(Barron's) Telecom Italia, Enel Look Cheap

Telecom Italia, Enel Look Cheap
As Italy emerges from a recession, economists see the tide turning. Shares of some Italian companies look inexpensive.

Traders have been talking about Italy a lot lately, and not with their heads in their hands, unlike in the past. The country has shown a remarkable willingness to make business-friendly changes, and shares of some large-company stocks such as toll operator Atlantia (ATASY) and bank Intesa Sanpaolo (ISNPY) have been on the rise.

Italy is just emerging from a recession, with GDP falling 1.7% in 2013 and 0.4% in 2014. It trails every euro-zone country except for Greece in terms of the proportion of the population that is working. The unemployment rate was 12% as of July; although that seems high, it was actually the lowest level in two years.

Economists see the tide turning. Morgan Stanley sees GDP rising 0.6% this year and 1.6% in 2016. “The upswing has quite some way to go,” writes Daniele Antonucci, a Morgan Stanley economist. “Unlike in the other large euro-zone economies, growth in the manufacturing sector continues to accelerate.”

Investors think a series of structural reforms, and strong support from the European Central Bank, will lead to more long-term growth.

Prime Minister Matteo Renzi has passed laws making it easier to fire workers, while also extending unemployment benefits and offering employers tax breaks for hiring permanent employees instead of part-timers.

“Italy’s got more than just cannolis going for it at the moment,” says Katrina Dudley, a portfolio manager at Franklin Templeton. “They’re really trying to tackle the old bureaucracy.”

Because of strict labor laws, Italian companies weren’t able to cut workers during the recession, and their profit margins plunged, Dudley says. Operating margins for the country’s largest companies were more than 14% before the recession. Last year they had fallen to 6.5%, she says. “Companies were under-earning because their hands were tied.”

Dudley singled out power company Enel (ENLAY) among the companies that can benefit from the country’s business-friendly changes. Enel is Italy’s largest utility and is part-owned by the government. It historically has been “inefficient and bloated, with a weak capital structure,” she says.

But CEO Francesco Starace, appointed in 2014, has been cutting costs and selling assets to pay down debt. Enel’s dividend yield, now at 3.5%, could rise to 5.6% (at the current stock price) once the company achieves its goal of spending 65% of its income on dividends. Dudley expects the stock to rise to more than five euros per share on the Italian stock exchange, up from a recent €3.99 ($4.52).

David Marcus, CEO and chief investment officer at Evermore Global Advisors, has also been investing in Italian companies. He says that investors reflexively avoid Italy because it is perceived as anti-business. “That opens opportunities for people like me,” he says. “Because Italy is coming from even further back than other countries, the opportunities are even greater.”

Telecom Italia (TI), a $23 billion-market-cap phone and Internet company formerly owned by the government, was known for haphazard management and high debt. But management has gotten more aggressive at selling or spinning off units, including launching an initial public offering for shares of its cell-tower business.

Recently, an outside player has made the investment even more intriguing. French media company Vivendi (VIV.France) has taken a 15.5% stake in Telecom Italia, and reportedly favors the sale of TI’s Brazilian business. Marcus expects Vivendi to push Telecom Italia to accelerate its reforms. “As a shareholder, we can sit back and watch them battle it out.”

Telecom Italia is the cheapest telecom stock in Europe, Marcus says. It trades at 5.4 times enterprise value to earnings before interest, taxes, depreciation, and amortization, versus an average of about 7 times for the group. He sees shares rising 60%.

(Barron's) Wirecard Shares Could Jump 60%

Wirecard Shares Could Jump 60%
Europe’s largest online payments service provider may have an upside of as much as 60% in the next year. One possibility: Buying the larger Worldpay.

Electronic-payments processor Wirecard looks likely to put some money into the pockets of investors.

The Munich–based company, Europe’s largest online-payment service provider, is enjoying blockbuster growth—and its shares (ticker: WDI.Germany) could offer as much as 25% upside.

Wirecard could be worth 46.39 euros ($52.34) in 12 months’ time, according to a consensus of analysts’ estimates. The stock closed on Friday at €36.89, or about 24 times projected 2016 earnings.

That sounds pricey, but Wirecard has at times traded at multiples as high as 33 over the past five years. At €46.39, its shares would trade for about 30 times, which doesn’t seem unreasonable.

