(UBS) FCA - FCA/PSA combination – the potential upside

FCA - FCA/PSA combination – the potential upside

Exploring scenarios for a combined entity
Fiat Chrysler Automobiles (FCA) is often the subject of M&A speculation – a perennial hot topic in the
auto sector. Although CEO Sergio Marchionne has publicly expressed his preference for other potential
combinations (CNBC interview, 30 March 2016), in this report we explore in detail what a merger with
PSA might look like. We think the companies complement each other well in terms of regional mix, and
at the same time see significant potential for synergies (large overlap in products and general R&D). A
merger would create a group of much greater scale (#5 car producer globally by market share, #2 in
Europe and #1 in Latam) and better regional diversification. We also look at an alliance, which offers
slightly less (but still significant) synergy potential.

€2.3-5.3bn synergies after full integration, c45-130% FCA share price upside
We estimate that a merger could yield annual synergies of €2.3-5.3bn (€1.9-4.1bn in an alliance),
equivalent to c25-60% of combined 2017E EBIT. These synergies derive from combining production
plants and model platforms, as well as from savings in general R&D, overhead and procurement costs.
Based on our NPV model, a merger could add €2.9-8.0/share in value for FCA shareholders, implying
c45-130% potential upside to the current share price, and based on a 50/50 share/cash acquisition of
PSA by FCA at a 20% premium to PSA's current market value. We've developed an interactive merger
model to enable investors to flex all the assumptions that went into our modelling.

Significant execution challenges
Our merger scenarios assume plant closures, platform consolidation, R&D rationalisation and overhead
optimisation, all of which may face political and regional challenges due to the re-allocation of resources
they would involve. Nevertheless, even in a conservative scenario and assuming no plant closures, an
FCA/PSA combination would still be value-accretive, which just serves to demonstrate how economies of
scale play out in the auto industry.

Valuation: Merger scenario not reflected in our price target; Neutral
As the likelihood and timing of any merger are unpredictable, we continue to value FCA on a standalone
basis. We maintain our Neutral rating and €7 SOTP-based price target. On a stand-alone basis, we
have a cautious longer-term stance on FCA due to its relatively weak balance sheet and strong earnings
exposure to the US trucks/SUV segment, which is at a cyclical high.

>>> Pre-Markets indications

ML
ROCKET - Hellofresh peer Blue Apron considering raising more money; bbg...+1%
TESCO/ MORRISON - BRC 3M Food LfL sees stepup to -0.3% from average -1.8%.+1%
BMPS - KKR, Blackstone & others targeted as potential buyers of NPLs......+1%
RDS - Positive. No divi cut, capex guidance implies $22-27bn p.a. Outflows+1%
AKER - On track with cost cut goal >30%, 3yr contract extension from Total+1%
ASTRAZENECA - Data for Acalabrutinib (BTK) in 1L CLL looked strong......+0.5%
MERCK - Data for PDL1 avelumab partner with PFE looks all encouraging...+0.5%
NH HOTELS - Spec Oceanwood to cease 4 seats from Chinese HNA on board...+0.5%
REPSOL - Agrees with Spanish unions on cutting 770 jobs; Economista.......u/c
ICAP - Tullett deal being referred for Phase 2 investigation. Minor issue.u/c
BANCO POP - Regulator asks for docs on rights issue post loans press spec.-1%
VIVENDI - To start video on demand service in Germany, d/g away from us...-1%
OUTOTEC - Medium term targets revised lower to 2-4% from 3-6% at CMD......-3%

CREDIT SUISSE
Adidas M/P German soccer jersey, made by Adidas, is a non-seller
Banca Gen M/P May total net inflows Eu433m (April Eu429m)
Burckhardt -3% FY15 results ~3% miss across the board
Daimler M/P Trucks CMD, expect to see more headlines throughout the day
Esure M/P Strategic review of Gocompare all inline
Fresenius M/P Smiths/Fres said to be final bidders for Pfizer's pump unit
Gamesa R Secured a new order from Elecnor
Meyer Burger +1% Awarded contract for over Chf10m
Miners -1% Copper -1%, Brent -0.20%, Iron Ore -0.80%, China +0.01%
Novartis M/P Says Tafinlar Combo Has Better Melanoma Survival Rate.
Royal Dutch -1-2% Investor day, asset sales as planned, Capex higher
Schindler M/P To Buy 25% in China’s Volkslift Elevator, Sets Up JV
Smiths group -1-2% Smiths/Fres said to be final bidders for Pfizer's pump unit

