FT : Monsanto operating chief sees a crop of seed and chemical deals

Monsanto operating chief sees a crop of seed and chemical deals

Deal activity in the seeds and chemicals sector, which has seen the multibillion-dollar merger of DuPont of the US and rival Dow Chemical as well as ChemChina take over Swiss group Syngenta, is likely to continue, according to a leading executive at Monsanto.
“I’m not convinced that consolidation is over in this space,” said Brett Begemann, president and chief operating officer of the US agricultural group, whose unsolicited offer for Syngenta was rebuffed last year.
While he was not aware of any imminent moves, he added that some less efficient companies may seek to be taken under the wings of stronger rivals. “If they choose to do that, we are open to conversations,” he said.

The continuing focus on food security among some governments will also drive deals, he added, pointing to the ChemChina and Syngenta transaction.
Mr Begemann said that Monsanto was comfortable as a standalone business but would continue to look at possible deals when they arose. “I suspect there’ll be opportunities. If it makes sense we’ll look at those,” he said.

The commodities rout, which has also spread to agricultural raw materials, has hit farmer incomes and squeezed margins for agricultural businesses. Analysts at BMI Research said reduced growth prospects meant that M&A activity would remain high.
“We expect more of these types of deals to take place over the coming quarters as the industry makes a strong push towards acquired sales growth to compensate for reduced organic growth,” said BMI.
Mr Begemann said he did not expect the ChemChina and Syngenta deal to affect the sector. “It was a geographic move,” he said, adding that the deal would not alter Syngenta’s “challenges”.
“The challenges that they have in their own portfolio, I don’t think that changes with the transaction with ChemChina,” he said, especially since it took 5-6 years to create new seeds.
Mr Begemann shrugged off concerns among some agricultural officials in Washington that the Syngenta merger could lead to the Swiss company’s genetically modified seeds winning preferential treatment from Chinese authorities.
Monsanto has a seed joint venture in China with state-owned Sinochem, where the Chinese company owns 51 per cent, and Mr Begemann said he had no reason “to be concerned about not having a level playing field”.
If that was not the case, “that raises a whole different set of questions”, he added.
GM grains and oilseeds are banned in China although Beijing allows the import of crops which are processed or for use as animal feed. Seed companies, including ChemChina, expect the Chinese government to relax the edict as Beijing tackles food security.

(ZH) The Biggest Threat To The S&P In The Next Month: "Only Buyer Keeping Th

The Biggest Threat To The S&P In The Next Month: "Only Buyer Keeping This Market Alive" Stops Buying

Even Bloomberg gets it.

In a note issued yesterday, the news behemoth reported what our readers had known for years: that "There's Only One Buyer Keeping S&P 500's Bull Market Alive", namely corporate buybacks, the same "buyer" of stocks that the smart money has been selling to for the past 7 weeks.

Dispelling any confusion about who the relentless buyer into the "wall of worry" is, this is what Bloomberg wrote:

Demand for U.S. shares among companies and individuals is diverging at a rate that may be without precedent, another sign of how crucial buybacks are in propping up the bull market as it enters its eighth year. Standard & Poor’s 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.

We got the latest confirmation of this earlier today when Bank of America said that "clients don’t believe the rally, continue to sell US stocks" to the only buyer left in town: "buybacks by corporate clients accelerated for the third consecutive week to their highest level in six months, which is also above levels at this time last year. This suggests that overall S&P 500 completed buybacks—which are reported with a lag—have likely picked up significantly as well."

This also explains why the ECB was so desperate to unclog, and explicitly backstop with its QE expansion, the suddenly slowing corporate bond market: without a fresh influx of new IG issuance, the buyback pipeline would be indefinitely halted, which in turn would have led to more stock selling without offsetting repurchases, further downside to credit, and so on in a feedback loop that would have required a forceful intervention by central banks.

However, while buybacks have been raging for the past three months, there is a very real and imminent danger to the market torpid bear market rally, when the first quarter earnings season begins over the next few days and brings with it the infamous buyback "blackout period."

Recall what we said almost exactly one year ago, citing Goldman:

"The closing of the buyback window ahead of earnings season has recently coincided with weaker S&P 500 performance. In half of the last eight quarters, the S&P 500 declined during the four weeks prior to earnings season. The S&P 500 rose an average of 0.3% in the month leading up to earnings season versus +1.6% both during earnings season and in the month following earnings season.

 

Indeed, over the past 4 quarters, the buyback blackout has without fail led to weakness across risky asset classes. So with the start imminent, how long is the lack of price indescriminate buying expected to persist? At least until the first week of May when the buybacks resume:

So while everyone's attention is on the Fed, the biggest danger to the S&P500 has little to do with what Janet Yellen may say tomorrow, and everything to do with the marginal buyer of stocks being  put into a state of forced hibernation: after all, corporations would want nothing more than to continue the rally without pause, as a surging S&P 500 would make it even easier to issue more debt, which in turn would be used to fund even more buybacks, push their stocks even higher, and lead to even greater "equity-linked" bonuses and compensation.

