>>> GlaxoSmithKline beats by $0.03, beats on revs (40.32)

GSK -1.17%

GlaxoSmithKline beats by $0.03, beats on revs
  • Reports Q3 (Sep) core earnings of GBP0.32 per share, GBP0.03 better than the Capital IQ Consensus of GBP0.29; revenues rose 23.1% year/year to GBP7.54 bln vs the GBP7.27 bln Capital IQ Consensus.
  • Vaccines sales grew 20% to £1,613 million with the US up 23%, Europe up 10% and International up 25%. Growth benefited from increased demand for Fluarix/Flulaval, primarily in the US, and Bexsero in both the US and Europe. 19p dividend declared for Q3. Continue to expect 80p for FY 2016 and 2017. Improved operating leverage driven by sales growth, delivery of restructuring and integration benefits and continued tight control of costs including targeted reinvestments.
  • Outlook: The Group aims to improve returns from its R&D innovation by striking a balance between pricing and volume generation. At its Investor Day on 6 May 2015, GSK outlined a series of expectations for its performance over the five-year period 2016-2020. This included an expectation that Group core EPS would grow at a CAGR of mid-to-high single digits on a CER basis. The introduction of a generic alternative to Advair in the US was factored into the Group's assessment of its future performance. The Group also stated it expects to pay an annual ordinary dividend of 80p for each of the years 2015-2017.

WSJ : Megamergers Face Delays From Heightened EU Scrutiny

Megamergers Face Delays From Heightened EU Scrutiny
Antitrust authorities seek more information on Syngenta-ChemChina deal amid wave of consolidation in agrochemicals

BRUSSELS—An industrywide review by European Union antitrust authorities is slowing down approval for some of the megamergers that have promised to reshape the global agrochemicals business.

Swiss seed and pesticide maker Syngenta AG this week said that regulatory approval of its proposed acquisition by China National Chemical Corp. likely will be delayed into early 2017 as regulators seek more information amid a consolidation wave in the sector. The companies had previously expected the deal to close this year.

In an interview on Tuesday, Syngenta Chief Executive Erik Fyrwald said Bayer AG’s proposed acquisition of Monsanto Co.—which would create the world’s largest seed and pesticide business—prompted more requests for information from regulators regarding the Syngenta and ChemChina deal “than we’d ever seen before.”

The comments suggest that the European Commission, the bloc’s antitrust regulator, likely will open an in-depth investigation into the Syngenta-ChemChina deal by Oct. 28, the EU’s deadline to complete the initial merger review.

The EU usually assesses mergers on a case-by-case basis and in the order in which they have been officially registered with the regulator. But the EU’s antitrust chief Margrethe Vestager has previously signaled that her department’s review of the deals would take into consideration the fact that several mergers in the agricultural sector were taking place at one time.
Bayer says it is preparing its submissions to regulators for the plans announced last month to acquire U.S. seed giant Monsanto for $57 billion.
The European Commission declined to comment.
Speaking before European lawmakers earlier this month, Ms. Vestager said it was too early to tell of the outcome of the agricultural deals but that it was important for farmers to benefit from affordable prices, quality and innovation.
Companies in the agricultural sector are scrambling to merge as declining prices for crops weigh on profit. But the wave of tie-ups, which also includes plans by Dow Chemical Co. and DuPont Co. to combine and then subsequently split in three, poses a challenge for regulators who normally conduct thorough reviews of such mergers.
In the U.S., the deal boom in the agriculture sector has prompted concerns in farm states, drawing scrutiny even from Republican leaders often skeptical of government intervention.
ENLARGE

The ChemChina-Syngenta deal, however, already has cleared a major regulatory hurdle in the U.S., after winning approval from the Committee on Foreign Investment in the U.S.—a government body with the power to block deals it deems a threat to the nation’s security.
EU regulators likely will scrutinize certain effects of the deals more closely than their counterparts in other jurisdictions, says Ioannis Lianos, a professor of global competition law at University College London.
In the EU, regulators likely will be stricter than peers in other regions when weighing whether the mergers create unreasonably high barriers to entry for rivals, particularly if there is a risk the companies create products that only work with their own brands, he said.
On Tuesday, Mr. Fyrwald said Syngenta received data requests from the EU on crop, geography and active ingredients. He said the companies didn’t meet an EU deadline last Friday to submit remedies to address potential antitrust issues because European regulators weren’t ready to provide feedback.
Syngenta’s review comes as the EU already has opened an in-depth investigation into the Dow-duPont merger on concerns the deal could lead to higher crop seed and pesticide prices. The commission said it found the concessions Dow and DuPont outlined in July “insufficient to clearly dismiss its serious doubts” about the merger being in line with EU rules.
On Tuesday, DuPont CEO Ed Breen told analysts on a conference call that the merger with Dow seems likely to close in the first quarter of 2017, instead of by the end of this year, because of the longer EU review. He said discussions with antitrust authorities in other countries, including the U.S., Brazil and China, were constructive and progressing.

