FT : Activist hedge funds hunt for Brexit bargains

Activist hedge funds hunt for Brexit bargains

Several household-name British companies have been targeted, says Owen Walker

Throughout the morning of June 24, the currency and equity markets went haywire as investors around the world tried to capitalise on the chaos created by the UK’s shock decision to leave the EU. But one niche category of hedge funds, activist investors, could turn out to be the long-term winners from Brexit.
Several household-name British companies have been targeted by activists since last month’s vote. While these moves are not directly related to the referendum result, the Brexit fallout will make UK companies more vulnerable to activist attacks in the coming years.

Activist hedge funds — which focused not only on investing in companies where they expect significant change, but also on being the agent of that disruption — will be on the lookout for ways to profit from the disquiet the UK is set to endure as its relationship with the rest of Europe and the world is redefined. British companies dealing with these seismic changes would do well to prepare for an activist on their shareholder register.
The fall of the pound to the dollar and euro since the referendum has meant that British companies are now much cheaper for foreign investors.
At the same time, the FTSE 250 — whose constituents are mostly domestically focused, which means the index is a better indicator of the resilience of the UK economy than the more international FTSE 100 — has experienced considerable volatility. There is little to suggest these market forces will lessen in the coming years, resulting in plenty of UK buying opportunities for overseas investors.
Foreign activists have already started taking advantage of the increased vulnerability of UK companies. Shareholder Value Management, a German investor, announced a 7 per cent stake in John Menzies, the Edinburgh-based logistics company, soon after the Brexit vote. SVM joined another foreign activist, Lakestreet Capital Partners of Switzerland, in calling for John Menzies to split its aviation services from its newspaper distribution business.
Through its UK offshoot, Elliott Advisors, US hedge fund Elliott Management has revealed positions in SABMiller, the brewer, and Poundland, the discount retailer. In both cases, the target company is in the process of being bought and Elliott is pushing for better terms — a strategy common among activists and dubbed “bumpitrage”. Last year Elliott’s successful campaign against Alliance Trust in Dundee resulted in the hedge fund gaining two board seats and the departure of the investment trust’s chairman and chief executive.
In the medium term, the response of policymakers to market uncertainty could unintentionally make British companies more attractive to activist investors. A Bank of England decision to cut to interest rates could further weaken the pound, thereby making UK companies cheaper still.
Should Philip Hammond, the new chancellor, follow his predecessor’s lead and cut corporation tax in an attempt to incentivise companies to stay, the lower tax rate would make UK companies even more alluring to overseas activists.
But perhaps the most attractive feature of post-Brexit Britain for activist investors is the widespread instability UK companies will face and the tough choices their boards and executives will be forced to make. Activists thrive in such conditions.
Corporate leaders will have to decide whether to sell overseas operations, relocate teams or close underperforming business lines altogether. These will be hard and uncomfortable decisions to make, especially where large-scale job losses are involved. But where a long-term executive or director may feel ill at ease forcing through such changes, an activist investor would have no such sentimentality. The activist would also have an easier job of convincing the company’s other shareholders that clinical restructuring was needed.
For the UK’s boards and executives, life looks set to become a little bit harder.

WSJ : Be Safe: Update Your iPhone, iPad and Other Apple Devices Now

Be Safe: Update Your iPhone, iPad and Other Apple Devices Now
Apple patched a hole, but you need to make sure you’re running the latest OS

If you use any Apple Inc. devices—an iPhone, iPad, Mac, Apple Watch or Apple TV—take some time today to make sure their operating systems are up-to-date.

Apple issued updates for iOS, OS X, WatchOS and tvOS on Monday that patched a security hole that could allow hackers to steal login and password data as you type it.

The exploit, which so far hasn’t led to any known hacks, was made public by Cisco Systems Inc.’s security research team, Talos. The malware, which disguises itself as a TIFF-formatted image, can be sent to Apple devices by way of messaging and email apps and web browsers.

“This vulnerability is especially concerning as it can be triggered in any application that makes use of the Apple ImageIO API when rendering tiled TIFF images,” said Tyler Bohan, a Talos researcher, in a blog post. Many apps on Apple devices use this specific API to render images, including Apple’s own Messages, Mail and Safari apps.

A similar security vulnerability, known as “Stagefright,” was found in Alphabet Inc.’s Android mobile operating system last year and was eventually patched.

