>>> Randstad France will implement a squeeze-out on Ausy shares and ORNANE Follo

Randstad France will implement a squeeze-out on Ausy shares and ORNANE 

Following the results of Randstad France's reopened cash tender offer for Ausy securities in France which was closed on 8-Feb-17, Randstad France holds today 5.9M Ausy shares, representing 95.18% of the share capital and at least 95.17% of the voting rights of Ausy.

Following the successful completion of the Offer and in line with its intentions, Randstad France has requested to the AMF the squeeze-out of the remaining outstanding Ausy shares and ORNANE not tendered to the Offer which will occur on 23-Feb-16, as indicated in the notice published today by the AMF (AMF notice n° 217C0491), it being specified that the treasury shares held by Ausy will be excluded from the squeeze-out.

The amount of compensation paid under the squeeze-out will equal that of the prices of the Offer, i.e. € 55.00 per Ausy share and € 63.25 (plus accrued interests), i.e. € 63.51, per Ausy ORNANE.

FT : Unilever chief now under pressure to deliver on reforms

Unilever chief now under pressure to deliver on reforms
Seeing off Kraft Heinz bid should be ‘wake-up call’ for group, analysts say

Relief coursed through Unilever’s riverside London headquarters on Monday, after the group saw off Kraft Heinz’s $143bn takeover proposal barely 48 hours after it was revealed.

Paul Polman, chief executive, who led the board’s efforts to lobby against the offer “was very determined”, says one person present at the weekend meetings.

But, while Mr Polman succeeded in warding off the US group’s proposal — with the backing of some shareholders — many analysts warn the century-old company could not simply return to business as usual.

“This doesn’t mean that Unilever is out of the woods,” says Warren Ackerman, an analyst at Société Générale. “This near miss should be a wake-up call for Unilever that maintaining its independence and culture is not a given.”

The pressure is now on Mr Polman to accelerate, or at least deliver, on reforms he outlined last year, which form the backbone of a three-year plan to improve profitability and growth at the UK’s third-largest company by market value.

Andrew Wood, an analyst at Bernstein Research says that despite the kudos of seeing off Kraft Heinz, “we believe that this has been a somewhat humbling and chastening experience for Polman and Unilever.

“How can a €53bn sales company (with €112bn market cap, before the bid was announced) be put under threat from a US corporation less than half its size in sales?” he adds.

Unilever’s share price fell more than 6 per cent on Monday but remains higher than it was before Kraft Heinz’s interest emerged on Friday.

One top 15 shareholder praises Mr Polman, whose model of long-term growth based on sustainable business practices is at the opposite end of the cost-cutting profit-driven model of 3G Capital. The private equity group, led by Jorge Paulo Lemann, the Brazilian billionaire, is the biggest shareholder in Kraft Heinz along with Warren Buffett, chairman of Berkshire Hathaway investment group.

“Polman is doing a good job,” says the shareholder. “The Kraft Heinz model is very different — it is based on cutting costs and maximising margins, not reinvesting back into the brands”.

Unilever is an unusual hybrid of a food, home care and personal care businesses with no directly comparable rivals.

But even Mr Polman acknowledges that the group’s operating profit margins, especially in its homecare and foods business, are still too low — its core operating profit margin of 15 per cent is half that of Kraft Heinz.


In addition, the company’s free cash flow conversion, of 82 per cent, is well below the average for home and personal care companies, of 100 per cent, according to Bernstein.

To sharpen its performance, Unilever last year adopted three policies aimed at generating €1bn of savings by 2019, all with echoes of 3G’s practices. These include zero-based budgeting — when managers have to justify costs each year from zero — and a plan to incentivise senior managers with shares to generate a more entrepreneurial culture.

First, Unilever has said it will target an improvement in its operating profit margin of 0.4-0.8 percentage points (up from 0.2-0.4 percentage points); second, it is aiming for underlying sales growth of 3-5 per cent — the actual growth rate last year was 3.7 per cent — and finally it has committed to increasing the rate at which it converts earnings to free cash flow to 90 per cent.

Another consequence of Kraft Heinz’s approach could be to increase Unilever’s resolve to sell its underperforming margarine and spreads business, which accounts for 5 per cent of sales but continues to suffer from falling revenues.

Some investors could also ramp up the pressure on Mr Polman to be more ambitious on M&A by seeking a large takeover, such as of the US group, Colgate-Palmolive. So far his policy has centred around small bolt-on acquisitions — such as Dollar Shave Club and prestige skincare brands.

Mr Polman argues that more value is generated for shareholders by acquiring small businesses and then ramping up sales.


The question is whether his measures go far and fast enough. Martin Deboo, analyst at Jefferies says: “Fortunately Unilever has a plan, albeit a less hair shirt one [than Kraft Heinz].”

If Unilever had to go further, he says it might consider selling more — or even all — of its foods businesses such as Hellmann’s mayonnaise and Knorr stock cubes.

“With Unilever looking even keener to exit its spreads business but with a spinout difficult with such a weak top line, might there be a deal to be done with Kraft Heinz for either spreads or spreads plus Hellmann’s, or even the whole smorgasbord?”