On the Bayer-Monsanto deal, while analysts have said Bayer’s crop science division is complementary with Monsanto, the parties may have to sell some overlapping businesses, including in cotton and canola seeds and herbicides, to satisfy antitrust concerns.

WSJ : The Curious Case of Telefónica’s Resilient Dividend

The Curious Case of Telefónica’s Resilient Dividend
Spanish telecommunications giant is scrambling to slash billions of dollars in debt
MADRID— Telefónica SA is scrambling to slash billions of dollars in debt to ward off a potential downgrade that would knock the Spanish telecommunications giant’s rating closer to non-investment grade.

In the past six months, it has tried, and failed, to sell valuable assets such as its British mobile operator O2 and its Telxius infrastructure unit to pare its €52.6 billion ($57.2 billion) debt, a figure that exceeds its market value of around €45 billion.

One thing, however, it hasn’t touched: its 75 euro cents a share dividend. Investors are watching to see if that reluctance continues Thursday, when Telefónica reports third-quarter earnings.

The company’s new chairman, José María Álvarez-Pallete, has said that the 2016 dividend is “comfortably covered,” but that the company will review the payout level at the end of the year. Pressure is growing, and some analysts are betting on a reversal.

Telefónica’s dividend is at “a level that does not currently seem sustainable,” said Mirabaud Securities analyst Javier Mielgo. The company paid out €2.4 billion in cash to investors for its 2015 dividend.

The dividend has some high-level beneficiaries, an example of the interlocking ties among Spain’s most powerful companies and executives. Two of the telecom’s biggest shareholders, Banco Bilbao Vizcaya Argentaria SA and CaixaBank SA, which together hold around 12% of Telefónica’s shares and have four of the 18 seats on its board, benefit handsomely from the dividend.

Telefónica’s dividend payments—€198.2 million to BBVA and €192.86 million to CaixaBank in 2015—helped the lenders boost profit as they struggled with weak loan demand, rock-bottom interest rates and greater capital requirements. The dividend is more important for CaixaBank, a domestic Spanish bank, than for BBVA, a large international bank with operations in Mexico and Turkey.


Still, Telefónica has disappointed shareholders before. It suspended investor payouts in 2012, when Spain was mired in a financial crisis.

“When I speak to investors, there is almost a unanimous view that a dividend cut is what Telefónica should do,” said Javier Borrachero, a Kepler Cheuvreux telecommunications analyst.

Some investors say Telefónica hasn’t cut the dividend because the company believes that operations in several countries are performing well enough to maintain it.

Also, César Alierta, who stepped down last April as Telefónica’s chairman and chief executive, might have made it uncomfortable for his successor to cut the dividend, at least right away. Mr. Alierta, who remains on the board, told analysts in February that the dividend was guaranteed “for the next, I don’t know, five years, 10 years.”

Mr. Álvarez-Pallete, the new boss, has vowed to uphold the company’s 2016 dividend.

One middle ground option analysts have mulled: Maintain the 40 euro cents a share cash payout, but cancel the other 35 cents in “scrip” dividend, in which investors can choose to receive cash or additional shares.

Moody’s Investors Service analyst Carlos Winzer said the credit-rating firm wants to see Telefónica cut debt; it doesn’t care how.

Moody’s assigns Telefónica a rating of Baa 2 with a negative outlook, two-notches above “junk.” Many investors, such as pension funds, don’t buy securities below that threshold.

Mr. Winzer’s message to the telecommunications giant: “Tell us before December 2016 what you’re going to do and we want to see you doing things in 2017 in order to meet the commitment of deleveraging.”

(Challenges) L’affaire Ubisoft-Vivendi: quand les politiques s'en mêlent

L’affaire Ubisoft-Vivendi: quand les politiques s'en mêlent
L'affaire opposant Yves Guillemot, le PDG et cofondateur de l'éditeur de jeux vidéo, à Vincent Bolloré, ne se joue pas que sur les places financières, mais aussi dans les coulisses gouvernementales. En toute discrétion.

Une petite phrase anodine? Pas vraiment. Lorsque Stéphane Roussel lâche à quelques journalistes mercredi 12 octobre qu’il « sort du bureau de Christophe Sirugue », le secrétaire d’Etat à l’Industrie, le nouveau PDG de Gameloft de l’ère Bolloré fait passer un message. Il vient alors de terminer une présentation des nouvelles ambitions de l’éditeur de jeux vidéo pour mobile, avalé quatre mois plus tôt après une OPA hostile. La première étape d’une réorientation stratégique dans un secteur d’activité considéré comme vital pour le groupe de médias à la recherche de contenus pour ses différentes plateformes.