In fact, some analysts are much more bullish than that. “We believe the market continues to undervalue Wirecard’s premium structural growth, Asia exposure, and strategic appeal,” notes Goldman Sachs analyst Mohammed Moawalla. His price target on the stock is €59, or roughly 38 times next year’s estimated earnings, pointing to a potential return of a whopping 60%.

The performance of Wirecard’s shares in 2015 hasn’t reflected those lofty expectations. The stock has added less than 2% since Jan. 1 versus a near 7% gain for the Stoxx Europe 600 industrial goods and services sector. Wirecard is about 15% below its 52-week high of €42.72, giving the company a market value of €4.56 billion.

WIRECARD, FOUNDED IN 1999, bills itself as a one-stop payment-service provider. The foundation for that boast is its combination of software technology and banking products. It offers retailers payment processing based on Internet technologies in online, mobile, and point-of-sale channels.

No European peer can match its breadth of service.

Wirecard is a key player in the sphere of near-field communications, the evolving standard for mobile payment at the point of sale. As Visa (V) and MasterCard (MA) put pressure on network operators and retailers to upgrade payment terminals for contactless payments, Wirecard is well placed to benefit.

Wirecard gets most of its sales from retailers that outsource their payment processes—and it’s enjoying phenomenal growth, thanks to the continuing buildout of e-commerce.

More online sales mean higher transaction volumes for online-payment service providers, and fee income is largely proportionate to transaction volume. In the first half of 2015, transaction volume was ahead more than 30% year on year at over €20 billion. That’s almost 60% of Wirecard’s 2014 transaction volume of €34.3 billion.

Only 24% of that volume came from outside of Europe, underlining the potential for global expansion.

NOT SURPRISINGLY, ACQUISITIONS are an important part of Wirecard’s growth strategy. The company made four acquisitions last year in countries such as Turkey, South Africa, and New Zealand, but there is scope to do much more, and management hasn’t been shy about voicing its ambitions.

Wirecard reportedly is interested in much larger rival Worldpay, which handled transaction volume of about 370 billion British pounds ($570.63 billion) last year. It represents 400,000 merchants, compared with fewer than 20,000 for Wirecard.

Worldpay has strong footholds in the United Kingdom and the U.S., in particular, so it could be a good fit for Wirecard, and a combination would be transformational.

However, the German company could face stiff competition from other bidders for Worldpay, including France’s Ingenico (ING.France). Worldpay’s private-equity owners, Bain Capital and Advent International, could yet opt for an initial public offering.

Given Worldpay’s reported valuation of £6 billion, Wirecard, with cash and equivalents of less than €700 million at the end of last year, probably would need to use its stock to help fund a deal. That could prove to be a brake holding back Wirecard’s share price.

If it misses out on Worldpay, Wirecard could become a target itself due to its attractive growth prospects.

Sales are forecast to increase at close to 20% annually through 2019, and earnings are projected to grow at about 30%. In 2016, it is expected to report earnings before interest, taxes, depreciation, and amortization of €277.8 million, or €1.57 per share, on sales of €919.6 million.

This year, Wirecard is forecast to post Ebitda of €225 million, or €1.25 a share, on sales of €761.3 million, up from last year’s Ebitda of €172.9 million, or 89 euro cents, on sales of €601 million.

A deal with Worldpay could create value for shareholders, but a possible sale also could put cash into shareholders’ pockets. Investors may want to open their wallets to shell out for Wirecard shares.

>>> Weekly Update

Weekly Market Update: Markets Stabilize Ahead of FOMC Decision


The volatility seen over the last month in global markets gave way to relative calm this week. US markets were subdued thanks to the Labor Day weekend holiday and a schedule light on major data releases. There was a notable increase in corporate debt issues as companies tried to get ahead of Fed hikes later this year, although the jury remains out on the feasibility of policy tightening at next week's FOMC meeting. Other highlights included the excellent JOLTs job openings report, Apple's product refresh, and various investor conferences where management teams largely indicated that prior guidance (or the low end) remains achievable despite the recent uptick in global growth concerns. Shanghai reopened for trade after a two-day holiday to another weak Chinese trade report, which inspired equity gains on hopes for more stimulus spending. US Treasury yields backed up modestly, as prices were pressured by supply from both corporate and government sales. For the week, the S&P and DJIA each gained 2% and the Nasdaq added 3%.