If you have an Apple device, like an iPhone, you'll want to make sure you're running the latest operating system, which patched a significant security hole this week. PHOTO: THE WALL STREET JOURNAL
Here’s how to check if your device’s operating system is up-to-date, and safe from the exploit. (Also: Consider opting into automatic OS updates that you can do in the settings below.)

iPhone, iPad and iPod Touch

Open your iOS device’s settings app and look for the General menu. Tap Software Update and you’ll see if you’re on the latest version of iOS—9.3.3—or not.

iOS 9.3.3 is compatible with the iPhone 4s and newer, the fifth and sixth generation iPod Touch, the iPad 2 and newer, all iPad Mini tablets and the iPad Pro.

Mac Computer

Open up the Mac App Store app and click Updates in the menu bar up top. Any OS X update will show up here if you need to install one. The latest version of OS X is El Capitan 10.11.6, and it is compatible with most Mac laptops and desktops dating back to mid-2007.


Apple Watch

To update your Apple Watch software, go to your iPhone and open the Apple Watch app. Tap General and select Software Update. The latest version of WatchOS is 2.2.2.

Apple TV

Open your Apple TV’s settings app and use your remote to select System, then Software Updates. Then hit Update Software. The latest version of tvOS is 9.2.2.

>>> (G20) Finance Ministers comment from G20 in China

(G20) Finance Ministers comment from G20 in China 
(JP) Japan Fin Min Aso: excess forex volatility and disorderly moves in currency are harmful
- G20 to use all tools available individually and collectively to promote growth
- No change in Japan stance on achieving fiscal consolidation
- Closely watching China economy; agreed with US Treasury Secretary Lew on the need for structural reform in China and transparency in the yuan; did not discuss currency issues with Lew in bilateral talks

(Re/code.net) Salesforce CEO told LinkedIn he would have paid much more than Mic

Salesforce CEO told LinkedIn he would have paid much more than Microsoft

A LinkedIn board committee met earlier this month to discuss the email from Marc Benioff.

It was already known that LinkedIn chose a potentially lower all-cash acquisition offer from Microsoft rather than take on the uncertainties of a stock-and-cash deal from Salesforce.

But now it has been revealed that Salesforce might have been willing to go “much higher” than Microsoft’s $26.2 billion, or change other terms of its bid, had it been given the chance.

In a filing with regulators on Friday, LinkedIn said a board committee met on July 7 to discuss an email from Salesforce CEO Marc Benioff.

“The email indicated that Party A would have bid much higher and made changes to the stock/cash components of its offers, but it was acting without communications from LinkedIn,” LinkedIn said in the updated filing with the Securities and Exchange Commission.

In addition to preferring the all-cash nature of Microsoft’s $196-per-share bid, LinkedIn has said its board was concerned about other issues with a Salesforce bid, including the fact that a deal would have required approval from its shareholders.

LinkedIn could still go with another bid if one comes in, but its deal with Microsoft contains a $725 million breakup fee provision.

Salesforce was the only serious rival to Microsoft, but LinkedIn also held talks with Google and Facebook, among others.

(Re/code.net) Verizon and Yahoo are set to announce an exclusive $5 billion deal

Verizon and Yahoo are set to announce an exclusive $5 billion deal

Verizon and Yahoo are set to announce that they are striking an acquisition deal, according to sources close to the situation. The news is expected by Monday, although it could come earlier or later.

But Yahoo told other bidders this afternoon — those interested in buying Yahoo have included private equity firm TPG and a group led by Quicken Loans’ Dan Gilbert — that the telco giant was the winner of the four-month process, said sources.

The transaction of about $5 billion still has to pass regulatory muster and also faces difficult integration issues. Also, the reception of the deal from Verizon shareholders will be an issue.

As per usual, there is always a chance it will not work out and one of the other bidders — most likely Gilbert — might lob in another offer once the terms are revealed.

Those terms are still unclear, including whether Verizon’s deal includes some or all of Yahoo’s patent and real estate assets, which have some (though diminishing) value.

Verizon is set to report its quarterly results on Tuesday, and sources said the pair hope to be able to announce details of the deal before then, if possible.

In any case, the move is not a surprise, given Verizon has been public in its interest in buying Yahoo and it has always been the front-runner.

Recode and others reported Friday that the Yahoo board had settled on Verizon, but the other bidders had still not been officially informed. Verizon was considered the safest bid among those made and most attractive, especially after Verizon upped its initial bid substantially. In addition, said sources, the willingness of Verizon to accept some "hairy" issues at Yahoo — including a less-than-ideal search deal with Mozilla and also large stock compensation costs.