Avec cette petite phrase, celui qui est par ailleurs directeur général en charge des opérations de Vivendi laisse entendre que son groupe compte user de tous les moyens pour arriver à ses fins. Et ce deux semaines après l’Assemblée générale d’Ubisoft qui a permis à la famille Guillemot de conforter sa position.

Dans cette bataille acharnée, les deux camps recherchent évidemment des soutiens publics ou plus discrets au sein du gouvernement. Et puis, quand il s’agit de Vivendi, la politique n’est jamais très loin. Même pour Ubisoft. On se souvient qu’en 2005, lorsque le numéro un français du jeu vidéo avait vu l’Américain Electronic Arts entrer à son capital, la famille Guillemot a tenté de jouer le patriotisme économique, en alertant le ministre délégué à l’industrie de l’époque, Patrick Devedjian qui avait pourtant exclu une « intervention directe ».

Lemaire derrière Ubisoft?

Dans l’affaire Ubisoft, pas d’intervention directe non plus. Difficile de prendre parti pour l’un ou l’autre camp dans un dossier franco-français. Cela n’a pas empêché Axelle Lemaire, la secrétaire d’Etat au numérique et à l’innovation de pencher très vite pour le numéro 1 français des jeux vidéo. « Cette indépendance [d’Ubisoft, NDLR] doit à tout prix être préservée », a-t-elle déclaré à Challenges en mars dernier. Depuis, elle a mis un peu d’eau dans son vin. « L’important face à la montée de Vivendi au capital d’Ubisoft est de laisser aux deux parties prenantes des marges de manœuvre indépendantes », a-t-elle déclaré de nouveau à Challenges. Et d’ajouter tout de même qu’elle a été frappée lors de l’Assemblée générale d’Ubisoft du rôle joué par les salariés. « Ils étaient présents en tant qu’actionnaires pour défendre leur entreprise. Je suis convaincue que leur revendication de préserver l’indépendance et la créativité de l'entreprise, qui est une nécessité dans le secteur du jeu vidéo, a beaucoup joué pour faire pencher la balance ».

Pourquoi une telle visite à Bercy? Si on confirme au sein du cabinet de Christophe Sirugue, un peu gêné, la venue de l’homme de Vincent Bolloré, « il l’était au titre de directeur des opérations de Vivendi et non de Gameloft et c’est lui qui était demandeur ». Chez Gameloft, on assure que c’est une « rencontre assez classique, quelque chose qui se fait de manière récurrente ». Et d’assurer que le nouveau PDG y a présenté les grandes lignes de la stratégie de Gameloft. Et pourquoi donc avoir choisi Christophe Sirugue? Parce que, selon une source proche du dossier, Axelle Lemaire n’a rien fait pour le recevoir...

Matignon dans le coup dès le début

Du côté d'Ubisoft, on s’active grandement dans les arcanes du gouvernement. L’entourage d’Yves Guillemot assure être en « contact direct » avec le cabinet de Manuel Valls depuis le début de l’affaire, soit octobre 2015, et avec le cabinet de Macron à l’époque où il était ministre de l’Economie. A Matignon, on dédramatise en rappelant que le cabinet s’intéresse à tous les dossiers économiques de la même façon. « Il y a un grand déficit de connaissance de l’industrie du jeu vidéo », argue-t-on chez l'éditeur, tout en ajoutant « ils sont bien au courant maintenant ». Une manière pourlui de montrer que le jeu vidéo est une nouvelle industrie qui va irriguer l’ensemble des divertissements. Ubisoft cherche à démonter le message délivré par Vivendi. « Quand Vivendi dit qu’ils ont besoin de nous, ça marche auprès des gens qui ne connaissent pas l’industrie et Ubisoft. Mais ils n’ont pas compris que nous n'avons pas besoin d'eux parce que nous sommes plus internationaux qu'eux, avec 95% du chiffre d’affaires fait à l’exportation ! ».

Yves Guillemot était du voyage officiel de Manuel Valls et d’Axelle Lemaire au Canada, un déplacement dans le cadre de l’accord CETA il y a quinze jours. Son entreprise symbolisait l’amitié franco-canadienne. L’occasion pour la secrétaire d’Etat de retourner dans le studio de Montréal, qui compte plus de 2.600 collaborateurs et qui est le centre névralgique des blockbusters du français.

