12:12:57 RTRS - SAFRICA'S FAWU UNION SAYS ARGUMENT THAT SABMILLER MERGER WILL NOT LEAD TO JOB LOSSES IS "DISHONEST"
LVMH Moet Hennessy Louis Vuitton SA - Portfolio momentum offsets F&LG softening
* LVMH delivered solid overall Q3 organic sales growth of 7%
LVMH reported 9M sales of €25.3bn (+18% y/y) as group organic sales growth came in at 7% in Q3
which was a small beat to Bloomberg consensus (5.4%). On a two-year stacked basis organic sales
growth momentum remained stable in Q3 compared to H1.
* Major cognac volume growth in Q3 but F&LG slowed more than expected
Enhanced company reporting now gives exact quarterly performance and confirmed three beats and one
miss by division. The overall beat at group level was led a very strong performance in Wines & Spirits (Q3
16% organic vs cons 5%), driven by the significant rebound in cognac shipments to China (UBSe Q3
total vol growth c22-26%), while Champagne volume growth also accelerated in Q3 (UBSe Q3 total vol
growth c6-10%). However the all-important Fashion & Leather Goods division was a notable miss as
growth slowed to 3% organic in Q3 (cons 6%) – detail is very limited at this stage. From a margin mix
perspective, the acceleration in Wines & Spirits should broadly offset the lower than expected growth in
Fashion & Leather Goods. Across the other divisions, good momentum was sustained in both Perfumes &
Cosmetics (Q3 7%, ahead of cons 4.5%) and Watches & Jewelry (Q3 11%, ahead of cons 7%) despite
toughening comps at both, while Selective Retailing was in line (5%).
* Key focus areas for the call tomorrow (3pm CET)
Key focus areas on the call tomorrow include (1) specific regional developments in F&LG, (2) feedback on
Golden Week sales, (3) price/mix development in cognac and (4) the drivers (and sustainability of) the
rebound in cognac shipments to China.
* Valuation: Our €186 price target is DCF-based
Following the strong share performance into results we think the F&LG softening may lead to a mixed
reaction at open tomorrow despite the overall organic growth beat.
From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: Oct 13 2015 08:47:45
Subject: (SG) LVMH : Status change confirmed: sales growth above peers an
Status change confirmed: sales growth above peers and lesser sales mix deteriorationUpdate Our recent rating upgrade to Buy was notably based on two sales factors: a) Salesgrowth above peers. Q3 reporting is only starting, but we expect LVMH’s 7% Q3 organicgrowth to stand above the sector, as in H1 (6% vs 4%). b) Less sales mix deterioration. Oneof the issues on LVMH in recent years was underperforming sales growth by high-margin LVand beverages (combined c.40% of group sales) and outperformance by low-margin retailing. InQ3, for the second quarter in a row, LVMH’s sales mix is now more stable. Wines / spirits (14%of Q3 sales vs 13% in Q3 2014): 16% organic growth reflects the rebound on a very low comp.basis in China (55% volume sell-in drop in Q3 2014), which materialised even though the selloutpattern is still falling and the XO volume sell-in drop (over 20%) is larger than initially hopedfor by the group. Overall, cognac volumes up 12% (-5% in Q3 2014) and champagne volumesup 5% (+ 3% in H1) point to a solid pattern that is likely to continue in coming quarters (easycognac comp. basis, sustained US dynamics). Fashion / leather goods (34% of sales vs 36%in Q3 2014): 3% Q3 organic growth is disappointing and reflects the lack of pricing power inmost brands ex LV (low euro), the repositioning of M Jacobs and D. Karan, and a slightly hardercomp. basis. Nevertheless, at 5% vs 6% for the group, the segment’s 9m organic growth rate isclose to the group average (compared with 3% vs the group at 5% for FY 2014). Others: the7% beauty organic growth (H1 at 6%) is remarkable given the double-digit comp. basis andreflects the stronger