(Les Echos) Orange and Bouygues will continue to discuss during the holidays

Orange and Bouygues will continue to discuss during the holidays

The meetings for the purchase of Bouygues Telecom should continue for the coming days.
Actors must find remedies to satisfy the competition authorities.

No winter break in telecoms. And especially not for consolidation. Discussions between Orange and Bouygues Telecom are well underway for the acquisition of the second by the first. "Christmas time is the best time to move forward," says an industry player. Martin Bouygues and Stéphane Richard, CEO of Orange, should use this time to enter the details of a possible marriage. Some speak of an announcement early in 2016 as possible.
"All the planets are aligned," declares one of the protagonists. "The discussions are going well, said a source familiar with the matter. Bouygues is very motivated. "Since the revelation by Bloomberg of ongoing negotiations, no voice was heard to oppose it. The rumor even ran that Patrick Drahi, owner of Numericable, SFR, could again make an offer to raise the stakes. But it was denied.
Among the subjects to adjust the price appears to pay. But also, and above all, competition issues, whereas the new entity would strengthen Orange, already dominant in France. Future group holds around 50% market share in the fixed and mobile. Whatever the authority, in Paris or Brussels, will address the issue, "the case will not go as a letter in the mail," says an expert.
Industrial logic
The passage from four to three operators can only be done if the market competition remains strong, which means "in the three remaining operators" that there is "one that is driven by a strategy of conquest new clients, "warned on France Info Bruno Lasserre, President of the Competition Authority. The regulatory authorities should also impose asset disposals.
The question is whether the operation can keep his strategic sense if they are too important. Furthermore, if one understands the interest in small Bouygues Telecom lean against a big, some wonder about the industrial logic for the Orange giant still grow on its own market. "If the competition authorities suspect that it is just to eliminate a competitor and improve margins, they will oppose the operation," notes one observer.
Both groups should link the meetings this week. Wednesday night, some believed attend one of them at the wishes of the French Federation of Telecoms (FFT). The main protagonists of the operation shared a long private conversation with the Minister of Economy, Emmanuel Macron, holding a glass of champagne in hand. "The champagne is classic for a banker when we celebrate a deal," smiled an industry leader, referring to the past of Emmanuel Macron Rothschild.

(Les Echos) Orange et Bouygues vont continuer de discuter pendant les fêtes

Orange et Bouygues vont continuer de discuter pendant les fêtes

Les réunions pour le rachat de Bouygues Telecom devraient se poursuivre pendant les prochains jours.
Les acteurs doivent trouver des remèdes pour satisfaire les autorités de concurrence.

Pas de trêve hivernale dans les télécoms. Et surtout pas pour la consolidation. Les discussions entre Orange et Bouygues Telecom vont bon train pour le rachat du deuxième par le premier. « Les fêtes de Noël, c'est le meilleur moment pour avancer », observe un acteur du secteur. Martin Bouygues et Stéphane Richard, le PDG d'Orange, devraient profiter de cette période pour entrer dans les détails d'un éventuel mariage. Certains parlent d'une annonce possible début 2016.
« Toutes les planètes sont alignées », décrète l'un des protagonistes. « Les discussions avancent bien, assure une source proche du dossier. Bouygues est très motivé. » Depuis la révélation par Bloomberg des négociations en cours, aucune voix ne s'est fait entendre pour s'y opposer. La rumeur a même couru que Patrick Drahi, propriétaire de Numericable-SFR, pourrait de nouveau déposer une offre pour faire monter les enchères. Mais elle a été démentie.
Parmi les sujets à régler figure le prix à payer. Mais aussi, et surtout, des questions de concurrence, alors que le nouvel ensemble renforcerait Orange, déjà dominant en France. Le futur groupe détiendrait autour de 50 % du marché dans le fixe et le mobile. Quelle que soit l'autorité qui, à Paris ou à Bruxelles, traitera le dossier, « l'affaire ne passera pas comme une lettre à la poste », affirme un expert.
Logique industrielle
Le passage de quatre à trois opérateurs ne pourra se faire que si la concurrence sur le marché reste vive, ce qui suppose « au sein des trois opérateurs restants » qu'il y en ait « un qui soit animé d'une stratégie de conquête de nouveaux clients », a prévenu sur France Info Bruno Lasserre, président de l'Autorité de la concurrence. Les autorités réglementaires devraient aussi imposer des cessions d'actifs.
Toute la question est de savoir si l'opération peut garder son sens stratégique si elles sont trop importantes. En outre, si l'on comprend bien l'intérêt pour le petit Bouygues Telecom de s'adosser à un grand, certains s'interrogent sur la logique industrielle pour le géant Orange de grossir encore sur son propre marché. « Si les autorités concurrentielles soupçonnent que c'est juste pour éliminer un concurrent et améliorer les marges, elles s'opposeront à l'opération », relève un observateur.
Les deux groupes devraient enchaîner les réunions cette semaine. Mercredi soir, certains ont cru assister à l'une d'elles lors des voeux de la Fédération française des télécoms (FFT). Les principaux protagonistes de l'opération ont partagé un long aparté avec le ministre de l'Economie, Emmanuel Macron, qui tenait une coupe de champagne à la main. « Le champagne, c'est classique pour un banquier quand on fête un deal », souriait un dirigeant du secteur, en allusion au passé d'Emmanuel Macron chez Rothschild.

