>>> Philips and provides update of launch Philips Lighting IPO

Philips and provides update of launch Philips Lighting IPO
Philips and Philips Lighting announce their intention to launch an IPO and listing on Euronext Amsterdam of Philips Lighting.
  • The intended IPO will consist of an offering of existing shares held by Royal Philips to institutional and retail investors in the Netherlands and to certain qualified institutional
    investors in various other jurisdictions.
  • Royal Philips intends to sell at least 25% of the Philips Lighting shares in the IPO. After the IPO Royal Philips will retain a majority holding with the aim to fully sell down over the next several years as Royal Philips will focus on its HealthTech businesses.
  • Philips Lighting is targeting an annual dividend pay-out ratio of 40% to 50% of continuing net income to be paid out in cash. The Company expects to make its first dividend payment in 2017, which will be based on the results over the full year 2016.
  • At the time of the IPO, the Company is expected to have a net financial indebtedness of ~€950 mln representing ~1.5x 2015 EBITDA

(BArCap) European Earnings Catch-Up with U.S. Not Priced In - note atatched

Investors are pricing in view that current gap in profitability “persists to perpetuity,” which is too pessimistic, Barclays equity strategists including Dennis Jose write in note.
  • European earnings are still languishing near prior-cycle lows, at a time when U.S. cos. have managed to grow earnings to prior highs
  • Disconnect has seen European equities underperform U.S. by 44% since 2008
  • Lack of earnings growth due to profitability issues, not lack of growth in real GDP, revenues, which have broadly recovered to prior-cycle highs
  • Profit margins still languishing near cyclical lows, with return on equity lowest seen relative to U.S. in 41 years
    • Differences in sector weights do not fully explain this gap
  • Pricing and productivity now improving in Europe
    • European cos. are stabilizing pricing, aggressively cutting labor costs, suggesting margin expansion; while data suggests U.S. margin contraction

WSJ : Amazon to Expand Private-Label Offerings—From Food to Diapers

Amazon to Expand Private-Label Offerings—From Food to Diapers

The first of the brands could appear on the company’s website in coming weeks

Amazon.com Inc. in the coming weeks is set to roll out new lines of private-label brands that will include its first broad push into perishable foods, according to people familiar with the matter.

The new brands with names like Happy Belly, Wickedly Prime and Mama Bear will include nuts, spices, tea, coffee, baby food and vitamins, as well as household items such as diapers and laundry detergents, these people said.

The first of the brands could begin appearing on Amazon’s namesake site as soon as the end of the month or early June, said one of the people.

Amazon has been working to develop the new private/label lines for several years and had approached branding consultants and manufacturers including TreeHouse Foods Inc., The Wall Street Journal reported last year.

An Amazon spokeswoman declined to comment.

Consumers have warmed to private-label brands since the days of generically named products sold in plain white packaging. Today, retailers from Wal-Mart Stores Inc. to Sephora to Dean & DeLuca sell a range of in-house brands that some may even view as higher quality.

Store brands reached $118.4 billion in U.S. sales last year, up about $2.2 billion from the prior year, according to the Private Label Manufacturers Association.

“Amazon is ‘carpet-bombing’ the market with new products,” said Bill Bishop, chief architect of brand consultancy Brick Meets Click. “Private label allows them to test out new prices and distinctive flavors with less risk.”

Mr. Bishop said private-label goods boast higher profit margins than name brands because companies save costs on marketing and brand development. And with Amazon’s rich trove of data, it may better predict which products will sell well to its customers.

Amazon only will offer the private-label products to members of its $99-per-year Prime membership, this person said, potentially giving the program a boost.

The retailer has been spinning out new private labels for years, including its Pinzon linens and towels and Elements baby wipes.

Its AmazonBasics line features hundreds of items such as cellphone cases, computer mice, batteries, dumbbells and dog crates. Recently, it has begun selling its own fashion lines such as Lark & Ro dresses and North Eleven scarves.

Amazon’s new brands will include the Happy Belly line of food stuffs including nuts, trail mix, tea and cooking oil, the people said. The Wickedly Prime brand will feature snack foods.

While the full lineup couldn’t be ascertained, Amazon previously applied for trademark protection for foods including pasta, granola, potato chips and chocolate, as well as razors and air deodorizers.

Amazon’s plans also include the Presto! line of household products such as laundry detergent and the Mama Bear brand for baby products like diapers, baby-food jars and gentle detergent, these people said.

It wasn’t clear how Amazon might price its new food and household goods products relative to brand names.

Food production carries particular risks. For its new brands Amazon will depend on manufacturers that may have varying quality controls. Any health-related recalls could damage Amazon’s reputation.