What is curious, however, is that unlike a year ago, when Goldman was pitching its "basket of US stocks focused on returning cash to shareholders via buybacks and dividends", this time Kostin and Co. are far more reserved, and instead urging clients to shun these companies which are largely drowning in debt as per the chart below, showing the highest corporate leverage in over a decade...

... and instead to buy companies with "strong balance sheets" which by definition are those who dedicate far less debt to pushing their stock price higher via such artificial and unsustainable gimmicks such as buybacks.

Will this time Goldman be right, or will the trade once again be to buy the more beaten down names over the next month, those whose buybacks are "brutally" put on hold, only to return with a vengeance come May?

We'll find out in 6 weeks; in the meantime, beware the S&P 500 Ides of March starting today, and lasting until Q1 earnings season is over.

>>> Mead Johnson said to be working with Lazard following takeover interest from

(earlier today)
Mead Johnson said to be working with Lazard following takeover interest from European food giants

The Mead Johnson bid tale is back.

Readers who follow Mead Johnson Nutrition, the US-listed baby formula manufacturer, might have grown somewhat weary - and possibly sceptical - about this particular takeover bid story. That's because the tale goes around the market every couple of years but is either denied or just fades away with little activity to back it up.

In fact, it was Neil Hume of the Financial Times/ FT Alphaville who was one of the first reporters to break the original Mead Johnson bid rumour - back in 2009! Here is the link to that article:


And Reuters did a piece in 2014 - here is the link:


However, this year I'm taking the story seriously because good sources tell me Mead Johnson has begun working bankers at Lazard following expressions of interest from European rivals Nestle and Danone.

I have also been told Danone has lined up JP Morgan and BNP Paribas for its potential tilt at Mead Johnson. It's not clear which investment bank is advising Nestle.

Now, to be clear some of the information for this article is from RARE-type sources whilst other important bits of the article aren't, so I haven't tagged this story as a "RARE" alert.

Still, for readers unfamiliar with the RARE, 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.

A Mead Johnson spokesperson said:

"As a matter of policy, we do not comment on marketplace speculation or rumour."

Nestle and Danone also declined to comment.

>>> CEZ eyes offshore windfarms in UK, Germany, France and Poland

CEZ eyes offshore windfarms in UK, Germany, France and Poland
* Up to EUR 2.2bn to be spent on buys over four years
* Western Europe increasingly targeted
* Opportunistic divestments also on cards

CEZ [WSE:CEZ], the Czech energy group, is interested in acquiring renewable energy assets including offshore windfarms in the UK, Germany, France and Poland, board member Tomas Pleskac said.

Pleskac, responsible for strategic development and new energy, said that CEZ could spend up to CZK 50bn (EUR 1.8bn) to CZK 60bn (EUR 2.2bn) on acquisitions over the next four years.

This would represent the state-controlled group’s first move into the offshore segment. CEZ is currently studying three German offshore windfarm targets and could potentially reach an agreement to acquire one or more “fairly soon”, Pleskac told this news service.

The typical size of such windfarms would be at least 400 MW, and the investment would be around EUR 100m per MW, he said. CEZ is seeking to acquire minority stakes of up to 49% in such windfarms as it so far has no know-how in offshore projects, he said.

Aquila Capital is advising CEZ regarding German wind opportunities, as per a company press release in January.

The company is also interested in other opportunistic acquisitions, for example in the Benelux countries as, CEZ increasingly points its radar at new western European markets, Pleskac said. While the company’s focus is on wind assets, it will could look opportunistically at other renewable targets, for example photovoltaic plants in Italy, he said.

CEZ is also interested in acquiring energy distribution and supply companies and energy traders in countries such as Germany, and heating companies in the Czech Republic and Poland. The key criterion is that they must be in countries with a stable regulatory environment, he said.

EDF's Polish assets

CEZ is interested in acquiring EDF’s [EPA:EDF] Polish assets, particularly the second phase of the sale process which will involve a larger number of plants, Pleskac said. However, this sale is likely to be at least three months away, he added. CEZ wants to significantly strengthen its market position in Poland’s heating sector, he said.

This news service reported that EDF is selling its Polish power generation assets in two separate processes. The first is to involve the Elektrownia Rybnik plant and the second is for thermal plants in Krakow, Gdansk, Wroclaw, Gdynia, Zielona Gora and Torun.

Rybnik reported sales of PLN 3.4bn (EUR 770m) and EBITDA of PLN 343m in 2014, according to a previous report.