world market and related dynamics in US / Europe and in make-up /perfumes, which play more to LVMH strengths than the previous skincare / Asia market focus.Likewise, the 11% watches / jewellery organic sales growth (H1 at 10%) is remarkable given thehighest quarterly comp. basis of the year, the anniversarying of the Rome Bulgari flagshipreopening and the transition at TAG Heuer, and reflects a double-digit pace at Bulgari andHublot. Lastly, selective retailing growth is stable vs H1 at 5%, despite the further deteriorationin Hong Kong / Macau affecting DFS (SGe a third of segment sales, o/w c.40% in HK/Macau),with double-digit growth at Sephora (SGe: 50% of segment sales).SG view While we expect comments on LV at today’s conf call (3:00 PM CET; 33(0)1 70 7709 40), SGe will stay broadly unchanged. Overall, we still think that a) with sector trends muted,investor risk is lower on large/diversified groups with dominant/established brands; b) unlike inthe past, all the group’s large brands (ex DFS) have a satisfactory performance.How we value the stock SG’s TP is the average of SOP/DCF (9.5% WACC, 4% LT growth)—
Status change confirmed: sales growth above peers and lesser sales mix deterioration
Update Our recent rating upgrade to Buy was notably based on two sales factors: a) Sales
growth above peers. Q3 reporting is only starting, but we expect LVMH’s 7% Q3 organic
growth to stand above the sector, as in H1 (6% vs 4%). b) Less sales mix deterioration. One
of the issues on LVMH in recent years was underperforming sales growth by high-margin LV
and beverages (combined c.40% of group sales) and outperformance by low-margin retailing. In
Q3, for the second quarter in a row, LVMH’s sales mix is now more stable. Wines / spirits (14%
of Q3 sales vs 13% in Q3 2014): 16% organic growth reflects the rebound on a very low comp.
basis in China (55% volume sell-in drop in Q3 2014), which materialised even though the sellout
pattern is still falling and the XO volume sell-in drop (over 20%) is larger than initially hoped
for by the group. Overall, cognac volumes up 12% (-5% in Q3 2014) and champagne volumes
up 5% (+ 3% in H1) point to a solid pattern that is likely to continue in coming quarters (easy
cognac comp. basis, sustained US dynamics). Fashion / leather goods (34% of sales vs 36%
in Q3 2014): 3% Q3 organic growth is disappointing and reflects the lack of pricing power in
most brands ex LV (low euro), the repositioning of M Jacobs and D. Karan, and a slightly harder
comp. basis. Nevertheless, at 5% vs 6% for the group, the segment’s 9m organic growth rate is
close to the group average (compared with 3% vs the group at 5% for FY 2014). Others: the
7% beauty organic growth (H1 at 6%) is remarkable given the double-digit comp. basis and
reflects the stronger world market and related dynamics in US / Europe and in make-up /
perfumes, which play more to LVMH strengths than the previous skincare / Asia market focus.
Likewise, the 11% watches / jewellery organic sales growth (H1 at 10%) is remarkable given the
highest quarterly comp. basis of the year, the anniversarying of the Rome Bulgari flagship
reopening and the transition at TAG Heuer, and reflects a double-digit pace at Bulgari and
Hublot. Lastly, selective retailing growth is stable vs H1 at 5%, despite the further deterioration
in Hong Kong / Macau affecting DFS (SGe a third of segment sales, o/w c.40% in HK/Macau),
with double-digit growth at Sephora (SGe: 50% of segment sales).
SG view While we expect comments on LV at today’s conf call (3:00 PM CET; 33(0)1 70 77
09 40), SGe will stay broadly unchanged. Overall, we still think that a) with sector trends muted,
investor risk is lower on large/diversified groups with dominant/established brands; b) unlike in
the past, all the group’s large brands (ex DFS) have a satisfactory performance.