Investec
UK
* ESURE-Annouces Strategic review of Gocompare, incl pot. demerger..........+1%
* GOOCH&HOUSEGO-H1.#'s 3% ahead after strong Q2.No chg to FY fcast.........unch
* NETSCIENTIFIC-Further £500k investment in PDS Biotech....................unch
* RETAILERS-read to MKS,NXT,ABF from New Look 'UK Challenging' cmmnts.......-1%
* ROYAL DUTCH- +ive comments re:- synergies,cap ex ahead of todays CMD....+1/2%
* RWS-H1.Strong trading aided by favourable cncy movements................+3-4%
* TULLETT/ICAP deal faces in-depth CMA probe. Deal May Lessen Competition...-1%
Euro
* ACCOR-Hollande wants diversified s/holders (response to Jin Jiang stake)...-1%
* AKER SOLUTIONS-cost cuts on track,NOK400m contract,good visibility.........+1%
* DAIMLER-trucks unit to lay off 1200 workers in US..........................-1%
* DTEL-T-Mobile to give away free shares to customers, stock traded -1.3%....-1%
* FRESENIUS SE-said one of 2 final bidders for $1.5bn PFE pump unit(Rtrs)..+0.5%
* ROYAL DUTCH-Cap Mkt Day-raises BG deal synergies to $4.5bn from $3.5bn.....+1%
* SCHINDLER-buys 25% in Chinese jv partner,option over rest, no financials...U/C
* TELIA-sales of $1bn-valued Fintur unit slowed by worries over US fines.....-1%
Other news
* Investor/Capital Mkt Days: AKER SOLUTIONS, ROYAL DUTCH, HENKEL(day 2)
* US Co's reporting later: Navistar, Valeant

MainFirst
*L'OREAL-Signs accord with Global Bioenergies - Le Figaro.........U/C
*DAIMLER-Trucks to cut 1,240 jobs,WSJ talked about this 15/2.......+0.25%
*SCHINDLER-To buy 25% in Volkslift(China) & sets up JV.............+1%
*FRESENIUS-And Smiths final bidders for PFE Pump Unit,($1.5bln)....U/C
*GAMESA-To install 7 Wind Turbines for Elecnor in Jordan...........+0.5%
*TELIA-Fintur sale has slowed due 2 concerns over past dealings....-0.5%
*ORANGE-To compete with Western Union in Africa Transfers-Echos....+0.5%
*AIR FRANCE-Pilots Union to meet with management June 7th - APF....U/C
*SAP-Uunit pays $59m to settle lawsuit vs California controller....U/C
* BURCKHARDT-Orders 523.2m(516),Sales 487.2m(506),Ebit 73m(76)......-5%
*NOVARTIS-Tafinlar combo has better melanoma survival rate.........+0.25%
*ZODIAC-Utd Tech looking at acq's in interiors,structures(N/D).....+1%
*ACCOR-Hollande wants Accor holders to remain diversfied-AFP.......-1%

>>> When Is the Facebook Stock Split Vote?