>>> Asian Update

Asian Mid-session Update: Japan guides FY16/17 bond issuance and GDP; China shares unimpressed with Central Economic Work Conference communique


***Economic Data***
- (CN) China Nov Conference Board Leading Economic Index: 0.6% v 0.3% prior
- (TW) TAIWAN NOV UNEMPLOYMENT RATE 3.8% V 3.8%E
- (UK) DEC GFK CONSUMER CONFIDENCE: 2 V 1E

***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 flat, S&P/ASX +0.2%, Kospi -0.1%, Shanghai Composite -0.5%, Hang Seng -0.1%, Mar S&P500 +0.1% at 2,017

***Commodities/Fixed Income***
- Feb gold -0.3% at $1,077/oz, Feb crude oil +0.7% at $36.06/brl, Mar copper -0.6% at $2.12/lb
- (JP) Japan MoF sells ¥2.33T v ¥2.5T indicated in 0.1% 2-year JGBs; Avg yield: -0.013% (record low) v -0.004% prior; bid-to-cover 4.72x v 5.18x prior
- (CN) PBoC to inject CNY30B in 7-day reverse repos (49th consecutive injection)
- USD/CNY: (CN) PBoC sets yuan mid point at 6.4746 v 6.4753 prior
- USD/KRW: Onshore opens at KRW1,176 v KRW1,177 prior close
- GLD: SPDR Gold Trust ETF daily holdings fall 0.5% to 645.9 tonnes

***Market Focal Points/FX***

- Financial press citing an un-named Japan Govt official said that the planned issuance of deficit financing bonds in FY16 would be at ¥28.8T, which would be an 8-yr low. This was attributed to increased tax revenue arising from stronger company profits. Japan released its FY16/17 guidance, seeing nominal GDP at 3.1% and real GDP at 1.7%. CPI is seen at 0.4% but expected to rise to 1.2% in FY16/17. The report also noted that the recently complied stimulus package to add 0.6% to GDP over next 3 years. FY16/17 bond issuance was guided at ¥34.4T. USD/JPY was last trading at 121.25, with very little action in the session keeping it in a 20 pip range.

China leaders, late Friday, said that they will address long term problems including industrial overcapacity and property glut. Specifics were not released, though seemed to point to looking for new sources of economic growth. The lack of details did not give investors much confidence which sent the Shanghai Composite into negative territory most of the session and dipping -0.5% after break. Currencies related to larger trading partners of China saw gains AUD/USD +0.5% to 0.7228; USD/IDR -1.17% (there is some talk the central bank has been intervening); EUR/USD traded mutely in a 20pip range 1.0924/04. Some of the oil producing country's currencies came under pressure as Brent crude prices hover near their lowest level since 2004; Mexico's Peso, Russia's Ruble and Norway's Krone all hit by falling oil revenue.

The Bank of Korea (BoK) bi-annual financial stability report indicated that fiscal health of household sector has worsened slightly; debt growth outpaces income growth in H2 due to the country's economic expansion being unable to back income. Kospi was under slight downward pressure, while the Korean Won and Singapore dollar made some smaller gains.

***Equities***
US equities / ADRs:
- ALXA: Presents AZ-002 Phase 2a interim results (Staccato alprazolam) in epilepsy patients; generally safe and well tolerated; +41.2% afterhours
- CTAS: Reports Q2 $1.03 v $1.00e, R$1.22B v $1.22Be; +1.5% afterhours
- PFE: Phase 3 study evaluating desvenlafaxine succinate sustained-release formulation in pediatric patients with major depressive disorder did not meet its primary objective; +0.1% afterhours
- SCS: Reports Q3 $0.30 v $0.33e, R$787.6M v $813Me; -20.3% afterhours

