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MergerMarket

* Nissin would like to increase stake from 19.9% — company spokesperson

* Nissin-Premier commercial partnership unlikely to proceed if McCormick bid prevails

* Premier’s pension scheme means McCormick unlikely to face other rivals

As merger talks with McCormick & Company [NYSE:MKC] continue, Nissin Foods Holdings [TYO:2897] could be interested in further increasing its stake in Premier Foods [LON:PFD], a Nissin spokesperson and an independent sector advisor said.

The spokesperson declined to comment on whether such an increase would amount to a rival bid, but he said Nissin would try to strengthen its tie-up relations by acquiring additional Premier Foods shares, on top of the 19.9% it currently holds.

A stake increase would come as Premier Foods shares lag the 63p per share Nissin paid exiting Premier Foods shareholder Warburg Pincus for a 17.3% stake last month. As this news service reported, Nissin’s current stake in Premier Foods is unlikely to be considered a frustrating action, but stands in the way of an eventual squeeze-out by McCormick, which would require 90% approval. Further stakebuilding by Nissin to 25%, however, could thwart a scheme of arrangement between Premier Foods and McCormick, which would require the consent of 75% of Premier shareholders.

It is not clear whether an increase in shares would be a prelude to a full bid. Premier could see Nissin as a potential “white knight” amid ongoing negotiations with McCormick, suggested the Nissin spokesperson and a second independent sector advisor. The Nissin-Premier tie-up, promoted in a presentation to shareholders last week, gives Premier Foods CEO Gavin Darby a growth opportunity to fall back on in case negotiations with McCormick fall through, the second advisor added.

Nissin has also signed a commercial partnership with Premier, conditional on the company no longer being under an offer period. This arrangement appears to be a prelude to Nissin taking a larger stake in the company, said the first advisor.

Nissin has a history of being a white knight in a hostile bid. Its largest acquisition was made in 2006 when it interrupted Steel Partners' [NYSE:SPLP] hostile bid for Myojo Foods as a white knight. Nissin offered JPY 870 per share, well above the JPY 700 offered by Steel Partners, as reported.

The potential acquirer also has access to financing, the Nissin spokesperson said. The company can borrow freely from its lead main bank, Mizuho, as well as from Bank of Tokyo Mitsubishi UFJ and Sumitomo Mitsui Banking, he added. At the end of March 2015, it had JPY 94.4bn in cash and deposits while it had JPY 3.9bn in short-term borrowing and JPY 9.5bn in long-term borrowing.

The Nissin-Premier partnership would give Nissin a better position in Europe and a range of new products to sell through its own regional channels, said the spokesperson and the second advisor. Nissin has footholds in Germany and Hungary and distribution networks in Spain and France, but still lacks a UK presence, said the spokesperson. Nissin already has a strong presence in Asia and North America, and expansion in Europe fits its global strategy, noted an independent sector analyst.

However, as McCormick is a global company with an established East Asian presence and could already overlap with Nissin, it would be unlikely that Nissin would seek a similar partnership with Premier under McCormick control, said the second advisor.

Beyond Nissin, other rival bids for Premier are unlikely, said a second sector advisor. Given the size of Premier’s pension scheme, a private equity bidder for the company would be unlikely, said the second advisor, a minority shareholder, and an independent pensions consultant.

A rival bid — even from an industry peer — would be unlikely, as Premier’s eclectic range of brands would be unlikely to fit any single bidder’s current needs, the second advisor said. Moreover, Premier’s pension scheme is liable to frighten off all but the most far-sighted offerors, the second advisor added.

Nissin and Premier had been talking about various business and capital tie-up possibilities, including an acquisition, for some time before McCormick’s initial 52p/share approach in February, said the Nissin spokesperson. Upon McCormick’s second approach, at 60p/share in March, the commercial partnership was reached in a matter of days, said the spokesperson, and Nissin simultaneously bought a 17.3% stake from Warburg Pincus.

Premier Foods did not respond to a request for comment..

Worldwide PC shipments totaled 64.8 million units in the first quarter of 2016, a 9.6 percent decline from the first quarter of 2015, according to preliminary results by Gartner, Inc. This was the sixth consecutive quarter of PC shipment declines, and the first time since 2007 that shipment volume fell below 65 million units.

- Sees stocks stopping rebuilding in Q2

- Positive refinery margins is good for traders

Vivendi and Mediaset unveil a "binding strategic and industrial agreement", which will lead to: i) the development of various initiatives for the production and distribution of audiovisual content; and ii) the creation of a

global OTT delivery platform. The online properties of the two groups in France, Italy, Spain and Germany will converge into a single project. The new project also forecasts expansion in countries where the two groups are not

present.