CEZ was previously reported as being interested in acquiring Vattenfall’s German assets. The deadline for binding bids is tomorrow (16 March), but CEZ chairman and CEO Daniel Benes and deputy chairman and CFO Martin Novak declined to comment on whether CEZ would submit a bid.

The company looked at the opportunity to acquire Thyssengas, the German gas asset, but then decided against bidding, Pleskac said. According to an unsourced newswire report last December, Macquarie hired Bank of America Merrill Lynch to run the sale of German gas grid Thyssengas. Thyssengas is valued at EUR 500m-EUR 600m, according to another report.

Romania, Bulgaria tipped for potential disposals

CEZ is also interested in disposals of foreign assets as it seeks to optimise its portfolio, Pleskac said. This would be on an opportunistic basis, if it were approached by any interested parties. It has not mandated any advisers for any review, nor is it planning any concrete sale process, he said, declining to reveal which assets could be candidates for disposal.

One sector adviser mentioned Romania and Bulgaria as the most likely candidates for asset disposals by CEZ, given the unfavourable regulatory and political environments in these countries. While there is no known ongoing process involving CEZ’s foreign assets, it is no secret that CEZ would like to sell its Bulgarian thermal plant Varna, he said.

The company closed down Varna in January 2015 as it did not meet ecological standards, as previously reported. The adviser said that any disposals were likely to be on an opportunistic basis.

CEZ owns production assets in Poland, Romania, Bulgaria and Turkey.

The company will finance buys through a combination of its own resources and debt, CFO Martin Novak said. CEZ has scope to raise its debt/EBITDA ratio from 2.2 to between 2.5 and 3 to help finance buys, Novak told this news service.

Pleskac and Novak were speaking as CEZ reported that its EBITDA reached CZK 65.1bn in 2015, a 10% year-on-year decrease, which it largely attributed to falling electricity prices. Operating revenues were CZK 210.2bn in 2015, up 4% on 2014's CZK 201.8bn.

>>> US Gapping down




Gapping down
In reaction to disappointing earnings/guidance: LINE -33.7%, VRX -17.9%, DCO -7.6%, MNKD -6.5%, (COO Juergen Martens resigns, Michael Castagna named Chief Commercial Officer, effective immediately ), ONTY -5.2%, NAVB -4.3%, TTEC -4%, MOMO -3.5%, FSM -2.6%, CFRX -1.7%, JMBA -1.6%, KANG -1%, LUK -0.9%, (Jefferies reports challenged Q1 results) PWR -0.8%, (appoints COO Earl Austin Jr to succeed Jim O'Neil as CEO effective immediately, reaffirms 2016 growth strategy & outlook), JASO -0.8%

M&A news: PRTY -2.7% (Acquires Festival SA for ~$5 mln)

Select EU financial related names showing weakness: SAN -3.4%, CS -3.1%, DB -2.7%, LYG -2%, BCS -1.4%, ING -1.2%, HSBC -0.9%

Select metals/mining stocks trading lower: BBL -7.1%, MT -5%, FCX -4.7%, AKS -3.7%, CLF -3.3%, X -3%, AA -1.4%

Select oil/gas related names showing early weakness: WLL -6%, SDRL -4.9%, PBR -4.6%, CHK -3.9%, BP -2.5%, MRO -2.5%, RIG -1.4%, TOT -1.4%

Other news: IMMU -15.1% (To terminate the Phase 3 PANCRIT-1 trial with yttrium-90-labeled clivatuzumab tetraxetan in patients with metastatic pancreatic cancer), ALR -8.2% (will be unable to file its 2015 Form 10-K within the extension period, discloses receipt of a grand jury subpoena from the DOJ), TCON -5.4% ( initiates phase 1B study of TRC105 in patients with lung cancer), NVIV -4.6% (commences an underwritten public offering of common stock for unspecified amount), CNX -3.9% (Moody's downgrades CONSOL (CNX) to B2 with outlook negative and Moody's downgrades Natural Resource Partners (NRP) to B3 with outlook negative), CBPX -3% ( announces 4.5 mln share secondary common stock offering by selling shareholders & 900,000 share repurchase), ZYNE -2.5% (following 150% surge higher Monday), GLOG -1.7% (files for $600 mln mixed securities shelf offering )

Analyst comments: DDD -8% (downgraded to Underweight from Neutral at JP Morgan), BHP -6.3% (downgraded to Underperform from Neutral at Macquarie), RIO -4.8% (downgraded to Equal Weight from Overweight at Morgan Stanley), HIBB -3.3% (downgraded to Sell from Neutral at Goldman), AZN -2.3% (downgraded to Hold from Buy at Jefferies), TIF -1.8% (downgraded to Neutral from Buy at Citigroup)