Job openings in America hit another record high in July. The latest Job Openings and Labor Turnover Survey (JOLTS) - one of Fed Chair Yellen's favorite gauges of labor market health - showed that job openings jumped to 5.75 million in July, the highest since the series began in December 2000. With openings at record highs, robust employment should be accompanied by a sustained pickup in wages, just another data point that suggests the Fed needs to tighten sooner rather than later. On Sunday, Fed watcher Hilsenrath wrote that dovish voter Williams told him he was anticipating liftoff this year if risks diminish, but that personally he remained on the fence regarding hikes. "All of the data that we have had up until now has been, I think, encouraging. It has been about as good, or better, than I was expecting, in terms of the U.S. economy. But there are some pretty significant headwinds that have developed," said Williams.

Chinese markets cooled off this week and volatility flattened out to a degree. On Tuesday, the August China trade surplus topped consensus but the decline in both exports and imports raised concerns. Exports fell 5.5% y/y, better than the 8.3% decline in July, while imports fell double the anticipated rate (-13.8% y/y v -6%e). The two-month slide in exports is causing extreme discomfort in Beijing, and the Shanghai Composite gained more than 5% on Tuesday and Wednesday on hope the ugly data would prompt yet another round of government stimulus. The August CPI and PPI data would complicate any PBoC action, as CPI inflation hit a one-year high of 2%, driven by surging food prices, while PPI inflation declined 5.9%. With costs higher and manufacturing prices lower, the outlook is only getting murkier.

In Japan, the Nikkei index gained 2.7% this week, snapping a four-week losing streak. Prime Minister Abe consolidated his power by winning a new mandate as leader of his party, and he urged companies to boost capital expenditures now that the Abenomics program is in full swing. Abe also announced that he wants to lower the corporate tax by at least another 3.3% in 2016 in support of his plans to get the corporate tax rate below 30%. An upward revision in the final Q2 GDP to -0.3% from the -0.4% preliminary reading eased some concerns about Japan heading toward yet another recession.

As expected, the Bank of England kept its key interest rate unchanged at 0.5% on Thursday, shrugging off recent market turmoil emanating from China. Last week's manufacturing and services PMI readings indicated some slowing in the UK economy, although the MPC agreed that signs of a slowdown in China and turbulence in global financial markets haven't as yet altered the outlook. McCafferty voted to raise the rate to 0.75% for the second meeting in a row. GBP/USD pushed out to two-week highs around 1.5450 after the decision. The Bank of Canada also held pat on rates and confirmed that Canada's resource sector continues to adjust to lower prices for oil and other commodities, with some spillover to the rest of the economy.

Emerging market currencies and stocks took heat after Standard & Poor's junked Brazil's rating. S&P lowered Brazil's sovereign rating to BB+ as the country's government struggles to shore up its fiscal accounts amid a faltering economy. In August, Brazil forecasted a fiscal deficit in 2016 of 0.5% of GDP, compared with a targeted surplus of 2% at the beginning of 2015. USD/BRL rose to around 3.8593, only a few pips from the Oct 2002 high of 4.00, and shares of Petrobras sank to levels last seen in 2002. Analysts were forecasting possible downgrades for Russia, South Africa, Turkey and Colombia, all of which face similar challenges as Brazil. Credit default swaps for Brazil and South Africa hit highs last seen during the financial crisis, while currencies in Turkey, South Africa and Malaysia plunged to the weakest levels in many years against the dollar.

A widely discussed Goldman Sachs note asserted that in a bear case scenario WTI could drop to as low as $20 before rebounding. Goldman cited the huge surplus from buoyant supply and weaker demand, and claims the market is even more oversupplied than expected with the surplus likely to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth. WTI crude traded in a narrow range from $44 to $46 for most of the week, while Brent bounced around between $47.50 and $49.50. Gold chief commodities analyst Currie said he sees a less than 50% chance of the $20 bear case coming to fruition.