When Is the Facebook Stock Split Vote?
Mark your calendars, Facebook shareholders: Your date to vote for the proposed Facebook stock split will be here soon.
In a regular filing on April 27, Facebook Inc. (Nasdaq: FB) announced plans for a 3-for-1 split.
The mainstream media won't discuss the vote for the Facebook stock split until closer to the actual vote date, which is June 20. But Money Morning wants to make sure our readers are ahead of the curve and know what to expect now. Today, we are going to discuss why Facebook CEO Mark Zuckerberg wants a Facebook stock split. Plus, we will look at whether or not you should add FB stock to your portfolio before the official Facebook stock split date.
Here's Why CEO Mark Zuckerberg Wants a Facebook Stock Split
This share structuring that Facebook will use has come to be known as "a founder-led approach," which helps founders and CEOs retain control of their companies. Google, now Alphabet Inc. (Nasdaq: GOOGL, GOOG), offered a similar split in 2014.
Keeping company control is an issue for Zuckerberg because of what he plans to do with most of his shares…
Zuckerberg and his wife, Priscilla Chan, plan to give 99% of their FB stock to their philanthropic endeavor, the Chan Zuckerberg Initiative (CZI).
In a public letter to his daughter Max on Dec. 1, Zuckerberg stated he felt a responsibility to leave the world a better place for his daughter and his grandchildren. The 32-year-old CEO will donate roughly $45 billion in Facebook stock to CZI to:
  • Join people across the world
  • Advance human potential
  • Promote equality for all children
While the gift is generous, there is one major problem if Zuckerberg donates all his stock away right now: He will lose his voting power.
Here's how this proposed Facebook stock split solves that…
Zuckerberg's Facebook Stock Split Solution
Facebook currently offers Class A shares and Class B shares. The typical investor owns Class A shares. Class A common stock entitles an investor to one vote for each share.
Facebook Class B stock carries much more power, as Class B owners are entitled to 10 votes per share.
Facebook stated on March 31 that Class A Facebook shares totaled 2 billion, and Class B Facebook shares were at 548 million.
On April 28, the Los Angeles Times reported Zuckerberg owns 4 million Class A shares and 468 million Class B. That gives Zuckerberg 60% of the voting power.
In order to keep that voting power, Zuckerberg will offer two shares of Class C stock for every one Class A and Class B share investors own. But Class C shares will not come with voting power.
This allows Zuckerberg to maintain control.
So how does this affect those who own Facebook stock?
If Facebook was mismanaged, investors should be concerned. But since its May 2012 IPO offering of $38 per share, Zuckerberg's leadership has propelled the Facebook stock price to climb 212% to $118.

(BofA-ML) Equity CLient Flow Trends - Finally, a week of net buying

Clients buy US stocks for the first week since mid-January
Last week, during which the S&P 500 was flat from the prior week, BofAML clients were net buyers of US stocks for the first time in 19 weeks, breaking a record-long selling streak that began in mid-January. Sales had generally been decelerating since late April. Net buying of $0.8bn was led by institutional clients, who have been the biggest sellers of US stocks this year. Hedge funds and private clients remained net sellers last week. Broader global flow data (EPFR data) similarly suggested inflows into US stocks in the most recent week (Thurs-Weds, vs. Mon-Fri for flows in this report). But four-week average BofAML client flows remain negative, as they have been since February, and flows in the coming weeks will suggest whether this represents true capitulation or simply a brief pause in outflows. Other sentiment measures, such as our Sell Side Indicator, suggest still-bearish equity sentiment.

Passive inflows, but single-stock buying, too (led by HC)
Net buying last week was led by flows into passive vehicles (ETFs), though clients were net buyers of single stocks as well. Single-stock buying was largest within Health Care, a sector which has seen net sales most weeks this year amid uncertainty over the US election and a positioning unwind. Clients also bought Utilities, Industrials, Tech, Staples, and Discretionary stocks last week. Financials and Energy stocks saw the biggest net sales. Currently, no sector has a long-term selling streak or buying streak, as the longest buying trend is for Staples (at three weeks) while the longest selling trend is for Telecom, Materials, Financials and Energy (two weeks each).

Other notable flows: Buybacks continue to slow
• Buybacks by our corporate clients slowed to their lowest weekly level year-to-date, with the four-week average trend in buybacks the lowest since January 2015. Cumulatively this year, buybacks are tracking in-line with levels we saw in the first five months of 2015, and below 2014’s record levels.
• Sector flows varied by client type – only Utilities saw net buying by institutional clients, hedge funds and private clients alike last week, while only Financials and Energy saw net selling by all three groups.
• Pension fund clients were net sellers of US stocks last week, following a week of net buying. Opposite of broader institutional clients (and similar to hedge funds), this group’s net sales were chiefly in Health Care and Consumer Discretionary stocks last week. This group remains a net buyer of stocks year-to-date, which was true in 2015 and 2014 as well. See Pension fund flows for details.