How we value the stock SG’s TP is the average of SOP/DCF (9.5% WACC, 4% LT growth)—
We upgrade Allianz to OW for one key reason: We expect nonlife in
Continental Europe to continue to improve thanks to Solvency 2, low
inflation and weak growth. Solvency 2 is a positive because higher nonlife
margins will help composite European insurers with both life and nonlife
fund rising requirements for life capital under the directive. We raise our
price target to €175 from €145, rolling forward to Dec16. We also
downgrade AXA to N for one major reason: We believe that Allianz is
relatively more attractive in particular due to its greater exposure to
German nonlife. We retain our price target unchanged at €26.1, also
rolling forward to Dec16.
note attached
Results: A Mixed Bag – Beat in 3Q15 Group Sales (+7%) but Weak Fashion & Leather Trends to Temper Enthusiasm Near-Term
Citi's Take — Shares performed well on the publication of strong 1H15 results but
came under pressure in August on renewed China-related concerns (poor macro
data, RMB devaluation and Shanghai stock market correction). Solid 3Q15 sales
(+7% in constant FX vs. consensus +6%) suggest these concerns were possibly
overdone, however 3% constant currency sales growth in Fashion & Leather
compares unfavourably with consensus of ~+6% and +10% in 2Q15, while the
strong beat in Cognac in China might have been artificially driven by
undershipments in 3Q14 (depletions for XO and VSOP in China remain negative, in
our estimates). Following strong recent share price performance (+11% over the
past week), the miss on this high-margin division could drive share price pressure
near-term in a quarter where the market traditionally focuses on sales momentum.
While regional growth disclosure will not be available until tomorrow’s conference
call, we would expect the following regional trends: i) continued double-digit sales
momentum in Europe still driven by tourism and parallel markets, albeit possibly
moderating from +14% in 2Q15 given price increases in 2Q15 and RMB weakness
(-5% vs. EUR since the RMB devaluation announcement in August); ii) double-digit
growth in Japan normalising from +34% in 2Q15, albeit against a ~15pp tougher
comparative (+5% in 3Q14 vs. -11% in 2Q14); management indicated 3Q15 sales
growth accelerated relative to 1H15 (+8%); iii) solid growth in the US (~+8-10%
estimated), a modest slowdown relative to 1H15 and a respectable outcome
considering the US stock market correction over the summer and US dollar strength
affecting inbound tourism and supporting outbound travel; and iv) continued
weakness in Greater China given negative wealth effects from stock market
correction and RMB devaluation, although recent data points of the Golden Week
holiday in Mainland China and Hong Kong have been on balance better than
expected.
Implications — Given i) a ~1% beat on reported 3Q15 revenues and better-than
expected constant currency sales growth (+7%); ii) adverse divisional mix (highmargin
Fashion & Leather underperforming, Watches & Jewelry outperforming and
artificial Cognac recovery in China); and iii) limited outlook comments, in particular
greater uncertainty from Louis Vuitton’s renewed quarterly sales volatility, we expect
consensus FY15 EBIT of €6.59bn (+15% YoY) and FY16 EBIT of €7.24bn (+10%
YoY) to be trimmed down by a low single-digit percentage.
