Betaville
SAB Miller said to have formally appointed Goldman Sachs as defence adviser; speculation in talks with Diageo
Here is a juicy jackanory to set your pulses racing on a Monday morning.
I hear from top sources that SAB Miller has formally appointed heavyweight investment bankers from Goldman Sachs as defence advisers alongside uber grandee dealmakers Simon Robey and Simon Warshaw, Morgan Stanley and JP Morgan Cazenove.
The move signifies SAB Miller clearly expects Anheuser-Busch Inbev and 3G to come up with a formal offer after being outed last week as preparing a takeover bid - although given what has just happened with RSA (see this morning's statement) the FTSE 100 brewer is likely to be particularly cautious about provisionally accepting any takeover offer and allowing the Brazilians to do due diligence.
Still, my man reckon in dark glasses reckons SAB Miller and its army of defence advisers will be working furiously hard on ways to get the best price out of the boys from Brazil.
One option, speculated my man, is a potential tie-up with UK-listed rival Diageo.
So watch this space...or tune into Tip TV later this morning.
SAB Miller declined to comment.
Asian Mid-session Update: Markets decidedly lower after hope for global growth looks bleak
***Economic Data***
- (NZ) NEW ZEALAND Q3 WESTPAC CONSUMER CONFIDENCE: 106.0 V 113.0 PRIOR (lowest level since Sept 2012)
- (UK) SEPT RIGHTMOVE HOUSE PRICES M/M: 0.9% v -0.8% PRIOR, Y/Y 6.4% v 6.4% PRIOR
- (NZ) NEW ZEALAND AUG RETAIL CREDIT CARD SPENDING M/M: 1.1% V 1.7% PRIOR; Y/Y 10.5% V 9.7% PRIOR
- (TH) Thailand Aug Auto Sales y/y: -9.9% v -12.5% prior
- (CO) Colombia July Trade Balance: -$1.97B v -$1.0Be (highest since Jan)
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 closed, S&P/ASX -2.5%, Kospi -1.6%, Shanghai Composite +0.5%, Hang Seng -1.3%, Dec S&P500 -0.5% at 1,940
***Commodities/Fixed Income***
- Dec gold flat at $1,137/oz, Nov crude oil +0.7% at $45.37/brl, Dec copper -0.2% at $2.38/lb
- (AU) Australia MoF (AOFM) sells A$700M in 4.25% 2026 Bonds; avg yield: 2.8083%; bid-to-cover: 2.12x
- (CN) China MOF sells 20-yr bonds, avg yield 3.74%
- (KR) South Korea sells 20-yr bond, avg yield 2.325%
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3676 v 6.3607 prior setting
- USD/KRW: Onshore opens at KRW1,172 v KRW1,162 prior close
***Market Focal Points/FX***
Asian markets remained decidedly pessimistic carrying a risk adverse tone after the FOMC held off on any action in the US on Friday. Saw some flow out of riskier assets and into debt vehicles, Australian and New Zealand bonds saw yields decline ~3-5bps.LME copper fell to a 2-week low of $5,240/ton as worries continue that China is truly slowing and will not be consuming at prior rates.
Greece elections held over the weekend saw the Syriza party take yet another victory and plan to form a government within 3-days. EUR/USD seemed unconcerned even gaining slightly to 1.1318 with a bottom of 1.1282 on a glimmer of reduced turmoil.
New Zealand consumer confidence fell to a 3-year low causing the kiwi to drop 0.2% to 63.67. Yen was little changed with Japan closed until Wednesday session. The USD/Won fell nearly 0.8% to 1,172.55
Australia new PM Turnbull announced his new cabinet, with former Treasurer Hockey vowing to step down from Parliament with no plans to seek a front bench position in the new government. Strength in Asciano was attributed to him being replaced and the FIRB will approve takeover by Brookfield Infrastructure for A$12B in cash and stock (announced in Aug).
The independent survey, China Q3 Beige Book, indicated that Chinese companies are too pessimistic over economy and that the country is not collapsing. The survey attributes the excessively negative view to the June stock market collapse and unexpected currency action in August. The survey said, "Those touting China's sudden fragility are either exaggerating current problems or have entirely missed the slowdown of the past several years."