The deal, which has been shepherded by Verizon’s EVP of Product Innovation and New Businesses Marni Walden and AOL head Tim Armstrong, will be a big leap for the company, which has been seeking to add to its ad tech and digital content offerings. Verizon bought AOL a year ago for $4.4 billion to start that process.

But that effort has been mixed so far. For example, its Go90 mobile video service, aimed at teens, has gotten a lot of criticism from investors. There are also worries about how well Verizon will fare going up against digital ad powerhouses like Facebook and Google.

Adding Yahoo’s assets to its weaponry could help — its BrightRoll programmatic video ad service is considered a plus — but a lot of its display tools are aimed at solving yesterday’s problems.

Verizon will also be getting a mass of media assets, some of which are still powerful, such as Yahoo Finance and Yahoo Sports, and others not so much. Under CEO Marissa Mayer, Yahoo spent large sums on content — such as its $1 billion acquisition of Tumblr and a deal to bring TV news star Katie Couric to the network — that have not paid off.

The same is true with Mayer’s intense — and many say misguided — plunge into mobile search technology, in an effort to make an end run around Google. Very little of her massive investment there has seen the light of day, and it is not clear if Verizon will continue it.

Also no surprise: Mayer is not expected to stay on after the deal is wrapped up in the fall, said sources, and it is unclear how many of Yahoo’s current execs will remain. Many have had their options accelerated, but someone has to keep the lights on until Verizon gets to fully claim its prize.

It seems likely that effort will be run by Armstrong, who had once tried to get Mayer to consider merging the companies. He was pretty much rebuffed by her, but the idea of an AOL-Yahoo merger has been around for a long time and almost happened a few of those times.

Here’s me writing about possible mergers of the pair in 2006. Then in 2008! Also 2010! And 2011! By the way, when AOL was really powerful in the mid-1990s, Yahoo was also given an offer by then-exec Ted Leonsis, as I reported in my book on AOL from then. (Conclusion: I have been covering Yahoo and AOL for too long.)

Mayer and Armstrong were also top execs at Google in its early days and have tangled since over talent raids while at Yahoo and AOL. (Remember the Ned controversy? Me either, but I did seem to write about it a lot!)

Well, finally it looks like it’s going to happen. And it will be really hard.

"This is going to be a very tough integration," said one source, who noted that Yahoo and Verizon have spent very little time on the specifics of how the companies will coordinate pretty much everything. "The unknowns are as big as the knowns."

Translation: It’s Yahoo, Jake.

Actually, maybe not anymore — it’s not clear if Verizon will keep the well-known brand. Whatever the case, the sale marks a definitive end to one of the internet’s most iconic and pioneering companies as an independent entity.

I tried everyone for a comment and no one seems to be home today. I wonder what they’re up to?

>>> Barrons weekend summary: cautious on pharmacy benefits managers; positive on

Barrons weekend summary: cautious on pharmacy benefits managers; positive on mortgage insurers 

Cover story: There are a number of reasons for investors to be concerned about the prospects of pharmacy-benefit managers, which haven't been effective in keeping rising drug costs contained, a task some top corporations are taking on themselves (Cautious on ESRX, CVS, UNH). 

Features: 1) Positive on ATVI, AHS, ANET, FB, SWHC, SPLK: Estimize, a crowdsourcing platform for earnings and revenue estimates, says Wall Street has underestimated the earnings potential of these six companies; 2) Positive on MTG, RDN, NMIH, ESNT: Shares of mortgage insurers are down from a year ago, but some analysts expect them to rebound when the housing market gains steam; 3) For the second year in a row, a survey from the National Association of Realtors shows Chinese nationals dominating the ranks of international home buyers in the U.S.

Tech Trader: The financial technology sector, or FinTech, is moving beyond a focus on payments driven by early players such as PYPL and SQ and into robo-advisors, exchanges, trading platforms, and financial-data companies. 

Trader: Issues such as the Brexit and the U.S. elections should be capping market enthusiasm, says Mark Luschini of Janney Montgomery Scott, but the market doesn't seem to care; Positive on CSCO, IBM, APD, PX, OXY, VZ: These six laggard stocks should begin to outperform once the economy picks up, according to research from Fundstrat; Positive on AIG: "If rates don't go up, AIG's warrants could take a while to be in the money, but as the insurer executes on its plans, there's plenty of time for the warrants to grow." 

Interview: John Wilson, managing director and senior equity portfolio manager, Columbia Threadneedle focuses on new-product pipelines where the Street's estimates might not be properly modeled (picks: BMY, CMCSA, FB, MDT, SWK, TJX). 