CS
ADP +1% Boost 2015 traffic forecast to at least 3% vs 2.6%
Autos -1% China September Retail auto sales rise 2.5%, CS on 4-5%
Barclays +2% Preparing to name James Staley as its next CEO
Bellway +2% FY solid, FY revenues 2% beat, pretax profit 4% beat
Diageo +1% Positive read from LVMH figures regarding Spirits
Faurecia -1% VW seeks EU3bn in cost cuts at suppliers, Handelsblatt
KPN -1-2% CS downgrade to NEUTRAL (Cautious on Tele2 4G launch)
K+N +1-2% EBITDA and EBIT ahead, raises FY EBIT margin
Leoni -15-20% Profit warning due to charges in Wiring Systems Division
LVMH UNCH No's light, Fashion & Leather org growth decelerating
Michael Page +2% Numbers better, Europe a bright spot
Miners -1% Copper -1.00%, Brent -3.15%, Iron Ore +0.25%, China -0.19%
Nexans -2% Read across from Leoni profit warning
Oils -1% Oil -3% overnight and -5% in 24 hours
Pirelli M/P CS downgrade to NEUTRAL (Limited upside)
SAP +2-3% Pre-announced, revenues and operating margins better
Schmolz -5-10% Sees poorer outlook for H2, cuts FY EBITDA
Sonova +1% Analyst day, announced the launch of CIC hearing device
MF
*SAP-IFRS Rev 4.99b(4.93),OP 1.62b(1.53),Cloud 4.12b(4.11)..........+4%
*REPSOL-In talks with EDP and others to sell Gas Unit-Expansion.....+1%
*LEONI-Will miss 2015 Ebit goal and lowers 2016 Rev target..........-8%
*K&N-Net 185m(171.2),Ebit 230m(221.2),targets Ebit margin of 5%.....+1.5%
*LVMH-Q3 Rev 8.58b(8.53),O/G +7%(5.4),W&S/P&C/Watches all better....-1% to 2%
*BARCLAYS-Set to name ex-JPM Banker Jes Staley as new CEO...........+1%
*HOCHTIEF-QIA sells 7m shs(10% stake) at €77(81.78),via MST.........-3%
*ADP-Raises FY 2015 Traffic growth f/casts to at least 3%...........+1%
*VESTAS-Considers extra Divi,share b/back,no acquisition spree......+2%
*BOSSARD-Sales 162m(163.5),Org Sales Grth +0.8%(1.5),FY unch........-0.5%
SABMiller plc ("SABMiller") and Anheuser-Busch InBev SA/NV (“AB InBev”)
Agreement in principle and extension of PUSU deadline
The Boards of AB InBev (Euronext: ABI) (NYSE: BUD) and SABMiller (LSE: SAB) (JSE: SAB) announce that they have reached agreement in principle on the key terms of a possible recommended offer to be made by AB InBev for the entire issued and to be issued share capital of SABMiller (the “Possible Offer”).
Under the terms of the Possible Offer, SABMiller shareholders would be entitled to receive GBP 44.00 per share in cash, with a partial share alternative (“PSA”) available for approximately 41% of the SABMiller shares.
The all-cash offer represents a premium of approximately 50% to SABMiller’s closing share price of GBP 29.34 on 14 September 2015 (being the last business day prior to renewed speculation of an approach from AB InBev).
The PSA consists of 0.483969 unlisted shares and GBP 3.7788 in cash for each SABMiller share, equivalent to a value of GBP 39.03 per SABMiller share on 12 October 2015, representing a premium of approximately 33% to the closing SABMiller share price of GBP 29.34 as of 14 September 2015. Further details of the PSA are set out below.
In addition, under the Possible Offer, SABMiller shareholders would be entitled to any dividends declared or paid by SABMiller in the ordinary course in respect of any completed six-month period ended 30 September or 31 March prior to completion of the possible transaction, which shall not exceed USD 0.2825 per share for the period ended 30 September 2015 and a further USD 0.9375 per share for the period ended 31 March 2016 (totalling USD 1.22 per share) and shall not exceed an amount to be agreed between AB InBev and SABMiller in respect of periods thereafter (which shall be disclosed in any announcement of a firm intention to make an offer).
The Board of SABMiller has indicated to AB InBev that it would be prepared unanimously to recommend the all-cash offer of GBP 44.00 per SABMiller share to SABMiller shareholders, subject to their fiduciary duties and satisfactory resolution of the other terms and conditions of the Possible Offer.
Antitrust and reverse break fee
In connection with the Possible Offer, AB InBev would agree to a "best efforts" commitment to obtain any regulatory clearances required to proceed to closing of the transaction. In addition, AB InBev would agree to a reverse break fee of USD 3 billion payable to SABMiller in the event that the transaction fails to close as a result of the failure to obtain regulatory clearances or the approval of AB InBev shareholders.
