So, I'm prepared to air The Restaurant Group takeover tale that I have stumbled across recently as it contains a lot more detail than your standard "private equity" bid rumours that go around the market every couple of weeks.
Sources say US private equity firm Apollo, which controls the Casual Dining Group (formerly known as Tragus), has been looking at combining The Restaurant Group - owner of Frankie and Benny's, Chiquito and Garfunkel's - with the Casual Dining Group.
It's not clear, however, whether Apollo has submitted a formal approach for The Restaurant Group but word is the buy-out house, founded by Wall Street buccaneer Leon Black, has got bankers at Morgan Stanley, advising on how it should pursue a deal. Apparently, talks have already been held with The Restaurant Group.
Apollo took control of Casual Dining Group - owner of Cafe Rouge, Las Iguanas and La Tasca - via a debt for equity swap in 2014. So, it's not hard to see what the US predator's angle might be given The Restaurant Group has issued three poor trading updates in a row and seen its shares crash 55pc over the last twelve months.
Now, readers need to aware this information is RARE of the RAREST kind. If you don't remember what RARE is, here is the definition:
Market gossip that hasn't been tested through formal journalistic channels (public relations executives, bankers etc). The rumour might be total codswallop but then again there may be something in it, so it's worth airing on Betaville.
What will be interesting is to see whether The Restaurant Group or Apollo/Casual Dining Group make a statement. The trend recently has been for potential offerors to go "pens down" once they are outed in the media so they don't have to confirm a report.
Restaurant Group and Apollo both declined to comment.
We expect a positive market reaction from the news about the Technip-FMC merger. We see this as a further step for both companies in providing a more integrated service to clients, and the announced synergies create additional
upside to both Overweight rated stocks.
* Targeted synergies: $400m of pre-tax cost synergies in 2019 (3% of
combined cost structure); 50% of this to be achieved in 2018. We think
that this implies value creation of ~$4bn by the end of 2019, which
compares to a combined market cap of $12.5bn, making the expected
value creation just over 30% of the combined market cap. The synergies
are primarily related to supply chain efficiencies, real estate, infrastructure
optimisation and other corporate and organisational efficiencies.
* All stock transaction: Technip shareholders to receive 2.0 shares of the
combined company for each share of Technip and FMC Technologies
shareholders to receive 1.0 share of the combined company. Each
company's shareholders will own close to half of the combined entity.
* Management changes: Executive Chairman of new company
TechnipFMC will be Thierry Pilenko (CEO of Technip). CEO will be Doug
Pferdehirt (CEO of FMC).
* Timing: Transaction closing expected in early 2017.
* Pro forma financials: End 1Q16 combined backlog of ~$20bn,
combined 2015 EBITDA of ~$2.4bn, end 1Q16 combined gross cash
position of $5.7bn and combined 2015 EBITDA margin of 12.1%.
* Shareholder returns: “Attractive shareholder return policy including
market based dividend; and share buy-back in line with cash flow
generation”.
* Conference call details: Call 1 - 8:30am UK time with dial-in: 0207 107
1613. Call 2 - 1:00pm UK time with dial-in: 0203 367 9456.
CEO: This year should be better than 2015 - financial press
- In position to reduce net debt
- Cash positive at current commodity prices
Technip/FMC Technologies have announced a USD13bn merger this morning, formalising their Forsys JV. Technip/FMC will have a roughly equal share of the combined company upon completion. The synergies targeted are significant - and above what we expected – we see a significant upward move this morning as fair although 15% (at the time of writing) is perhaps higher than we’d have expected. More details/conf call details below.
Who are FMC Technologies? They are the #1 supplier of subsea production systems (SPS), such as trees and manifolds, and processing equipment, competing with OneSubsea, Aker Solutions and GE, as well as being a significant player in provide surface flow equipment onshore. The co had revenues of USD6.4bn and EBITDA of USD1bn (15.2% margin) in 2015.
Merger details
This is a merger of equals, with TEC shareholders having marginally more than 50% of the combined entity upon completion (current market caps are USD6.2bn for TEC and USD6.6bn for FMC Technologies); completion is expected early 2017 with listing in Paris and New York.
Combined co had ~USD20bn of 2015 revenues and EBITDA of USD2.4bn last year.
The industrial logic is around the formalisation of the Technip/FMC joint venture Forsys, which was formed last year and has been targeting performing joint SURF/SPS projects and marketing potential 30% cost savings for clients as a result - with benefits such as integrated project delivery, more product standardization/joint R&D and more early engagement.
We’re not surprised… but earlier than we thought: Forsys has had some success in winning FEED work but there has not yet been a full conversion to a more significant EPC contract; we thought that a merger was a distnict possibility but that it would not emerge until more progress had been seen in terms of project awards/execution.
Significant synergies: The cost synergy number of USD200m (2018) and USD400m (2019+) is larger than we'd expect and equates to a ~20% uplift on pro-forma EBITDA. Given the lack of direct overlap/competition between the two co's, this is higher than we would have expected from such a transaction (and equates to about 3% of the cost base).
The cost of implementation is USD250m.