Notable movers by sector:
- Consumer discretionary: Skyworth Digital 751.HK +0.6% (acquisition proposal)
Unicharm 8113.JP -1.1% (earning speculation); Bic Camera Inc 3048.JP +1.4% (acquisition); McDonald's Corp 2702.JP -7.2% (considers partial sales in Japanese arm); Kirin Holdings Co 2503.JP -5.3% (cuts guidance)
- Financials: Poly Real Estate Group Co 600048.CN -2.3%, Gemdale Properties and Investment Corp 535.HK -1.9% (China to push property destocking); GPT Group GPT.AU +0.4% (asset sale)
- Industrials: Doosan Infracore Co. 042670.KR -9.1% (to sell machine tool business)
- Technology: Sharp Corp 6753.JP +0.8% , Hon Hai Precision Industries 2317.TW -1.0% (Hon Hai offers investment in Sharp); Toshiba Corporation 6502.JP -10.8% (sell stake in unit, guidance)
- Materials: Zijin Mining 2899.HK +2.1% (adjusts private placement); Posco 005490.KR +0.9% (awarded contract); Kentor Gold KGL.AU -4.8% (cost saving measures); Saracen Mineral Holdings SAR.AU +2.1% (reassess production outlook)
- Energy: Guodian Technology & Environment Group Co 1296.HK -2.7% (asset impairment); Origin Energy ORG.AU -1.8% (cuts exposure to lower oil prices)

FT : Global deal Breaking 2007 records



A surge of deals in the pharmaceuticals, energy and consumer sectors has pushed merger and acquisition activity to an all-time high, surpassing 2007’s peak — but dealmakers have admitted that bond market turmoil and geopolitical instability are their biggest worries for 2016.
This year, global mergers and acquisition volumes have surged to a new record level, with the total value of announced transactions climbing to $4.6tn, compared with $4.3tn eight years ago, according to Thomson Reuters data.

Many of these deals have been for tens or hundreds of billions of dollars — including the blockbuster tie-ups between drugmakers Pfizer and Allergan, brewers AB InBev and SABMiller, and oil majors Royal Dutch Shell and BG Group.
Hunger for growth in a weak economic environment, cheap financing and continued pressure from activist shareholders to boost returns drove many companies to combine.
Dealmakers have said these fundamentals remain broadly intact for 2016. However, many have also warned of growing fears among their peers that a fresh terror attack, like that in Paris last month, or another financial crisis could tarnish businesses’ confidence and bring the M&A run to an end.
“There is clearly more caution in the market than there was a year ago,” said Richard Sheppard, co-head of M&A for Europe, Middle East and Africa at Deutsche Bank.
A growing source of angst in the last part of the year has been the high-yield debt market, following concerns that some highly leveraged energy companies may have trouble servicing their debt. Although this so-called junk bond market is small, the risks of a spillover are realistic, bankers warned.
“Turmoil in the high-yield market will absolutely dampen M&A activity, particularly in the larger, leveraged deals,” said Peter Weinberg, founder of boutique investment bank Perella Weinberg Partners.
But Chris Ventresca, co-global head of M&A at JPMorgan, said this might spur a wave of defensive deals as companies try to tackle problems presented by cyclical downturns. “We’ll see more defensive deals in the commodities-linked sectors, with companies facing significant stock price and balance sheet pressure over the past year.”
M&A cos 1
Overall, dealmakers appeared confident there was scope for more M&A, as merger activity in 2015 as a percentage of market value was below the percentage for 2007. Thomson Reuters’ figures also show the median multiple of deal value to earnings in 2016 was lower than it was in the 2007 boom.
Inside Business

Record year for M&A with big deals and big promises
U.S. one-hundred dollar bills are arranged for a photograph in Hong Kong, China, on Monday, July 20, 2015. The yuan has proven to be among the more resilient emerging-market currencies this year, having fallen less than 0.1 percent versus the dollar as China cut interest rates and the U.S. prepared to raise. Photographer: Xaume Olleros/Bloomberg
Investors should take synergy claims with pinch of salt
“It doesn’t feel like we are in bubble territory yet because the transactions you’re seeing have industrial logic,” said Scott Barshay, a Cravath, Swaine & Moore lawyer, who has worked on more than $250bn worth of deals this year. “Momentum on strategic deals is strong . . . it feels like 2016 is going to look a lot like 2015.”
Wilhelm Schulz, head of M&A at Citigroup for Europe, Middle East and Africa, said it would be harder to replicate the level of activity seen in the US in 2015, after deal values rose 64 per cent year on year, to $2.3tn, according to Thomson Reuters data. However, he noted the Emea region remained well below its 2007 peak and was likely to see some growth.
Mr Ventresca agreed it would be difficult to maintain the level of blockbuster deals next year but said: “We are more likely to see an increase in smaller and midsized deals, as lower valuations have made these companies more attractive acquisition targets, given recent stock price declines.”