The proposed deal is cemented by a share swap. As part of the deal (closing expected on 30th September 2016), Vivendi will receive 41.3m shares in Mediaset (3.5%) at €3.23ps, with Mediaset receiving 7.4m Vivendi shares at €18.65ps. Mediaset will transfer 100% of Mediaset Premium (and €120m of net cash) in exchange for 40.5m Vivendi shares (2.96%), valuing Mediaset Premium at €755m. Vivendi and Mediaset have committed themselves to a three-year lock-up agreement on the respective listed shares. Vivendi cannot acquire further shares in Mediaset in the first year, and cannot grow its stake beyond 5% in the second and third year. No board members have been

appointed yet. The agreement between Mediaset and Vivendi is subject to the necessary reviews of the relevant Antitrust authorities, which we expect to be light.

Fundamentally, a positive for Mediaset ... The fact that Mediaset is crystallizing value around a margin/returns dilutive business and in exchange receives a decent liquid stake in Vivendi is good news. Our 2016/17 EPS increases 59/4% as: i) Mediaset Premium losses in 2015 were bigger than expected (€114m vs MSe on €90m); ii) Underlying cost inflation is more constrained (+€10m versus MSe on +€20m) than expected; and iii) This points to better than expected profits in the remaining free-TV operations where ad trends are also pacing slightly better than expected.

...although terms perhaps not as good as expected: i) There is a ~€200m

cash leakage as Mediaset has to first buy Telefonica's 11% stake in Mediaset

Premium and will deconsolidate €120m of cash; ii) The value of Mediaset

Premium of €755m is €150m short of our expectations; iii) Mediaset share

count increases 3.5%; and iv) The existing lock-up that prevents Vivendi from

getting a >5% stake in Mediaset until 2019 will likely remove any M&A

premium that may have been baked into the share price for now. Our SOTP is

updated for the deal, but our €3.7 PT is unchanged. Our 2016 EPS is up 59%

(very low base and benefit of deconsolidation of losses) but our outer years

forecast are more modest, which explains why our base €3.7 PT is unchanged.

* The initiative would provide capital to the sector, avoiding the bail in of some banks and improve investors’ confidence

* Banks should benefit from a new support whilst NPLs disposal may continue to remain a drag

- A new company to stabilise the sector. According to the press, (Sole 24 Ore, 9 April 2016) the government is planning to launch a new company aimed at: 

1) supporting planned rights issues for the weaker domestic banks (private equity) and

2) investing in the NPLs disposals. The details are still unveiled but it seems that the Newco may launch two new funds that will be financed mostly by issuing debt. 

The initial capital should reach EUR2-3bn, increasing up to EUR5bn

Italian institutions among the main shareholders. The Newco should be funded by private investors mainly, even though Cassa Depositi and Prestiti (CDP) may take a 20% stake injecting EUR1bn, whilst banking foundations could also participate for up to EUR500m, pension funds for an undisclosed amount and Italian banks for EUR1.5-2bn, we estimate. According to the Sole 24 Ore, Unicredito could inject EUR500m, Intesasanpaolo a higher amount and UBI a lower amount. No institutions should control more than 20% stake in order to avoid full consolidation of the Newco

in its own balance sheet.

EUR5bn programme enough to provide support to banks…. Details are still unclear, but we assume that the larger fund would have a EUR3.5bn liquidity to invest in supporting banks’ recapitalisation, corresponding to 65% of the four banks bailed in November. Veneto Banca and Banca Popolare di Vicenza are widely expected to rise EUR2.8bn over the next weeks but these operations have already been guaranteed from the two main Italian banks ISP and UCI. As we have no indication of other large capital needs in the sector, we believe that EUR3.5bn could

be adequate to support the sector short term.

… but not to support NPLs disposals. Gross NPLs in February hit EUR196bn. Regardless of considerations on the coverage and the collateral values (Italian banks, new financing structure to improve market price of NPLs, 19 February 2016) a new fund with EUR1.5bn liquidity would make no difference, albeit it may be helpful

to support specific situations to be valued on a bank by bank basis.