Financial details below – accretive to TEC shareholders even with synergies: TEC contribute significantly more of the EBITDA near-term (68%/62% in ‘16E/’17E on consensus estimates) although we think that, given FMC Tech’s higher returns/barriers relative to much of Technip’s business (particularly Onshore/Offshore) that this is fair.
The contribution notably shrinks as we get to 2018 when TEC’s current strong backlog rolls off (56%/44% from TEC/FMC respectively) – and with the significant synergy number, the deal is still accretive to TEC shareholders.
Don't expect antitrust issues: The two companies don't compete directly with each other, so this is much like the Schlumberger/Cameron deal that was completed smoothly as opposed to the recently blocked Halliburton/Baker Hughes transaction.
Leadership: Pilenko is going to move to the Chairman role with the recently appointed FMC Tech CEO Douglas Pferdehirt moving to the CEO role of the combined company. There’s no details on the CFO.
Our first thoughts: We think this is positive for Technip s/holders with longer-term EBITDA uplift on the high synergies number, a mix shift towards a higher return/margin business, together with the industrial logic of the deal.
Read-through: We see mixed read-through for SUBC (stronger competitor – but potential disruption from the merger and also possible speculation that ‘they could be next’ with their alliance with Schlumberger) and negative read-through for CGG (any hope of Technip returning near-term will be gone with this deal).
ML
TECHNIP - To merge with FMC to create new company with equity value $13b+5-8%
GRAINGER - NNNAV +8% to 283p, net rental income & recurring profit +13%...+3%
3I - Strong. Key metric, NAV, is 5% ahead of BAML. FY16 div 22p v 17p est.+3%
ELECTROCOMPONENTS - Prelims look usefully ahead at the rev & PBT line.....+3%
ROYAL MAIL - Op profit £742m v £727m cons with EPS 41.3p ahead of 39.8p...+2%
HENKEL - Top line small beat, EBIT 3% ahead and margin strong. FY16 reit..+2%
MILLICOM - We UPGRADE to Neutral on M&A optionality, take PO to SEK 520...+1%
CINEWORLD - Solid. Saw 10% rev growth for the 19 week period to 12th May..+1%
SWISS PRIME - Q1 reads well with NAV +1% & guidance for FY in confirmed...+1%
WIRECARD - Inline. EBITDA €62m vs preannounced €61.9m. Outlook unchanged..u/c
SPIRE HEALTHCARE - Trading update bang inline with expectations...........u/c
INFORMA - Trading statement shows guidance reiterated, all inline.........u/c
BALFOUR BEATTY - AGM statement looks fine. Nothing new to highlight.......u/c
IHG - RevPAR: US -2.7% with notable weakness in higher end (luxury -6.7%).-1%
MICHELIN - April tire data flags risk of high inventories in North Am.....-1%
UNICREDIT - Spec CEO may step down as early as June 1 according to Sole...-1%
ACCORD - RevPAR stats for France -9.4% with Paris -14.4% & Regions -8.2%..-1%
MERLIN ENT - Group inline. London remains challenging despite FX tailwind.-1%
MITCH & BUTLERS - Inline, LfL's weak, margins ahead improving 50bps yoy...-1%
JULIUS BAER - Mixed. AUM inline, gross margins better at 91bps v 89bps..-1-2%
ROLLS - SFO looking to expand their investigation into Nigeria; FT......-1-2%
ENQUEST - Mixed. Prodn to end April of 42.7kbd vs FY16 target of 44-48kbd.-2%
WHITBREAD - RevPAR data sees UK -3.3% with London -10.7% & Regions +0.3%..-2%
RYANAIR - Sentiment negative with EgyptAir flight going missing o/n.....-2-3%
EASYJET - EgyptAir flight missing. Have 22% mkt shr in Paris & fly A320s-2-3%
BAYER - Newswires confirm Bayer has put forward a bid for Monsanto......-3-4%
THOMAS COOK - Inline but FY16 EBIT guidance cut to 3-10% below cons.....-6-7%
CS
BASF -2-3% Monsanto/Bayer - spec BASF could counterbid
Bayer R Monsanto Says It Received Takeover Approach From Bayer
Booker -2-3% FY PBT 150.8m vs bberg cons 152.5m
Britvic +2-3% Reports H1 revs 3% beat, op profit 2% beat, EPS 7.5% beat
Compass M/P CS upgrade to NEUTRAL (Downside risks reduced)
Covestro -2-3% Bayer own 69% of Covestro (€5bn stake)
Cineworld +1% Rev growth of 9.8%, confident on FY
Dairy Crest UNCH PBT 57.7m vs CS at 56m, business is well positioned
Euromoney M/P Underlying level -6% vs cons -3%, keep FY expectations
Electrocomp +3-4% FY revs and EPS better
Fevertree +5% Strong trading, expect FY to be marginally ahead
Genmab +5% Positive Phase 3 “Pollux” study of Darzalex
Grainger UNCH Performed strongly during transformational period
Harg Lans M/P Numbers inline with market expectations
Henkel M/P Q1 adj Operating profit beats ests, confirms 2016 Outlook
Julius Baer UNCH AuM CHF305bn. in line with CSe 305.2bn.