***Equities***
US equities / ADRs:
- XRS: To acquire Firstleap Education, financial terms not disclosed
- PETCO.IPO: Renewed talk that KKR, Friedman and Hellman have made prelim offers - NY Post
- BABA: $105B (63% of shares) lockup period has ended
Notable movers by sector:
- Consumer discretionary: COFCO Tunhe Co 600737.CN +10.0% (updates on SOE reform); Fonterra FCG.NZ +1.8% (updates on job cut)
- Financials: Sunac China Holdings 1918.HK +5.5% (not to proceed agreement with Yurun); China Vanke 000002.CN +0.2% (first batch of share repurchase); Suning Universal Co 000718.CN +7.2% (sets up jv for tv and game business)
- Industrials: China Railway Group 601390.CN +7.0% (restructuring plan);
Hubei Aviation Precision Machinery Technology 002013.CN +10.0%, AVIC Aircraft 000768.CN +5.1%, Sichuan Chengfei Integration Technology 002190.CN +4.3% (China boosts SOE reform in several sectors); Worley Parsons WOR.AU -4.3% (contract signed)
- Technology: Coolpad Group 2369.HK +12.9% (updates on jv with Qihu); Hon Hai Precision Industries 2317.TW -1.5% (speculation that Hon Hai bids for LCD unit)
- Materials: China Polymetallic Mining 2133.HK -4.6% (leadership changes); Lynas Corp LYC.AU -1.3% (FY15 result); Beadell Resources BDR.AU -1.9% (H2 guidance); Gold Road Resources GOR.AU +1.2% (speculation on bid)
- Energy: Santos STO.AU -1.1% (CEO's comment)
-Telecom: China Mobile 941.HK +0.1% (Aug operation data)
- Utilities: China National Nuclear Power Corporation 601985.CN +2.8% (UK Fin Min's comment)
Overheard: A Chorus of Warnings on Valuations
After opting to hold rates lower last week, Janet Yellen didn’t express concern about froth in the stock market or in biotech valuations.
But the Nasdaq Biotechnology Index is up by more than 40% since she warned about it during Congressional testimony in July 2014. Pharmaceutical executives are less sanguine. For example, Roche Holding’s chief, explaining why it is unlikely to pursue deals for later-stage products, used the word “bubble” in an interview with Reuters last Tuesday. This followed similar warnings by Eli Lilly’s boss in July. True, pharmaceutical companies looking for products would love to see cheaper biotech valuations as they hunt for acquisitions. But Ms. Yellen had no ulterior motives when prices were even lower.
Even if prices have defied such biotech skepticism, the chorus of warnings is only getting louder.
Ferrexpo mulls appointing adviser for restructuring which could involve stake sale
Ferrexpo, the UK-listed iron-ore producer, is looking into appointing an external adviser to work on a wider restructuring process than is already under way, The Sunday Times reported without identifying sources.
The restructuring options could include a cut to the dividend, cost-cutting measures or a stake sale to a party seeking a strategic investment, the report said. It noted that the company is cash-generative and may thus be an attractive prospect to a potential buyer.
The board of Ukraine-based Ferrexpo has scheduled an emergency meeting for later this week following last week’s collapse of Bank Finance and Credit, a bank which holds USD 174m of Ferrexpo’s total USD 280m cash on deposit, the report said. It noted that Ferrexpo’s share price plummeted by one-third on news of Bank F&C’s insolvency, leaving the iron-ore business with a GBP 280m (USD 435m) market cap.
Ferrexpo has net debt of USD 653m and had already entered negotiations to amend some of its loan terms prior to Bank F&C’s insolvency, the report said.
Ferrexpo is 50% owned by tycoon Kostyantin Zhevago, who also owns Bank F&C, the item stated, adding that a 24% Ferrexpo stake is owned by the investment firm BXR. Zhevago’s willingness to come up with new funds may prove key to the company’s future ownership, the report said.
Sunday Times
For T-Mobile It’s a September to Remember
T-Mobile is on pace to best its second-quarter subscriber additions, and it looks like an increasingly attractive acquisition target.
What a difference 12 days can make for T-Mobile US.
Speaking last Friday at an investor conference, Chief Executive John Legere said the wireless carrier had already surpassed the 2.1 million net subscriber additions it posted in the second quarter with 12 days left in the third. Its net additions for postpaid customers and postpaid phone subscribers are also on track to exceed second-quarter figures.
The carrier, whose shares have risen 37% over the past year, has been snatching market share, sending the rest of the industry reeling. Shares of Verizon Communications and AT&T have fallen by 10% and 7% over the period, respectively. Sprint’s are down by 35%.
For T-Mobile, as for the rest of its industry, the last 12 days of the quarter are particularly meaningful. For one, September usually brings a stepped-up pace of subscriber activity as people return from summer vacations and school starts. And the retail launch of Apple’s new iPhone is scheduled for this Friday. That should make for a busy final weekend of the quarter in T-Mobile’s retail stores.