Mike Fox, head of sustainable investments at Royal London Asset Management, which holds a 0.66 per cent stake in Unilever’s UK-listed shares, says: “We backed the management’s decision to reject the bid by Kraft Heinz and we have no concerns with the strategic direction of Unilever.”

But he adds: “The challenge for Unilever management now will be to deliver the recently announced strategy of improving margins and above-market growth.”

WSJ : Europe’s Periphery Debt Market Welcomes New Member: France

Europe’s Periphery Debt Market Welcomes New Member: France
Some investors are selling French government debt over concerns the country could leave the eurozone

Investors are once again selling the bonds of Europe’s peripheral economies amid political concerns. This time around, France has joined the club.

Some investors are selling French government debt, worried that the country will elect Marine Le Pen as its president, a candidate that has promised to take the country out of the eurozone. That has left French bonds behaving increasingly like their peers in the parts of Europe hit hardest by the 2011-12 sovereign-debt crisis.

It is quite a flip for Europe’s second-largest economy. After that crisis, French bonds traded with Germany’s. On Monday, a poll showing Ms. Le Pen comfortably in the lead for April’s first round of the presidential election drove yields on French 10-year bonds to jump to 1.064%. Yields rise as bond prices fall.


The spread with German bond yields hit 0.84 percentage point during the day on Monday, the highest in more than four years, before settling at 0.75 percentage point as European markets closed. Six months ago, this gap was only 0.22.

Also rising are Italian and Portuguese 10-year yields which are up by around 0.7 percentage point against Germany’s in the last six months. Greek yields have jumped.

The premium that investors demand for holding the debt of these nations over richer northern European economies like Germany and the Netherlands will continue to rise as a range of risks grow and the European Central Bank’s massive bond buying program buys less debt, investors say.

It could be French yields leading the charge higher this time. Analysts at Japanese bank Mizuho Financial Group, Inc. told their clients Monday that they should stop treating French government bonds on par with German or Dutch debt.

“France is in the driving seat” in eurozone bond markets, Francesco Garzarelli, co-head of European macro research at Goldman Sachs said in a recent research note.

To be sure, Southern European spreads were widening before concerns spiked over France. In Italy and Portugal, economic growth remains weak as bad debts burden banks. In Greece, concerns have resurfaced that officials will fail to secure new loans from European creditors.

But, in the eurozone, there is a history of selling in one country’s bonds that ripples out across weaker members of the currency bloc. France appears to now be acting in that role.


“If France was to leave, the viability of the remaining euro would be very difficult to justify,” said Neville Hill, co-head of global economic research at Credit Suisse.
The French presidential election takes place over two rounds this spring. Most experts and polling suggest Ms. Le Pen will fail in the election’s second round, as voters choose an “anyone but Le Pen” candidate. But international investors, in particular, are fretting about the possibility that the National Front’s candidate will pull off a Brexit-style surprise and shock markets.

A poll released Monday suggests Ms. Le Pen will win the first round of the vote, but lose in the second round, garnering 42% or 44% respectively against Emmanuel Macron and François Fillon, the two next most popular candidates. But Ms. Le Pen’s second-round polling support has been rising in recent months, causing volatility in European bond markets.

Within the 19-nation eurozone, investors always dump the bloc’s weaker economies and rush into stronger members like Germany whenever risks of a breakup of the currency emerge.

In 2012, the European Central Bank stemmed the fall in peripheral bonds by buying up billions of euros in this debt.

But ECB bond-buying has passed its peak.

Starting in April, officials will cut the amount of bond-buying they do every month from €80 billion ($84.89 billion) to €60 billion, as part of a broader trend of developed world central banks reducing their involvement in markets.

The program’s strict rules also mean that the ECB has to buy a smaller share of the debt of some of the neediest nations, chiefly Portugal. While ECB officials suggested last week that they may be increasingly favoring flexibility in these rules, investors remain worried that they hamper the bank’s ability to prop up peripheral debt.

“Without ECB support it’s hard to see how their spreads don’t widen up further,” according to Said Haidar, chief executive of the New York-based hedge fund Haidar Capital Management. Mr. Haidar is now betting against Southern European and French bonds.

Still, the ECB is unlikely to allow eurozone yields to reach 2012 levels again, investors say.

And not all of the periphery is looking shaky. Investors see the bonds of two peripheral nations, Spain and Ireland, as increasingly being on safer footing, just as they view French debt on shakier ground.

Spain’s 10-year bond yields are now around 0.5 of a percentage point above Italy’s, their most positive spread against Rome in five years. Ireland’s 10-year yields are now practically equal to France’s, yielding 1.047% and 1.035% respectively on Monday.

Investors are also finding bargains in the midst of Europe’s latest round of political turmoil, even in France. Since January, Adam Whiteley, portfolio manager at London-based Insight Investment, has bought French government debt while selling French corporate bonds, because he believes that the gap between the two has narrowed too much.

Also, most investors—particularly French ones—still believe it is unlikely that euroskeptic candidates like Ms. Le Pen will win power, and overcome Europe’s complicated electoral systems.