Kudelski +2-3% Entered into a patent license agreement with Yahoo
Lufthansa -1-2% Exec Harry Hohmeister said bookings are a little bit weaker
Merlin Ent -1-2% Numbers inline, London has been slightly soft
Merck KGaA +2% Q1 EPS pre items beats estimates, EU 1.54 est EU 1.43
Miners -1% Copper -2.00%, Brent -3.00%, Iron Ore -1.55%, China +0.21%
Mothercare +1-2% FY adj PTP inline, total group sales inline
Nat Grid -2% Adj EPS 63.5p vs consensus 62.1p, gudance inline
Royal Mail M/P Numbers slightly ahead, guidance slightly soft
SAP +1% Salesforce +6% after hours after boosting FY revenue
Shanks +1% EPS beat on a lower tax rate, Net debt slightly better
Spire Health M/P Trading statement and guidance inline
Swiss Prime +1% Q1 rental income CHF 113.2m, confirms guidance
Thomas Cook -10-15% EBITDA guidance light, guidance for FY poor
UDG Health UNCH Op profit 2.5% beat, EPS inline, Maintains FY outlook
Reg Utils -2% US utils (XLU) closed on the lows -2%
Wirecard -1-2% Q1 revs €210.5m vs cons 211.6m, keep FY ebitda guidance
Shore calls
ROLLS-ROYCE - said to face bribe probe from SFO relating to Nigerian op's..UNCH
MOTHERCARE - UK LfL +3.6%,intl markets challenging,online sales strengthen..+1%
HARG.LANSDOWN - net inflows of 2.3bn,ytd revs +12%.........................UNCH
BALFOUR BEATTY - trading inline,order book to show some growth in H1.......UNCH
PORTMEIRION - South Korea mkts slower to recover,total sales -2%............-3%
FEVERTREE - outperforms expectations,momentum grows,margins strengthened....+2%
ON THE BEACH - rev +21.6% £35.5m,oper.pft +54.2%,on track to meet FY expec.UNCH
MABS - EPS +9%,recent performance more encouraging,to re-shape estate.......+1%
ROYAL MAIL - revs +1% £9.25bn,margins -10bps on higher costs...............UNCH
DAIRY CREST - inline,cheese squeezed,debt higher,we trim FY no's by 3-4%...UNCH
BOOKER - Fy revs 5b.Fy pbt 150.8m.Divi 4.03p.On track in new financial year.+1%
THOMAS COOK - H1 pre tax loss 288m.Summer bookings -5%......................-5%
NATIONAL GRID - Fy ptp 3.14b.Sees 2017 UK performance same as last year....UNCH
BREWIN DOLPHIN - H1 pbt 28.4.Says markets challenging in H2.................-2%
BRITVIC - H1 ebitda in line with estimates. Confirms forecast..............UNCH
MERLIN - YTD trading broadly in line with expectations......................-1%
INVESTEC - Fy eps 48.6p.Says activity levels supporting group performance...-1%
STAFFLINE - Says continued to make excellent progress in new FY.............+1%
RICARDO - 10 month profit in line with FY views............................UNCH
INFORMA - Remains confident of meeting full year expectations..............UNCH
MF
BAYER-Monsanto gets unsolicited acq proposal from Bayer............-4%
*MERCK-Sales 3.7b(3.72),Ebitda 1.1b(1.05),Rebif/Erbitux better......+2.5%
*BAER-AUM 305b(303),Net inflows below -3%(4/6),CET1 15.9%...........-1%
*HENKEL-NI 549m(530.7),Ebit 751m(737.9),Sales 4.46b(4.49)...........+2%
*WIRECARD-Rev 210.5m(211.6),Ebitda 62m(61.25),EPS 30c(31)...........+0.5%
*ROLLS ROYCE-Said a face probe in Nigeria - FT......................-1%
*SWISS PRIME SITE-Rental Inc 113.2m,Ebit 82.7m,Profit 48.8m.........-1%
*GATEGROUP-Sales 743.3m(724.5),Ebitda 22m(24.9),Margin 3%(3.5)......-0.5%
*SAP-Read across from Salesforce stock +6% a/hrs-mkt share gains....-1%
*ROCHE-FDA grants Tecentriq Atezolizumab accelerated approval.......+0.5%
*ABERTIS-Govt will not extend Toll Road concessions-Confidencial....-1%
*THOMAS COOK-PT -£288m(-180),Rev £2.67b(2.66),summer bkings -5%.....-5%
Boscolo chairman removed; may open way for stake sale - Boscolo not quoted
Angelo Boscolo has been removed as chairman of troubled Italian hotel group Boscolo, Italian-language daily Il Messaggero reported.
The unsourced report said that he has been replaced by his brother Giorgio, adding that Angelo Boscolo is believed to have been removed at a shareholders' meeting of Boscolo SAS, the family holding, on 12 May.
The item claimed that the removal of Angelo Boscolo could unblock the sale of a stake to a partner for the group.
According to the report, possible partners are Blackstone, Starwood and CdP Immobiliare.
The item noted that Boscolo has debts of EUR 320m.
Il Messaggero