>>> What to look at today - 7th of June 2016

Dow +0.64% S&P +0.49% Nasdaq +0.53% Russell +1.09%
US Market closed higher as investors deciphered recent remarks from Fed Chair Yellen about the economic outlook and monetary policy. Other focal points for today's trade included strength from the oil patch, continued softness in the dollar, relative weakness in safe-haven areas, and key sector leadership from the heavily-weighted industrial (+0.8%) and financial (+0.6%) sectors. Ms. Yellen stated in prepared remarks that she remains positive on the economic outlook of the U.S. economy and warned that too much significance should not be assigned to one monthly report. However, Ms. Yellen also stated that last Friday's Employment Situation Report was concerning on balance. Cues for a potential rate hike "in the coming months" were noticeably absent from her speech, but she maintained that further gradual increases in the federal funds rate are likely to be appropriate and conducive to meeting and maintaining the Fed's dual mandate. The energy space (+2.0%) showed broad-based strength as oil prices increased 2.1% ($49.73/bbl, +$1.04). Volume were below average at 800mil shares. US After Hours Earn : UNFI +10.8%, GIGA +5.4%, XTLY +2.4%, ENVA -10.6%, PEB -4%, SIGM -3.1%, CASY -2.2%. SRPT +26.5% on FDA news, WGBS+12.4% on distribution agreement in Japan, Z+9.5% on News Corp Agreement, DRYS-37% on Liquidity report, MSTX -12.6% on delays on Phase 3 data, ALXN-11% on Phase 3. Asian equity markets are higher, tracking fresh gain in US indices after the latest comments from Fed's Yellen largely confirmed that Friday's disappointing payrolls data puts expectations of policy tightening on hold in the short run. Stateside, Hillary Clinton has reportedly secured enough Delegate support to become Democratic Party presumptive nominee, with pledged superdelegate count taking her beyond the 2,383 threshold.

Nikkei +0.54% Hang Seng +0.81% CSI -0.06% Shanghai +0.02%

Eur$ 1.1354 CNH 6.5763 CNY 6.5719 GBP 1.4516 CHF 65.4278 CHF 0.9713 WTI$ 49.64 (-0.10%)

S&P+0.07% EuroStoxx +0.27% Dax +0.34% SMI +0.09%

Macro :
- Yellen: Only on Rare Occasions Can Fed Give Specific Guidance
- Germany Urges EU to Tighten Car Emissions Test Law: FT

Keep an eye on :
- ABG SM : Spanish Broker Eurodeal Closes After Abengoa Investment: Cinco
- AC FP : France’s Hollande Wants Accor Holders to Remain Diversified: AFP
- AF FP : Air France Pilot Unions to Meet With Management June 7: AFP
- AKER NO : Aker Solutions on Track to Reach Cost Cuts Goal of >30%, to Invest NOK500m in Solstad Offshore
- AKZA NA : Akzo Nobel Sees Lower EU Chlorine Output on Switch From Mercury
- ALO FP : GE-Alstom $3b, 5-yr Synergy Goal ‘Well Under Way’: GE’s Bolze
- BCP PL : BCP Stock Short Selling Temporarily Banned Through June 8: CMVM
- CON GY : Continental AG Plans R&D Centers in Chongqing, Shanghai: Caixin
- DAI GY : Daimler Trucks to Lay Off >1,000 Workers: Gazette (Earlier)
- EUCAR FP : Icahn, Hertz’s Top Holder, Bought 983,929 Shares on June 2, 3
- FRE GY : Smiths, Fresenius Said Final Bidders for PFE Pump Unit: Reuters
- GAM SM : Gamesa to Install 7 Wind Turbines for Elecnor in Jordan
- HEIA NA : United Breweries competitor says Heineken will acquire majority soon - Het Financieele Dagblad
- NOVN VX : Novartis Says Tafinlar Combo Has Better Melanoma Survival Rate
- OML LN : Old Mutual talks with Affiliated Managers Group about possible sale of Old Mutual US asset management arm end
- ORA FP : Orange to Compete With Western Union in Africa Transfers: Echos
- OR FP : L’Oreal Signs Accord With Global Bioenergies, Le Figaro Says
- OTE1V FH : Outotec Targets Average Annual Services Sales Growth of 5%-15%
- PC IM : Pirelli OKs Sale of 10% of Pirelli Industrial to Aeolus: Sole
- POP SM : Spain’s CNMV Asks Popular for Info on Rights Issue: Expansion
- RL US : Ralph Lauren Said to Plan to Cut Up to 10% of Jobs: WWD
- SCHP VX : Schindler to Buy 25% in China’s Volkslift Elevator, Sets Up JV
- SMIN LN : Smiths, Fresenius Said Final Bidders for PFE Pump Unit: Reuters
- SOI FP : Soitec Raises EU75.4m in Final Stage of Recapitalization Project
- TKA AV : Telekom Austria CEO Has Supervisory Board’s Support: Chairman
- UNA NA : Unilever, Adobe Fined for Using Illegal Data-Transfer Tool
- VIV FP : Vivendi to Start Video-On-Demand Service in Germany: Figaro
- YHOO US : Verizon Said to Bid $3b for Yahoo Web Assets in 2nd Round: WSJ