Pre-conditions
The announcement of a formal transaction would be subject to the following matters:
•unanimous recommendation by the Board of SABMiller in respect of the all-cash offer, and the execution of irrevocable undertakings to vote in favour of the transaction from members of the SABMiller Board, in a form acceptable to AB InBev;
•the execution of irrevocable undertakings to vote in favour of the transaction and to elect for the PSA from SABMiller’s two major shareholders, Altria Group, Inc. and BevCo Ltd., in each case in respect of all of their shareholding and in a form acceptable to AB InBev and SABMiller;
•the execution of irrevocable undertakings to vote in favour of the transaction from AB InBev’s largest shareholders, the Stichting Anheuser-Busch InBev, EPS Participations SaRL and BRC SaRL in a form acceptable to AB InBev and SABMiller;
•satisfactory completion of customary due diligence; and
•final approval by the Board of AB InBev.
The Board of AB InBev fully supports the terms of this Possible Offer and expects (subject to the matters above) to give its formal approval immediately prior to announcement.
AB InBev reserves the right to waive in whole or in part any of the pre-conditions to making an offer set out in this announcement, other than c) above which will not be waived.
The conditions of the transaction will be customary for a combination of this nature, and will include approval by both companies’ shareholders and receipt of antitrust and regulatory approvals.
In view of the timetable for obtaining some of these approvals, AB InBev envisages proceeding by way of a pre-conditional scheme of arrangement in accordance with the Code.
The cash consideration under the transaction would be financed through a combination of AB InBev’s internal financial resources and new third party debt.
Further details of the PSA
The PSA comprises up to 326 million shares, which will be available for approximately 41% of the SABMiller shares. These shares would take the form of a separate class of AB InBev shares (the “Restricted Shares”)1, with the following characteristics:
Unlisted and not admitted to trading on any stock exchange;
Subject to a five-year lock-up from closing;
Convertible into AB InBev ordinary shares on a one for one basis after the end of that five year period;
Ranking equally with AB InBev ordinary shares with regards to dividends and voting rights; and
Director nomination rights.
SABMiller shareholders who elect for the partial share alternative will receive 0.483969 Restricted Shares2 and GBP 3.7788 in cash for each SABMiller share.
Extension of the PUSU deadline
In accordance with Rule 2.6(a) of the Code, AB InBev was required, by not later than 5.00 pm on 14 October 2015, to either announce a firm intention to make an offer for SABMiller in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for SABMiller, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.
In accordance with Rule 2.6(c) of the Code, the Board of SABMiller has requested that the Panel on Takeovers and Mergers (the "Panel") extends the relevant deadline, as referred to above, to enable the parties to continue their talks regarding the Possible Offer. In the light of this request, an extension has been granted by the Panel and AB InBev must, by not later than 5.00 pm on 28 October 2015, either announce a firm intention to make an offer for SABMiller in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for SABMiller, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of the Panel in accordance with Rule 2.6(c) of the Code.
AB InBev reserves the following rights:
•to introduce other forms of consideration and/or to vary the composition of consideration;
•to implement the transaction through or together with a subsidiary of AB InBev or NewCo or a company which will become a subsidiary of AB InBev or NewCo;
•to make an offer (including the all-cash offer and PSA) for SABMiller at any time on less favourable terms: •with the agreement or recommendation of the Board of SABMiller;
•if a third party announces a firm intention to make an offer for SABMiller on less favourable terms; or
•following the announcement by SABMiller of a whitewash transaction pursuant to the Code; and
•to reduce its offer (including the all-cash offer and PSA) by the amount of any dividend that is announced, declared, made or paid by SABMiller prior to completion, save for ordinary course dividends declared or paid prior to completion, which shall not exceed USD 0.2825 per share for the period ended 30 September 2015 and a further USD 0.9375 per share for the period ended 31 March 2016 (totalling USD 1.22 per share) and shall not exceed an amount to be agreed between AB InBev and SABMiller in respect of periods thereafter (which shall be disclosed in any announcement of a firm intention to make an offer).
The announcement does not constitute an offer or impose any obligation on AB InBev to make an offer, nor does it evidence a firm intention to make an offer within the meaning of the Code. There can be no certainty that a formal offer will be made.
A further announcement will be made when appropriate.