“I see the risk as limited,” said Frédéric Lamotte, chief investor at Indosuez Wealth Management. “From a portfolio point of view, generally, I don’t care.”

FT : Apple claims Brussels breached its fundamental rights in tax case

Apple claims Brussels breached its fundamental rights in tax case
Tech giant challenges fairness of demand to pay €13bn to Ireland

Apple is claiming that the European Commission breached its fundamental “right to good administration” when it demanded last year that the tech giant pay €13bn in back taxes to Ireland.

The legal argument was one of 14 so-called “pleas” lodged by the company in its appeal against the commission’s finding that a favourable tax regime granted by Dublin over 11 years constituted illegal state aid.

The pleas were published by the European Court of Justice on Monday, setting the stage for one of the biggest competition cases ever handled by the Luxembourg-based tribunal.

Apple’s two main arguments challenge the fairness of the commission’s investigation and maintain that Brussels made fundamental errors in its interpretation of Irish law and of the way in which the tech giant generated its profits.

Specifically, the pleas claim the commission “violated the principles of legal certainty and non-retroactivity”, failed to conduct “a diligent and impartial investigation” and breached the EU’s Charter of Fundamental Rights.

The iPhone maker says that by failing to give reasons for its decision, the commission infringed the company’s “right to good administration” under the charter, which guarantees impartial, fair and timely treatment.

One critic of Apple in Brussels said its resort to a “fundamental rights” defence was “hilarious”.

“There is no human right to receive tax subsidies,” said German Green MEP Sven Giegold, who sits on the parliament’s tax avoidance committee. “Even Apple does not stand above the law.”

Several other of Apple’s pleas relate to the commission allegedly misunderstanding Irish tax law and providing “self-contradictory” and poorly researched assessments of how the company attributes profits to its US headquarters.

Lawyers said the sheer range of Apple’s relatively experimental arguments reflected what an unusual test case this was for Brussels. “The [commission’s] tax ruling cases are novel, so the pleas are also novel,” said Philipp Werner, competition partner at Jones Day.

Margrethe Vestager, the EU’s competition commissioner, has dismissed claims that state aid rules are arbitrary or untested, pointing out that the EU has challenged corporate tax arrangements since the 1980s. In a recent speech in Ireland she said multinational companies were “pushing the boundaries of aggressive tax planning”.

Apple’s two Irish companies — Apple Sales International and Apple Operations Europe — hold the rights to make and sell the company’s products outside North and South America but pay very low tax rates as most profits are allocated to a head office not considered resident for Irish tax purposes.

Apple argues profits should be taxed in the US where its intellectual property is created although taxes are not paid until the profits are actually brought back to the US.

However the commission argued that the Irish tax rulings — letters outlining how Apple would be taxed in Ireland — in 1991 and 2007 artificially cut the company’s Irish tax bills to below 1 per cent of its European profits.

The Irish government is also appealing against the commission’s decision, using arguments which echo Apple’s logic.

The commission said it will defend its decision in court. Apple reiterated the statements that it made in January, when the commission’s decision was published, saying it paid a worldwide tax rate of 26 per cent.

The court hearing is expected after the summer.

FT : Listed hedge funds: rescue me Premium

Listed hedge funds: rescue me
The market does a poor job valuing alternative managers

Spare a thought for Mike Novogratz. Mr. Novogratz was a hotshot macro trader at Fortress Investment Group for more than a decade, before an unceremonious departure in late 2015 after heavy losses in his fund. When he left, Fortress repurchased his shares for $4.50 — well off the company’s 2007 IPO price of $18.50. But when SoftBank recently bought out all of Fortress for $8 a share, a 39 per cent premium to its undisturbed price, it was an indication that the market had failed to understand how to value Fortress.

Fortress was the first “alternative” manager to list its shares. Its performance in the subsequent decade hardly lived up to expectations. The primary reason was that its private equity funds have disappointed which, in turn, kept it from raising new funds. It infamously raised “gates” during the financial crisis to keep investors from redeeming their interests. Mr Novogratz’s macro fund collapsed.

Still, Fortress boasts $70bn under management which echoes a common complaint in the sector; considering its assets and earnings power it is wildly misunderstood. In a recent presentation, it argued that cash and investments on its balance sheet, as well as as-yet unrecognised performance fees, were worth more than $4 a share alone. This implies that before the SoftBank buyout, investors ascribed virtually no value either to its core management nor performance fees.

The day after SoftBank announced its rescue of Fortress, Och-Ziff, the other laggard among listed hedge funds, reported its fourth-quarter results. Its shares are off 90 per cent since its IPO. The fund paid a $412m settlement to US authorities over an African bribery scandal. Its flagship fund has seen its asset base shrink by 29 per cent in the last year.

Flagging hedge funds often just wind down. However, Och-Ziff announced a new incentive scheme to keep its star trader, James Levin, by granting him 39m shares that vest over five years. Dan Ochs, the firm’s founder, offered up to 30m of his own shares to limit dilution. The trick for listed funds: hang on long enough for a saviour who can take advantage of a cheap price.