D’aucuns verront un lien entre cet activisme et la décision récente de Bpifrance. Le bras économique du gouvernement a effectivement décidé de céder à Ubisoft les 3,2% du capital qu’il détenait depuis plusieurs années, en septembre dernier. Nicolas Dufourcq, son directeur général, dément avec véhémence toute décision politique dans ce dossier. « Il y a une bataille boursière entre Ubisoft et Vivendi. Nous nous sommes demandé comment rester neutre. Fallait-il vendre la moitié de notre participation à Vivendi et l’autre moitié aux frères Guillemot? La meilleure solution a été de vendre à l’entreprise, dans l’intérêt des salariés ». Bpifrance a trouvé « une solution élégante » pour se sortir de ce piège. Le directeur général renchérit en déclarant que la vente des actions d’Ubisoft était actée depuis novembre 2015, soit un mois après l’arrivée de Vivendi au capital, « au moment où, comme chaque année, nous faisons valider nos plans de monétisation »… Il reconnaît toutefois qu’il a été approché par la famille Guillemot. En revanche, silence radio du côté de Vivendi. Et de rappeler qu’il n’était pas particulièrement proche du management de l’éditeur, notamment parce que ce dernier n’a jamais voulu que la BPI soit représentée au conseil d’administration. Selon lui, « il n’y a eu aucune pression et la position de neutralité a été celle de l’Etat. La BPI défend les intérêts de la France face aux menaces étrangères ». Et dans cette affaire, il n’y a aucune menace de ce type. Mais les coups de fil avec les différents cabinets ne devraient pas pour autant s’estomper dans les mois à venir, Vivendi n’ayant toujours pas baissé les bras. Il faudra bien mettre tout le monde d'accord.

(Jefferies) Beverage : Potential Bottler Implications of KO's Africa Decision

Beverages
Eluding While Aligning: Potential Bottler Implications of KO's Africa Decision

Key Takeaway
Jefferies global beverage team collaboratively views CCE and CCH as likely
beneficiaries from KO’s decision to exercise its option to buy ABI's stake in the
Coca-Cola Beverages Africa (CCBA) JV. CCH is best positioned to acquire the
stake, which could drive upside to our £21 PT, and we reflect potential value
from a sale of its W. Euro. territories as part of the deal structure in our €37 PT
for CCE. CCH is our preferred way to play this theme.
CCH likely better positioned than CCE for ABI’s stake in CCBA: While both CCE and
CCH are likely to express interest as KO refranchises ABI’s stake in CCBA, which we value at
€4-5 billion (12-15x EV/EBITDA), we believe that the latter is likely better positioned given
its expertise in EMs, including Nigeria.
Very plausible that CCH’s W. European territories may go to CCE as part of KO’s
bottler alignment strategy: This would serve two purposes: (i) further align the Coke
system's bottling footprint in W. Europe as CCE acquires distribution rights in contiguous
countries (Ireland/Switzerland/Austria/Italy); and (ii) help CCH finance a potential CCBA
stake (2.3x debt leverage including sale of W. Europe territories, 4.0x excluding).
KO – keeping the fox (ABI) out of the hen house: CCBA covers 40% of KO’s Africa
volumes (~5% globally). The potential refranchising of ABI’s stake in CCBA to CCH (lower
likelihood to CCE) should have little impact on KO’s performance in Africa. However, we view
ABI, which handles PEP’s distribution in Brazil through AmBev and long-rumored to have
ambitions to acquire KO in a potential mega-deal, as a very capable partner for KO. While
consistent with KO’s bottler alignment focus, the co.’s decision to exercise its option to buyout
ABI’s stake in CCBA can reasonably be viewed as a step toward “playing defense” against
a potential ABI bid longer-term. Our FY16-18 est. and $45 PT for KO remain unchanged.
CCE – edging up PT on M&A optionality, though still too early to get
constructive: We lift our PT to €37 (from €36) and incorporate M&A optionality (acq.
of CCH’s W. Euro. territories as part of deal structure). Our base case suggests 12% EPS
accretion from the acq. of CCH’s W. Euro. territories. Yet, despite the potential for upside
to expectations from M&A, we remain on the sidelines due to the weak macro, difficult
competitive env't, and GB excise tax risk. Trimming FY16-18 est. on recent GBP weakness,
though lifting PT to €37 ($40 USD) on 50/50 weighted fundamental/strategic outcome.
CCH – attractive without M&A, though CCBA represents upside optionality: We
see merit to the purchase of ABI's stake in CCBA owing to potential EPS accretion (5-11% in
year three), as well as likely multiple expansion as leverage to higher growth EMs increases
markedly (Africa to 63% of profits from 9%, including sale of W. European territories to CCE).
We remain positive on CCH even in the absence of a major transformational deal as focus
likely turns to bolt-on acquisitions, higher returns to shareholders, and an attractive recovery
story driven by: (i) an improving topline and margin outlook; (ii) greater alignment with KO;
and (iii) balance sheet optionality. Our FY16-18 est. and £21 PT are unchanged.
3Q an unlikely catalyst for KO, which reports on Wed. (10/26): Likely constrained
by EM weakness reported across global consumer staples this earnings season, we