>>> US Gapping up


Gapping up
In reaction to strong earnings/guidance: SZYM +34.7%, (also signs a definitive 5-year global supply agreement w/ total revs of more than $200 w/ Unilever), BORN +23.5%, SKIS +19%, AMPH +17.4%, (light volume), ESI +15.6%, BIND +15.4%, BDE +14.6%, (light volume), GCAP +13.5%, BONT +13%, EGY +10.8%, INGN +8.7%, DSW +7.8%, FDS +5.9%, PERI +5.9%, PFSW +4.9%, PLCE +4.8%, HDS +4.3%, FSYS +4.1%, ARTX +3.5%, PETX +3.3%, CLLS +2.7%, VSLR +1%, EPRS +0.6%, BLCM +0.5%

M&A news: OUTR +13.3% (to explore strategic and financial alternatives; increases quarterly dividend to $0.60/share from $0.30/share), MJN +8.1% (Betaville blog post reporting that MJN has received takeover interest from Danone (DANOY) and others)

Other news: CPXX +434.5% ( announces 'positive' results from Phase 3 trial of VYXEOS Liposome for Injection in patients with high-risk acute myeloid leukemia), OREX +35.7% (announces commercialization and distributorship agreement with valeant pharmaceuticals (VRX) for Mysimba for 18 Central and Eastern European countries & Turkey; announces strategic acquisition of all U.S. rights to Contrave, the branded anti-obesity prescription medicine), EXXI +21.4% (makes the interest payment due on its EPL Oil and Gas, Inc. 8.25% Senior Notes and reduces its borrowing base from $500 mln to $377.7 mln), CTIC +16% (provides update regarding the availability of pacritinib to certain patients with myelofibrosis), BPMC +11.5% (announces worldwide collaboration/exclusive license agreement with F. Hoffman-La Roche (RHHBY) to accelerate and expand its development of medicines in the field of cancer immunotherapy), APPY +7.6% (Terminates proposed transactions with Strand Life Sciences), AVEO +5.9% (disclosed SEC settlement update - Based on the progress in the process thus far - could potentially settle with the SEC for a total amount of $4 mln; also reported earnings), BCRX +5.4% (D.E. Shaw & Co discloses 5.1% passive stake), HBIO +4.3% (announces delay in filing Form 10-K), GWPH +2.3% (following 120% move higher Monday), RTK +2% (Rentech announces that GSO Capital Partners LP has agreed to provide an additional short-term liquidity of $6 mln ), AVP +1.6% (To reduce headcount by 2,500 positions as part of 3-year plan), ANTH +1% ( files for $100 mln mixed securities shelf offering)

Analyst comments: CONN +2.8% (upgraded to Overweight from Equal Weight at a boutique firm), AAPL +1.6% Morgan Stanley out with a favorable view on iPhone demand in the March qtr)

>>> US Early premarket gappers


Early premarket gappers


Gapping up: CPXX +382.1%, SZYM +28.9%, ARO +26.9%, BORN +23.5%, CTIC +19.4%, AMPH +17.4%, BIND +15.4%, ESI +14.1%, OUTR +13.4%, BONT +13%, DSW +12.8%, DSW +12.8%, BDE +12.4%, INGN +12.3%, EGY +10.8%, FDS +6.1%, BCRX +5.4%, XONE +5%, PFSW +4.9%, MJN +4.4%, HBIO +4.3%, FSYS +4.1%, HDS +3.6%, GWPH +3.5%, ARTX +3.5%, PLCE +3.5%, PETX +3.3%, RTK +2%, AVP +1.6%, JASO +1.5%, AAPL +1.1%, LEJU +1.1%, ANTH +1%, VSLR +1%, SUNE +0.9%

Gapping down: IMMU -20.8%, VRX -17.3%, LINE -16.3%, NVIV -10.9%, DCO -7.6%, MNKD -7.2%, BBL -6.9%, BHP -6.2%, CLF -5.9%, APPY -5.8%, TCON -5.4%, SDRL -5.4%, WLL -5.4%, CHK -5.3%, RIO -5.2%, ZYNE -4.9%, AKS -4.5%, FCX -4.5%, MT -4.2%, TTEC -4%, CNX -3.9%, CBPX -3.6%, X -3.4%, PBR -2.9%, PRTY -2.7%, RIG -2.6%, FSM -2.6%, CS -2.5%, BP -2.5%, CSTM -2.5%, AZN -2.4%, AA -2.1%, LYG -2%, DB -1.8%, GLOG -1.7%, CFRX -1.7%, JMBA -1.6%, MOMO -1.6%, TOT -1.4%, HSBC -1.2%, ING -1.2%, CLLS -1.2%, KANG -1%