Granted, the carrier’s growing subscriber base makes network investment even more important. But Mr. Legere said his company would bid aggressively in a coming government spectrum auction. He noted that cable providers might seek mobile assets as content moves to the Internet. That encouraged the notion that they could target T-Mobile.
For investors, there are still plenty of reasons to ring up T-Mobile.
O2 to become public company again after merger with Three
O2 is being lined up to become a public company again under plans by CK Hutchison, after it has completed its £10.3bn acquisition to create the UK’s largest mobile telecoms group.
CK Hutchison, which is controlled by Hong Kong billionaire Li Ka-shing, is buying O2 from Telefónica, and will merge it with its Three network depending on regulatory approval.
In an interview with the Financial Times, Canning Fok, co-chief executive of the Hong Kong group, said the combined UK business would be run by David Dyson, Three’s chief executive.
“David Dyson is our leader here and so he will be the leader [of the new business],” Mr Fok said.
This will raise questions over the future of O2 boss Ronan Dunne, although other roles could exist in the wider group. A spokesperson for Mr Dunne confirmed that he will step down from his position as chief executive of O2 after the deal had completed.
Mr Fok added that an initial public offering of the combined £15bn business has been discussed with external investors, which have committed about £3bn to fund the deal. Investors include the CPP Investment Board and Singapore’s GIC.
O2 was last listed as a separate business after being split from BT in 2003.
“There is a liquidity requirement by our investor group and one way to provide will be an IPO, which we will support,” said Mr Fok, who declined to give a timeframe.
“Its only reasonable that you give yourself some time. No one is a magician . . . you need to work on business, and get the customer happy.”
He said the group would initially continue to use O2 and Three as brands. “You can assume that it might become Three. But there is a twist,” he said. “We haven’t made the final decision yet. We have a certain time we can use O2. It’s a strong brand.”
Mr Fok was confident that Hutchison could agree a deal with the regulators to pass his acquisition of O2 in the UK and the merger with Wind and Three in Italy.
Analysts have warned that both deals might face difficulties after a similar deal in Denmark was pulled this month in the face of opposition from the antitrust regulator in Brussels.
“This market is full of competition. We have done this exercise in Austria and Ireland and we will come up with a solution in which everyone is comfortable,” he said.
Denmark was a different sort of merger to the UK, he added, given the attempt to merge the second- and third-largest groups, which could have led to a near duopoly.
He also that he would talk to Ofcom, the UK telecoms regulator, about the future of a complicated network sharing arrangement. O2 shares a network with Vodafone, while Three shares with EE, but both rival groups would resist being left on their own in a three-company market.
Mr Fok said it would not be practical to offload the extra traffic on one network immediately.
“Three is 45 per cent of the data in the UK so it’s not like one day I can make a decision to switch to this or that. We have to work with the regulator to see what is the best approach,” he said.
Nike’s Challenge: Staying Ahead of the Pack
Company’s growth has been helped by athleisure phenomenon
Nike Inc. has long been running in a league of its own but young rivals are trying to muscle in.
Under Armour Inc. on Wednesday forecast it would double revenues over the next three years to $7.5 billion. And Skechers USA Inc. has vaulted into the No. 2 spot among sports-footwear makers in the U.S.
With $30.6 billion in sales in its last fiscal year, Nike’s position as the world’s best seller of sports attire and footwear is solid—and its challenge is maintaining its giant lead.
When the company reports first-quarter earnings Thursday, its sales growth faces a tough comparison to last summer’s World Cup mania. Analysts polled by FactSet forecast revenues of $8.2 billion and earnings per share of $1.19, up slightly from $7.9 billion and $1.09 a year ago.
A Citigroup research report notes that Nike’s North American region is facing its toughest quarterly comparison since June 2012. A year ago, the company posted 15% growth in future orders for the region, an important metric that estimates growth in wholesale orders for the coming six-month period and is considered an indicator of demand for Nike products.
Citi says Nike needs to maintain a projected double-digit growth rate of future orders to avoid a hit on its shares. Nike stock is up 19% so far this year, making it the second-best performer in the Dow Jones Industrial Average after UnitedHealth Group Inc.
Nike’s recent growth has been helped by something that has less to do with sweat and more to do with style—the athleisure phenomenon, which has been called the biggest trend to hit fashion since the skinny jean. But there, too, it is facing new competition. Spandex-infused styles were trotting the runways of New York Fashion Week, highlighting the full breadth of Nike’s ever-growing competition, which now extends beyond sporting goods bins to high-end luxury.