Amazon has stumbled in private labels before. Its Elements line, which promised greater transparency about where and how goods were made, initially included diapers, but Amazon pulled them weeks after launching in late 2014, citing design flaws.

It also has discontinued a tool line and cookware endorsed by a Seattle chef.

In a twist, Amazon may graduate some of its coming products to the Elements label based on a formula including ratings and sales, suggesting it plans to make it a premium line, one of the people said.

The Elements private label has been sold only through Prime since it was released in late 2014. Despite the restriction, its Elements wipes represent about 9% of all baby-wipes sales on Amazon.com, according to analytics firm One Click Retail.

Amazon occasionally designates some products for special discounts available solely to Prime members. For instance, some customers were surprised last month to find certain videogames such as Assassin’s Creed Syndicate could only be purchased by Prime members.

By some estimates, Amazon has 50 million or more Prime members. The company covets them because they spend more on the site on average and may watch streaming videos such as its “Transparent” TV series.

In addition to bolstering its Prime service, the new lineup of private-label products may feed Amazon’s Fresh grocery delivery business, which is available in several U.S. cities.

WSJ : Johnson Controls Merger Will Give Its Spinoff a U.K. Home

Johnson Controls Merger Will Give Its Spinoff a U.K. Home

Filing reveals Adient shares “will be treated as a taxable dividend” for recipients

When Johnson Controls Inc. spins off its big auto-parts business in October, shareholders won’t get the tax breaks they expected. Instead, they receive something that might be even better: a company with a London address and even lower taxes.

Milwaukee-based Johnson Controls recently disclosed in a regulatory filing that the auto-parts company, which will be known as Adient, will be based in London, and shares in the new company “will be treated as a taxable dividend” for recipients.

Johnson Controls, which also makes heating and air-conditioning equipment and auto batteries, had to rejig the spinoff plan unveiled last summer after opting in January to merge with Tyco International PLC, one of the latest in a series of so-called tax-driven inversion deals.

The merger is effectively blocking the tax-free spin off of the auto business Adient that Johnson Controls first envisaged, but the deal is expected make it easier for Johnson Controls to relocate the new company to London.

It will also cut the tax bill of Adient by more than a third.

The merger with Tyco will make Johnson Controls an Irish company. Spinning off Adient afterward will allow it to be immediately recognized as a foreign-based scion of Johnson Controls.

If Adient was spun off as a U.S.-based company, it would have to pursue an inversion on its own or with a foreign-based merger partner to relocate to a low-tax country.

“Even though there’s some tax costs [for shareholders] going on up front, they’ll easily recoup those going forward because Adient will have such a low tax rate,” said Robert Willens, a corporate tax consultant.

Adient will incorporate the world’s largest maker of car seats, as well as other interior parts and last year generated $20 billion of sales.

With a London headquarters and most of Adient’s seating operations already in Europe, such as German seat maker Recaro, the new company will have a corporate tax rate of 10% to 12% compared with the 17% levied on Johnson Controls in the U.S. in its latest quarter.

The prospective tax wrinkles emerged during merger talks between Johnson Controls and Tyco, which was once one of the world’s largest industrial conglomerates before shrinking through a series of spin offs to focus on security and fire-protection systems.

“We discussed that at length as we were going through the deal process so we knew about this,” Tyco Chief Financial Officer Robert Olson said on an investor call last month.

As part of the merger, Johnson Controls will own 56% of the new company, while Tyco—the smaller partner—will be the purchaser and surviving company.

It will keep the Johnson Controls name, but maintain Tyco’s corporate headquarters in Cork, Ireland. Johnson Controls projects the merger will save about $150 million in taxes over three years.

Under the U.S. tax code, Tyco would have had to operate Johnson Controls’ automotive business for at least five years for Adient shares to qualify for tax-free treatment in the U.S., according to analysts.

“This case boils down to the fact that Tyco, as the acquiring corporation, has not been actively engaged in the seating and interiors business,” said Brian Sponheimer, a research analyst for Gabelli & Co.

Adient’s low-tax London address though could become an attractive asset for future mergers in an automotive components sector notorious for thin margins.

Tyco, which was one of the first high-profile U.S. companies to move to a low-tax haven in Bermuda when it merged with security alarm company ADT during the 1990s, later sold or spun off foreign-based businesses that eventually became partners in inversion deals with U.S. companies.

Meanwhile, Tyco switched its corporate registry from Bermuda to Switzerland before moving to Ireland in 2014.

The distribution of Adient shares is scheduled for Oct. 31. Shareholders will receive one Adient share for every 10 shares of Johnson Controls they own. The merger with Tyco is scheduled to be completed on Oct. 3.