Small Caps: Positive on CSW: Company recently spun off from Capital Southwest "has an opportunity to improve profit margins by better integrating its manufacturing platform, and it could drive growth by cross selling." 

Alternative Investments: Charles Royce, manager of the Royce Pennsylvania Mutual Fund, is looking at alternative investment management companies such as ARES, KKR, and APO. 

European Trader: Portfolio managers who run U.S. mutual funds that invest in British stocks have been fairly upbeat despite the Brexit vote, and there is an overall sense that U.K. shares are stabilizing. 

Asian Trader; Defensive stocks in Asia have become expensive, and even income investors should look elsewhere, especially toward the financial industry. 

Emerging Markets: "Recently considered a good idea, investing in Turkey has quickly turned into a nightmare as the government uses increasingly autocratic methods to purge its society following a failed coup." 

Commodities: Natural gas prices in the U.S. have risen since winter, and they may still have room for gains. 

Streetwise: "Investors looking for safety and income have driven utility stocks to pricey levels and low yields," and though the rally has yet to wind down, investors should take profits.

(Reuters) Exclusive: Tesla, SolarCity close to merger agreement


(Reuters) - Tesla Motors Inc TESLA.O and SolarCity Corp SCTO.O have made progress in putting together a deal that will merge the electric car maker and the solar panel installer, people familiar with the matter said.
The two companies, which count billionaire Elon Musk as a major shareholder, are in the final stages of carrying out due diligence on each other, and could agree on the terms of a deal in the coming days, though it is still possible that their negotiations end unsuccessfully, the people said on Saturday.

It could not be learned whether SolarCity would be successful in including a go-shop provision in a merger agreement with Tesla that would allow it to continue to solicit bids from other potential buyers for a short period of time.

The sources asked not to be identified because the negotiations are confidential. Representatives for SolarCity and Tesla did not immediately respond to requests for comment.

Tesla announced last month that it had made an all-stock offer for SolarCity worth $2.8 billion. It argued that by acquiring SolarCity, the two companies would form a one-stop clean energy shop, offering consumers solar panels, home battery storage and electric cars under a single trusted brand.

SolarCity has not publicly revealed its views on Tesla's offer since it announced on June 27 that it had formed a special committee consisting of two board members to evaluate the offer. The committee said it had retained legal and financial advisers and would review the proposal against SolarCity's standalone prospects and a broad range of strategic alternatives.

As chief executive of Tesla, chairman of SolarCity and the biggest shareholder in both companies, Musk has recused himself from voting on the deal at both companies. Several Tesla and SolarCity executives, including Musk's cousins SolarCity CEO Lyndon Rive and SolarCity board member Peter Rive, have also recused themselves from voting.

Elon Musk said on July 20 when he revealed his master plan "part deux" for Tesla that he is looking to create a "smoothly integrated and beautiful solar-roof-with-battery product."

"We can't do this well if Tesla and SolarCity are different companies, which is why we need to combine and break down the barriers inherent to being separate companies," Musk said.

(AppleInsider) 'Apple Car' rollout reportedly delayed until 2021

'Apple Car' rollout reportedly delayed until 2021, owing to obstacles in 'Project Titan'

Apple's rumored electric car won't hit the roads until 2021, owing to various obstacles encountered in "Project Titan," a report claimed on Thursday.

In profiling three brothers who once worked on Apple's Siri team, but now work on Titan, The Information quoted sources as saying that while the company was aiming for a 2020 rollout, problems have forced a delay. Among these is the departure of one-time Titan leader Steve Zadesky in January.

The brothers at the center of the story — Brian, Kevin, and Michael Sumner — have reportedly been developing software to capture the tremendous amounts of data Apple cars will generate, and may also be involved in buying and configuring servers for that purpose.

It's speculated that data will be uploaded to Apple servers, allowing the company to evolve autonomous driving technology and boost its accuracy.

The report suggests that Apple will have to dramatically improve its cloud infrastructure if it wants to handle all of the demands of a self-driving car in-house, unlike Tesla, which offloads some data tasks to Amazon Web Services. A single self-driving vehicle can generate anywhere between 2 and 10 gigabytes of data per mile, according to the CEO of DeepMap, a company specializing in mapping technology for self-driving systems.

It's not yet clear, though, if the first-generation "Apple Car" will actually be self-driving. Past reports have indicated that the first model might be semi-autonomous at best, though the company is at least believed to be developing self-driving systems.