multiple in a buyout/consolidation scenario. The broad communications sector in the U.S. continues to consolidate. While, in the near-term, the wireless industry will likely remain at four national players, in the long-run, they expect further consolidation. They continue to view TMUS as essentially the only way for a domestic or foreign company to enter the U.S. wireless market in a meaningful way. Potential acquirers of TMUS could include Comcast, SoftBank/Sprint, Charter/Liberty, DISH, foreign carriers, and/or private equity. Firm calculates a 2018 PMV of $75 per share, growing to $115 per share in 2021. 

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • CYH +20.3%, RIC +16.3%, XCRA +11.6%, HLX +8%, EXAS +7.2%, VIPS +6.9%, LL +6.1%, EROS +5.6%, OPME +3.6%
  • MDR +3.3%, WMT +3.2%, CTG +3%, AAP +2.4%, MDWD +2.4%, CYRN +2.3%, NRZ +2%, M +1.9%, NDSN +1.7%, HD +1.7%, EXPD +0.9%, WLK +0.6%


M&A news:

  • DGAS +16.6% (enters into a definitive agreement to merge with an affiliate of Peoples Natural Gas; Delta shareholders will receive $30.50 in cash/share)
  • PLKI +16.4% (Restaurant Brands (QSR) is in advanced discussions to purchase PLKI, according to Bloomberg)
  • FCH +15.8% (Ashford Hospitality Trust (AHT) submits non-binding proposal to acquire FelCor for a total consideration of $9.27 per share)
  • TROX +14.4% (to acquire the TiO2 business of Cristal for $1.673 bln of cash and Class A ordinary shares)

Select metals/mining stocks trading higher: CLF +2.9%, AKS +2.5%, X +1.5%, MT +1.3%, HBM +1.2%, AUY +0.8%, .

Other news:

  • DCTH +46.3% (study demonstrated that 45.7% of patients with ocular melanoma that metastasized to the liver who underwent percutaneous hepatic perfusion using investigational Melphalan/HDS experienced a complete or partial response)
  • EYEG +34.1% (enters into exclusive, worldwide licensing agreement with Valeant Pharmaceuticals (VRX) )
  • APOP +20.1% (announces 'positive' final results from its clinical trial of ApoGraft in healthy donors)
  • IDXG +19.5% (announces the initiation of a collaborative research program with Viatar CTC Solutions to detect and characterize early cancer in liquid biopsies)
  • VCEL +8.2% (FDA has designated the investigation of ixmyelocel-T for reduction in the risk of death and cardiovascular hospitalization in patients with chronic advanced heart failure due to ischemic dilated cardiomyopathy as a Fast Track Development Program)
  • VALE +7.6% (new shareholders' agreement was filed, executed by Litel Participações S.A., Litela Participações S.A., Bradespar S.A., Mitsui & Co., and BNDES Participações 
  • RBS +5.4% (provides update on remaining State Aid obligation)
  • EW +5.3% (CardiAQ testing has been completed; enrollment has resumed )
  • BCLI +4.2% (signs an agreement w/ CCRM to support the market authorization request for NurOwn)
  • PGH +3.1% (announcs plan to reduce its outstanding debt through the use of $530 mln cash on hand)
  • MDLZ +2.6% (following confirmation that KHC withdrew transaction with UL/UN)
  • GRPN +1.9% (continued strength)
  • SRPT +1.8% (enters into an agreement to sell its Rare Pediatric Disease Priority Review Voucher for $125 million)
  • AEHR +1.5% (receives an order in excess of $4 mln from a subcontractor to its lead customer for the FOX-XP Test and Burn-in System)
  • SCON +1.4% (receives a U.S. Patent for an aspect of the RCE-CDR system architecture used in manufacturing Conductus HTS wire)
  • GIS +1.3% (following confirmation that KHC withdrew transaction with UL/UN)

Analyst comments:

  • JAG +3.7% (initiated with a Outperform at Credit Suisse)
  • SBLK +3.1% (upgraded to Buy from Hold at Deutsche Bank)
  • ADNT +1.3% (initiated with a Overweight at Morgan Stanley)