>>> Europe : Brokers Upgrades & Downgrades - 7th of June 2016

>>> Up
*KERING RAISED TO ’BUY’ AT HSBC
*RIO TINTO RAISED TO NEUTRAL VS SELL AT CITI

>>> Down
*MARCOPOLO CUT TO ’UNDERWEIGHT’ AT JPMORGAN
*SAS CUT TO HOLD AT NORDEA
*VIVENDI CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS (Note attached)
*YARA INTERNATIONAL CUT TO HOLD AT NORDEA

>>> PT Change


>>> Initiation
*KAUFMAN & BROAD RATED NEW NEUTRAL AT GOLDMAN, PT EU39
*MOL RATED NEW BUY AT ING, PT HUF18.421
*NATIXIS RATED NEW BUY AT JEFFERIES
*PARQUES REUNIDOS NEW OVERWEIGHT AT MORGAN STANLEY, PT EU19
*PARQUES REUNIDOS RATED NEW OVERWEIGHT AT BARCLAYS, PT EU17.5

>>> Call
>> Stock
*DEUTSCHE BETEILIGUNGS ADDED TO BAADER-HELVEA TOP STOCK IDEAS
*HEIDELBERGCEMENT, ROSENBAUER ADDED TO BAADER-HELVEA TOP IDEAS
*LEONI ADDED AS SHORT POSITION TO BANKHAUS LAMPE ALPHA LIST

>>> Asian Update

Asian Mid-session Market Update: AUD rallies to 1-month high on neutral bias in RBA policy hold

***Economic Data***
- (AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.75%; AS EXPECTED
- (AU) AUSTRALIA MAY AIG PERFORMANCE OF CONSTRUCTION INDEX: 46.7 V 50.8 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 116.8 v 113.2 prior
- (JP) JAPAN MAY OFFICIAL RESERVE ASSETS: $1.25T v $1.26T PRIOR
- (NZ) New Zealand May ANZ Truckometer Heavy M/M: -1.7% v -2.6% prior
- (TW) TAIWAN MAY CPI Y/Y: 1.2% V 1.7%E; WPI Y/Y: -2.8% V -3.9%E
- (PH) Philippines May CPI M/M: 0.3% v 0.2%e; Y/Y: 1.6% (1-year high) v 1.3%e; CPI Core Y/Y: 1.6% v 1.5%e
- (UK) MAY BRC LFL SALES Y/Y: 0.5% V +0.3%E (First increase in 2 months)

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.4%, S&P/ASX +0.5%, Kospi +0.9%, Shanghai Composite -0.2%, Hang Seng +0.8%, Jun S&P500 flat at 2,108

***Commodities/Fixed Income***
- Aug gold -0.2% at $1,246/oz, Jul crude oil -0.3% at $49.55/brl, Jul copper -0.3% at $2.11/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 0.2 tonnes to 881.2 tonnes
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5618 V 6.5497 PRIOR
- (CN) PBOC to inject CNY50B in 7-day reverse repos
- JGB: (JP) Japan's MOF sells ¥728B in 0.3% 30-year bonds; Avg yield: 0.314% v 0.319% prior; Bid to cover: 3.42x v 3.01x prior
- (KR) South Korea sells 3-yr bonds at 1.385%

***Market Focal Points/FX***
- Asian equity markets are higher, tracking fresh gain in US indices after the latest comments from Fed's Yellen largely confirmed that Friday's disappointing payrolls data puts expectations of policy tightening on hold in the short run. While the Fed chair did her best to straddle both sides of the fence by warning against reading too much into one month of data, investors focused on omission that rate move can be expected "in the coming months". Fed funds futures now assign just a 4% chance of a hike in June, 26% chance of a move in June or July, and just below a 50% chance of rates being higher after September meeting.