Recent market chaos had shut down new issuance in corporate bond and IPO markets, though the bond market drought appears to be easing as market turmoil subsides. In August there were 13 consecutive sessions without a single investment-grade bond issued, the longest dry spell since the financial crisis. Meanwhile, it has been nearly a month since markets have seen an IPO open for trade, the longest such period since August of 2013. Wednesday saw the busiest day for corporate issuance YTD, with around $27 billion from 17 issuers in a total of 33 tranches coming to market. Analysts said up to $100 billion in investment-grade bonds were expected to be sold in the month of September as companies look to lock in low rates ahead of Fed tightening.


Corporate news was highlighted by the refresh of Apple's product line on Wednesday, as it updated its iPhone, iPad, and Apple TV devices. Among the new developments was the launch of a larger format iPad Pro, taking on Microsoft's Surface Pro for professionals and featuring the Apple Pencil stylus (a peripheral device that Steve Jobs famously railed against). Apple also announced that it would, for the first time, provide its own financing option for iPhones, putting new margin pressure on wireless carriers.

In deal news this week, Strategic Hotels & Resorts agreed to be acquired by Blackstone Group for $14.25/share in cash, for a total transaction valued at $6.0 billion. Media General reached a deal to acquire Meredith Corp in a $3.1B cash and stock deal. Also, after the close last Friday Teco Energy agreed to a buyout by Emera Inc. valued at $6.5 billion in cash. Trucking and logistics name XPO Logistics reached a deal to acquire rival Con-Way in an all-cash deal valued at $2.72 billion.

>>> US Close Dow+0.63% S&P+0.45% Nasdaq+0.45% Russell+0.41%

Closing Market Summary: Abbreviated Trading Week Ends on Higher Not

The stock market finished the abbreviated trading week on a higher note. The S&P 500 added 0.5%, extending its weekly gain to 2.1% while the Nasdaq Composite (+0.5%) outperformed slightly, adding 3.0% for the week.

Broadly speaking, the Friday session was very quiet and did not feature any major macroeconomic or company-specific developments. Instead, stocks began the day under modest pressure as noteworthy weakness in the energy sector (-0.8%) fueled the opening retreat. The energy sector settled not far above its low while the remaining groups fared much better and helped the market erase its early loss.

Staying in the energy sector, the cyclical group represented the lone decliner of the week, losing 0.7% since last Friday. Crude oil contributed to underperformance in the sector as the energy component settled lower by 2.8% at $44.63/bbl after briefly dipping below $44.20/bbl in the morning. For the week, WTI crude surrendered 3.1% with today's decline following cautious comments from Goldman Sachs. Specifically, the investment bank cut its 2015 price forecast to $48.10/bbl from $52.00/bbl and lowered the 2016 outlook to $45.00/bbl from $57.00/bbl.

Elsewhere, the other commodity-related sector—materials (-0.2%)—also settled in the red while other groups posted gains. Notably, consumer discretionary (+0.7%), technology (+0.6%), and health care (+0.7%) gathered steam as the market climbed off its session low.

Thanks to today's gain, the technology sector gained 3.1% for the week, which was good enough for the sector to end ahead of its peers. The influential sector followed Apple's (AAPL 114.02, +1.45) lead as the stock jumped 1.3% on Friday and 4.4% for the week.

The relative strength in technology helped the Nasdaq stay ahead of the broader market through the week, but the tech-heavy index also received a measure of support from health care, and specifically, biotechnology. To that point, the health care sector (+0.7%) finished among today's leaders, extending its weekly gain to 2.8%. As for biotechnology, the high-beta group enjoyed a strong week, evidenced by the iShares Nasdaq Biotechnology ETF (IBB 354.74, +4.02), which climbed 1.2% on Friday to end the week higher by 5.2%.

The afternoon recovery in stocks had little impact on Treasuries as the 10-yr note remained near its high with the benchmark yield ending the day lower by four basis points at 2.18%.

Today's participation was below recent averages as roughly 810 million shares changed hands at the NYSE floor.