>>> US After Hours Summary: EBF +3.2%, SCS -20.1% following earnings/g


After Hours Summary: EBF +3.2%, SCS -20.1% following earnings/guidance; ALXA +41% following Phase 2a study results

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings:  EBF +3.2%, CTAS +1.0%

Companies trading higher in after hours in reaction to news:  ALXA +41.2% (announced interim results of its Phase 2a study of AZ-002 in epilepsy patients; AZ-002 produced a dose-related decrease in mean SPR, the primary endpoint in the study), NTI +9.1% (entered into merger agreement with Western Refining (WNR); NTI unitholders will receive $15.00 in cash and 0.2986 of a share of WNR common stock for each NTI common unit held), BTU +7.6% (disclosed Wyoming Department of Environmental Qualit as completed its review of self-bonding related to permits that were under renewal; reaffirmed self-bonding eligibility for both permits), CYDY +3.7% (FDA cleared CytoDyn for relaxed entry criteria for its ongoing Phase 3 trial)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings:  SCS -20.1%, OFC -3.1%

Companies trading lower in after hours in reaction to news:  RPRX -1.6% (reported that it believes topline results from all three of its ongoing Proellex studies, can be reported by the end of third quarter of 2016), NTAP -1.2% (acquired SolidFire for $870 mln in cash)

>>> US Close Dow+0.72% S&P+0.78% Nasdaq+0.93% Russell+0.60%

Closing Market Summary: Holiday Week Begins on Upbeat Note

The stock market began the trading week a higher note thanks to a final-hour rally that lifted the market back to its opening high. The S&P 500 added 0.8% while the Nasdaq Composite (+0.9%) outperformed slightly.

Overnight, Asian markets had a mixed showing with China's Shanghai Composite (+1.8%) outpacing other regional indices thanks to stimulus hopes. Meanwhile, European indices flashed solid intraday gains, but they slid into the close with Spain's IBEX diving 3.6% due to political uncertainty stemming from general elections that took place over the weekend. Mariano Rajoy's Partido Popular came out on top, receiving 123 votes, but forming a lasting coalition government may be a challenge considering the runner-up Socialist party has ruled out forming a joint government with PP. Spain's 10-yr note sold off in response, sending its yield higher by nine basis points to 1.79%.

Once the attention shifted to the U.S., equity indices spiked out of the gate, hitting their session highs during the opening hour of the trading day. All ten sectors took part in the rally, but the market ran into some resistance that coincided with renewed selling in crude oil, which ended the day lower by 1.3% at $35.79/bbl. Furthermore, the intraday selling in oil may have rekindled concerns about the high-yield debt space. To that point, the iShares iBoxx $ High Yield Corporate ETF (HYG 79.28, -0.25) opened in the green, but slumped to lows, dragging the broader market with it.

The late morning pullback returned the market into the bottom half of its trading range where action was confined until the final hour rally placed the S&P 500 just below its early high. The energy sector (+0.1%) ended the day just above its flat line while the remaining cyclical groups posted stronger gains.

The top-weighted technology sector (+1.1%) spent the day among the leaders thanks to a strong showing from high-beta microchip names. Avago Technologies (AVGO 145.80, +5.60) spiked 4.0% after RBC Capital Markets upgraded the stock while the broader PHLX Semiconductor Index rallied 1.9%.

Similar to technology, industrials (+0.8%) and financials (+0.9%) had a strong showing while the consumer discretionary sector (+0.4%) underperformed. Dow component Disney (DIS 106.59, -1.13) lost 1.1% despite a strong opening weekend for the latest installment of the Star Wars franchise while Chipotle Mexican Grill (CMG 522.01, -19.07) surrendered 3.5%, dropping to a new low for the year amid reports the Center for Disease Control is investigating new E. coli cases at company restaurants.

Treasuries showed losses overnight, but climbed into the green during morning action. The 10-yr note eked out a modest gain, pressuring its yield to 2.20% (-1 bp).

Today's participation was in line with recent averages as roughly 900 million shares changed hands at the NYSE floor.

Investors did not receive any economic data today, but tomorrow, the third estimate of Q3 GDP will be released at 8:30 ET (consensus 2.0%) while October FHFA Housing Price Index and November Existing Home Sales (consensus 5.30 million) will be reported at 9:00 ET and 10:00 ET, respectively.

  • Nasdaq Composite +4.9% YTD
  • S&P 500 -1.8% YTD
  • Dow Jones Industrial Average -3.2% YTD
  • Russell 2000 -6.1% YTD