- Reversal in expectations of monetary policy divergence are particularly stark in contrast to Australia, where analysts had anticipated RBA to stick to its trend of policy easing coming in sets of pairs. Instead, today's RBA rate hold and accompanying statement seem to pin cash rate at 1.75% for the foreseeable future. RBA reiterated that inflation has been low and elevated exchange rate complicates transition to non-mining sector of the economy, but added that growth continues despite the decline in business investment. RBA also acknowledged recent recovery in trade components, stating that exports, along with other "areas of domestic demand" are expanding above trend. Recall the latest trade balance showed exports rising for the 2nd straight month and the deficit narrowing to 13-month low. On labor, RBA said that while recent indicators have been mixed, they are "consistent with continued expansion of employment in the near term." AUD/USD hit a 1-month high in the wake of RBA statement, rising 60pips above 0.7420, as yields on 3-year Australia govt bond rose 5bps to 1.61%.

- Ahead of this week's RBNZ rate decision, New Zealand Institute of Economic Research (NZIER) Shadow Board recommended a hold thanks to NZ economy showing decent momentum and continued concerns related to appreciation in the property market. NZD also got a slight boost after comments from New Zealand Treasury forecasting 2016 inflation to be slightly higher than expected, bouncing back above the $0.69 level.

- Elsewhere, vast majority of economists expects Bank of Korea to hold rates at 1.5%, but also anticipate another easing as soon as July. Govt think tank KDDI also offered a cautious view in its monthly report, noting the economy is facing slowdown in manufacturing amid sluggish exports and that recovery is unlikely due to the global economic slowdown and external uncertainties.

- Sterling pairs were volatile in late Asian session, as GBP/USD spiked up some 150pips above 1.4640. Those gains were quickly paired on reports that erroneous trade / "fat finger" action distorted the market. A pair of Brexit polls did move the needle slightly back in favor of Stay camp after a flood of surveys supporting Leave case over the weekend.

- Stateside, Hillary Clinton has reportedly secured enough Delegate support to become Democratic Party presumptive nominee, with pledged superdelegate count taking her beyond the 2,383 threshold. Bernie Sanders reiterated his weekend remarks that Superdelegate numbers dont count until the convention. Democratic primaries in California and New Jersey later today should clarify the state of the race further and may produce more concessions from the underdog Vermont senator.

***Equities***
US equities / ADRs:
- SRPT: Announces FDA Request For Dystrophin Data Prior To Making A Decision on Eteplirsen NDA; +25.8% afterhours
- UNFI: Reports Q3 $0.76 v $0.66e, R$2.13B v $2.17Be; +11.4% afterhours
- Z: Zillow to pay $130M to settle trade secret lawsuit brought by Newscorp's Move.com - filing; +8.0% afterhours
- FDX: RAISES DIVIDEND 60% TO $0.40 FROM $0.25; implied yield 1.0%; +0.5% afterhours
- THO: Reports Q3 $1.51 v $1.45e, R$1.28B v $1.29Be; +0.3% afterhours
- CASY: Reports Q4 $1.19 v $1.21e, R$1.58B v $1.55Be; -2.6% afterhours
- ALXN: Topline results from Phase 3 REGAIN Study of Eculizumab (Soliris) in patients with Refractory Generalized Myasthenia Gravis (gMG) did not reach statistical significance; -10.5% afterhours

- YHOO: Said that Verizon $3.0B bid is for web assets only, excludes patents and real estate - financial press

Notable movers by sector:
- Consumer discretionary: Le Saunda Holdings 738.HK -1.8% (Q1 result); Suning Appliance Co 002024.CN -2.6% (to acquire Inter Milan); Gome Electrical Appliances Holdings 493.HK +1.1% (share buyback)
- Financials: CITIC Securities 6030.HK +0.5% (May result); Evergrande Real Estate Group 3333.HK +1.9% (May result)
- Industrials: Great Wall Motor 2333.HK +4.5% (May result)
- Energy: Fortescue Metals Group FMG.AU +3.7%, BHP Billiton BHP.AU +3.4%, Rio Tinto RIO.AU +2.1% (iron ore rises); Origin Energy ORG.AU +1.3% (said to consider additional asset sales)
- Healthcare: Mayne Pharma MYX.AU +3.3% (FDA approval)

WSJ : Verizon to Bid $3 Billion for Yahoo’s Web Assets

Verizon to Bid $3 Billion for Yahoo’s Web Assets

Private-equity firm TPG also expected to make new Yahoo bid

Verizon Communications Inc. on Monday planned to submit a second-round bid of about $3 billion for Yahoo Inc. ’s core internet business, said a person familiar with the matter.