A recent trouble spot for Nike has been in its legacy product: running footwear. The proliferation of casual styles at family-channel stores has boosted Skechers into its second-place sports-footwear ranking, according to industry tracker NPD Group. This past spring, Nike executives said midprice running shoes weren’t “performing as well as we would like.”
The Skechers surge shows Nike isn’t insulated from competition, though Nike’s setback may have been short-lived. On its last earnings call in June, Nike Brand President Trevor Edwards said the category was rebounding.
Meanwhile, on the playing field, Under Armour has gotten a lot of buzz from its sponsorship for golfer Jordan Spieth, basketball point guard Stephen Curry, and football quarterback Tom Brady all of whom won major championships this year. German-based Adidas AG, fighting to combat its declining U.S. market share, recently signed NBA all-star James Harden and NFL MVP Aaron Rodgers, and announced it would take over the NHL league outfitting rights in two years.
Furthermore, central to Nike’s task of maintaining its dominance will be dealing with succession after founder and chairman Phil Knight retires, something that is expected next year. The company laid the groundwork for his exit in June, transferring much of his supervoting class A shares to a separate holding company, and at a recent shareholders’ meeting ratified the election of Mr. Knight’s son Travis to the board of directors.
The company is also expected to announce its first investor day meeting in two years, for later this year.
Dow-0.30% S&P-0.15% Nasdaq+0.10% Russell+0.48% Nikkei-1.06% Hang Seng+1.94% Shanghai -3.20% EuroStoxx-0.96% FTSE-0.22% CaC-0.28% Dax-2.05% Ibex+1.12% MIB-1.14% SMI -0.38% SXXP-0.27%
In one of the most uncertain monetary policy announcements in years, the Fed held rates near zero and left many market watchers nonplused with a mixed message about the future. The Fed noted additional improvement in the labor market, but justified a further delay in rate liftoff by citing new concerns about global market volatility. Disappointing US retail sales and industrial production data during the week gave the Fed decision some additional cover. Elsewhere, the Euro Zone reported more anemic inflation data, while the BOE said it was on track for contemplating its own rate move around the turn of the year. Ahead of the FOMC meeting, a risk-on sentiment sent equities higher, but they retrenched after the Fed's cautious tone about overseas developments (exacerbated by triple witching expiry on Friday). For the week, the DJIA lost 0.3%, the S&P500 dipped 0.1%, and the Nasdaq edged up 0.1%.
Macro :
- Japan Expected to Maintain Economic Outlook Next Week: Nikkei
- ECB’s Coeure Says Greek Euro-Exit ‘Completely Ruled Out’
- Fed Hike Would Add Insult to Injury for EM: BlackRock’s Goldberg
- Bullard Says Fed ‘Ready to Go’ on Rates in Oct. if Warranted
- Moody's cuts France sovereign debt rating one notch to Aa2 from Aa1; revises outlook to Stable from Negative
Keep an eye on :
- ABI BB : AB InBev Pondering Move to U.K. to Avoid Tax Bill: Telegraph
- AAPL US : Reportedly had discussions earlier this year with the California DMV, leading to increased speculation about a potential 'Apple Car' - UK press
- BAYN GY ; Bayer Says Covestro Share Sale to Raise EU2.5b
- DLG GY : Dialog Semiconductor to Buy Atmel for About $4.6 Billion
- FCX US : Icahn discloses stake increased to 8.8% (up from 8.46% in Aug) - 13D/A filing
- FXPO LN : Ferrexpo Considers Hiring Adviser for Restructure: Sunday Times
- IBE SM : Iberdrola, UIL File Merger Settlement in Connecticut
- IHG LN : InterContinental Hotels poised to clinch acquisition of Fairmont for GBP 1.9bn; eyes Moevenpick
- ZIL2 GY : ElringKlinger Lowers Outlook for 2015 Adj. Ebit
- LEG GY : LEG Immobilien to see Deutsche Wohnen make voluntary public takeover offer
- LEO GY : Leoni Sees 2016 Consolidated Revenue ~EU4.8b, Saw EU5b
- RL US : Barron's Article, overseas expansion and rising margins could lift the stock 20% or more.
- CFR VX : Jaeger May Sell Regent St. Lease to Coach, Relocate:Sunday Times
- ROG VX : Roche’s Esbriet Reduces Risk of Death by 38% After 2 Yrs: Study
- VOD LN : Vodafone Considers Selling Minority Stake in Indian Unit: Times
- VOW3 GY : Volkswagen Sued Over Claims Its Cars Cheat on Emissions Testing
- VOW3 GY : Volkswagen Plans to Buy Red Bull Formula 1 Team, BBC Says
- VOW3 GY : Volkswagen CEO Says Personally Sorry for Broken Trust