ASOS H1 PBT 5% beat, gross margin +40bp and FY16 guidance maintained +3%

ERICB/NOKIA -ve read from Juniper pre-release, JNPR -6% after hours -2%

GIVAUDAN Strong beat driven by a very robust performance in Fragrance +2%

LVMH Fashion & Leather Goods a miss at flat vs. JPMC e 2%. -3%

REPSOL Trading statement yday, broadly inline unch

ROCHE FDA approves Venclexta. Was well anticipated unch

ROCKET Selling 9.1% stake in Lazada for USD 137mm. Px looks good +3%

STAN CHART JPM Reit OW +2%

TELENOR Press: Telenor exiting India will be a last resort option -2%

TRYG Numbers look good and Solvency 2 better than expected +2%

WHITBREAD Costa management change -2%

SHIRE - cited as possible target for Allergan (DealReporter).................+1%

SHELL - Van Beurden says market conditions are challenging,china weakened....-1%

OXFORD INST - strong performance last quarter,reits prev guidance for FY...+0.5%

ASOS - H1 pbt 21.2m+18%.Revs 667.3m+21%.On track sales&margin growth for Fy..+2%

SPORTS DIRECT - To buy freehold property from CIP for 108m..................UNCH

MICHAEL PAGE - Q1 trading particularly good performances in US,Cont Europe...+1%

NEXT FIFTEEN - Fy ptp 16.1m.Revs 129.8m.Confident forward statement..........+1%

SCS - LfL sales +9.1%,profit +13%,strong sales order intake,FY modestly ahead+3%

GALLIFORD TRY - responsible for four out of the seventeen Edinburgh schools.UNCH

BREEDON - Hope acquisition to be referred for in-depth investigation by CMA-0.5%

SOFTWARE RADIO - sees FY results ahead of mkt expec,revs +24%,gd order book..+5%

PORVAIR - gd start to yr,revs +14%,healthy order books,inline..............+0.5%

FALKLAND ISL - FY profits 10-15% lower than prev yr,record cash at £14m....-tive

*GIVAUDAN-Sales 1.15b(1.15),Flav 591m(597),Frag 561m(549),LFL 5.8%..+1%

*LVHM-F&L 0%(2.5),W&S 6%(6),W&J 7%(3.9),Rev 8.62b(8.73),OG 3%.......-5%

*SIKA-Sales 1.274m(1.256),EMEA/NA/Asia all better,outlook ok........+0.5%

*VIVENDI-To acquire 15% of FNAC(+1%),via Capital Inc of €159m.......U/C

*FRAPORT-March paseengers +3.9%,Cargo -1.6%,Q1 passengers +3.3%.....+0.5%

*ROCHE-FDA grants Venclexta accelerated approval....................+0.5%

*CLARIANT-To buy 17% Biospectrum,become Global distributor..........-0.5%

*ROCKET-Sells 9.1% stake in Lazada for $137m to Alibaba Group.......+2.5%

*NOKIA/ALCATEL/ERIC'S-Read across from Juniper after hrs -6%........-2%

*ASOS-Rev £667m(666),PT £21.2m(20.2m,GM +40bp's(7)..................+3%

Asos +2% H1 revs inline, pretax profit 5% beat

Burberry -2-3% Negative read from LVMH numbers, Fashion & Leather weaker

Chr Hansen +1% sees organic revenue growth BETTER

Clariant +0.5% Signed an agreement to acquire a 17 % share in BioSpectrum

Engie +1% Gazprom Agrees on Natgas Pricing w/Engie, Ending Dispute

Ericsson -1-2% US peer JUNIPER -6% after hours post weaker numbers

Fagron -1-2% Q1 revs 5% miss, stock -86% over the past 6 months

Givaudan UNCH Q1 sales 0.5% ahead, org growth slightly better

Italy banks -2% Details on Italian fund Atlante, 5 billion Euros

Kering -2-3% Negative read from LVMH numbers, Fashion & Leather weaker

LVMH -2% Revenue 1% below cons, Fashion & Leather weaker

Michael Page UNCH UK looks slightly worse, EU slightly better

Miners M/P Copper -0.10%, Brent -0.50%, Iron Ore -0.35%, China -0.70%

Nokia -1% US peer JUNIPER -6% after hours post weaker numbers

Norsk Hydro -1% US Peer ALCOA -4.5% after hours, Q1 ahead, guidance weak

Pernod +0.5% Positive read from LVMH no's, cognac better in US market

Remy +1% Positive read from LVMH no's, cognac better in US market

Roche M/P AbbVie, Roche Drug Wins U.S. Approval to Treat Leukemia

Shire M/P Speculated as Potential AGN Target: DealReporter

Sika -1% No's inline, LatAm better offset by weakness in N America

Tryg +2-3% Q1 pretax DK563m vs cons 489m, Solvency II better

Whitbread -1% MD of Costa Chris Rogers to leave