The telecom company, seen as the leading contender to buy Yahoo, was expected to meet Monday’s deadline for the second round of bids. Yahoo is expected to hold at least one more cycle of bidding, and the offers could change by the final round, people familiar with the matter have said.

A Verizon spokesman and a Yahoo spokesman declined to comment.

Verizon indicated it isn’t interested in acquiring certain Yahoo assets, such as patents and real estate, as part of the deal, one of the people said. Yahoo said earlier this year it is exploring the sale of non-core assets, including real estate and patents, that could fetch more than $1 billion.

As of late Monday, private-equity firm TPG was expected to submit a second-round bid before the deadline, according to a person familiar with the matter. It wasn’t clear if the other suitors that previously participated in the auction submitted new bids. They included private-equity firms Advent International and Vista Equity Partners, as well as a group led by Quicken Loans founder Dan Gilbert. It is possible that not everyone will bid for all of the core business and that proposals will be structured differently.

Last month, The Wall Street Journal reported that Verizon and other potential suitors were expected to bid about $2 billion to $3 billion in the second round. That range is lower than the price Yahoo’s web properties were expected to fetch as recently as April, when people close to the process said Yahoo’s core business likely would go for between $4 billion and $8 billion.

Some bidders were less enthusiastic about doing a deal after last month’s sale presentations by Yahoo Chief Executive Marissa Mayer at the company’s Sunnyvale, Calif., headquarters, according to people who attended the meetings. Those presentations revealed the extent to which Yahoo’s online advertising business is declining, the people said.

Verizon, which acquired AOL Inc. last year for $4.4 billion, is seen as having the clearest path to turning around Yahoo. The telecom giant likely would combine Yahoo’s web properties, which together attract more than a billion users a month, with its growing business in online ads. That would enable Verizon to offer more than at least some other bidders.

In submitting its bid, Verizon told Yahoo it would be willing to pay more or less based on a few lingering questions about the deal, the person said. For example, Verizon likely would pay a higher price if Yahoo agreed to help cover the cost of employee severance payments for any workers cut as a result of the acquisition, the person said.

The bulk of Yahoo’s roughly $35 billion market capitalization is comprised of its stakes in Alibaba Group Holding Ltd. and Yahoo Japan .

>>> US After Hours Summary: Z +10% following settlement agreement with

After Hours Summary: Z +10% following settlement agreement with NWSA; DRYS -38% after providing details on its liquidity

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: UNFI +10.8%, GIGA +5.4%, XTLY +2.4%

Companies trading higher in after hours in reaction to news: SRPT +26.5% (discloses FDA request that Co provide dystrophin data from biopsies already obtained from the ongoing confirmatory study of eteplirsen), WGBS +12.4% (enters into an exclusive distribution agreement in Japan with Takara Bio), Z +9.5% (settlement agreement with News Corp (NWSA))

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ENVA -10.6%, PEB -4%, SIGM -3.1%, CASY -2.2%

Companies trading lower in after hours in reaction to news: DRYS -37.7% (After filing 8k which covered previously released Q1 results and updated details regarding liquidity), MSTX -12.6% delays the anticipated timing for announcement of top-line data from its Phase 3 clinical study of vepoloxamer in patients with sickle cell disease), ALXN -11% (announces topline results from Phase 3 REGAIN Study of Eculizumab in patients with refractory generalized myasthenia gravis - REGAIN study missed its primary endpoint), ENVA -10.6% (announces the completion of a prelim assessment of the proposed rule regarding small-dollar loans issued on June 2nd by the CFPB, estimates rev decline of 30-40% if proposed ruling is adopted), ESI -6.4% (ordered by the Department of Education to enhance its finances, according to the WSJ), TRU -2.1% (commences ~15.6 mln common stock offering )