Economic data included PPI, Michigan Sentiment, and Treasury Budget:

  • Producer prices were flat in August after increasing 0.2% in July while the consensus expected a decline of 0.1%
    • Energy prices declined 3.3% in August, which was the largest downturn since a 10.1% drop in January, after falling 0.6% in July
    • Food prices increased 0.3% in August after declining 0.1% in July with the aftermath of the bird flu epidemic continuing to wreak havoc on the egg supply, driving egg prices up 32.2%
    • Excluding food and energy, core PPI increased 0.3% for a third consecutive month in August while the consensus expected an increase of 0.1%
  • The University of Michigan Consumer Sentiment Index dropped to 85.7 in the preliminary September reading from 91.9 in August while the consensus expected a drop to 91.5
    • The Current Conditions Index fell to 100.3 in September from 105.1 in August while the Expectations Index declined to 76.4 from 83.4
    • The overall decline in the Consumer Sentiment Index can be traced to the pullback in stock prices that began at the end of August while other measures that typically impact confidence levels --gasoline prices and employment conditions—continued to improve over the past few weeks
  • The Treasury Budget statement for August showed a deficit of $64.40 billion while the consensus expected a deficit of $62.00 billion
    • The Treasury data are not seasonally adjusted so the August deficit cannot be compared to the $149.20 billion deficit recorded in July Investors will not receive any economic data on Monday.
  • Nasdaq Composite +1.8% YTD
  • Russell 2000 -3.7% YTD
  • S&P 500 -4.8% YTD

(Fudzilla.com) Microsoft interested in acquiring AMD

Exclusive: Talks taking place

Our industry sources claim that Microsoft is seriously talking to AMD about buying the chipmaker. The pair have been in talks for a while, but we are unsure if the deal is happening or when something will be announced.

It is no secret that AMD's CPU roadmap is hardly competitive. From late 2015 and through most of 2016 the business has been rubbish. The hope of Zen cores being successful is AMD's only option for survival. Microsoft has a lot of cash in the bank and has a place for AMD under its wing.

In case that Microsoft does acquire AMD, as we suggested a few months back, it will control the development of the next generation console chip for its future Xbox and it would be able to create decent GPUs to promote its DirectX 12 and beyond. Of course Microsoft would have to compete with Nvidia. Linux fans of AMD GPUs would not be too happy about it, although Redmond has been getting more open source friendly lately.

When it comes to CPUs, the future Zen derivative could end up in the future Surface, you know the tablet that iPad Pro copied the form factor, the cover keyboard and the pen. AMD has a server division as well as computational division, everything that Microsoft uses.

The fact that Raja Koduri, a man behind cool things at ART X and ATI Radeon R300 now runs Radeon Technology Group could mean that the company might be acquired in pieces too. We always suggested that one of the solutions is that AMD sells off GPU business to a company that would licence it back to AMD for its APU products.

Our well informed industry sources suggest that Intel is interested in the acquisition of AMD. Before you blast us with your comments, the world changed a few years back and Intel is not a monopoly anymore. Apple has quite big of a stake with iPads and companies like Samsung have their own SoCs that are used for their tablets and phones. Qualcomm and MediaTek got stronger as well. In this changed world Intel would have a chance to acquire AMD if it really wanted.

Desktop, Server, Notebooks will survive but some of these market segments are simply becoming less relevant than five years ago. Yes, the world has changed.

FT : How assets will react to a rate rise

How assets will react to a rate rise

Credit markets may pose highest risk, with investors ill-prepared

What happens when rates rise? We have been asking this question all week, in preparation for next week’s potential decision by the Federal Reserve to raise interest rates for the first time in nine years.
At present, the market judges the chance of such a move as only about one in four, and this sounds accurate to me. A rate rise now seems unlikely, but it is far from out of the question. So, here is a Long View guide to what will happen to different assets when rates rise.

First and most clearly, there are the effects on commodities and currencies. A rate rise — particularly if part of a longer term cycle of rising rates — directly strengthens the dollar, and therefore weakens assets priced in dollars. It would bring money flowing back to the US. The dollar would be strong, while the downward pressure on oil and industrial metals would remain.
As a rate rise would be seen as deflationary, it would weigh on the gold price as well.
In emerging markets, we have already had several dress rehearsals for a rate rise. If it comes, it will accentuate the pressure on emerging market currencies, which is already severe. Since the last round of emerging market crises, there have been moves to lower government dependence on dollar-denominated debt, but there is plenty of corporate dollar debt out there.
The effect would be more differentiated than in previous crises. But those countries with current account deficits could expect to feel the pressure — led probably by Brazil.
With equities in the US, the picture is far more complex. The move has been so widely telegraphed that investors should have prepared for it. Historically, there is no direct correlation between the start of a rate-rising cycle and falls in equities. Such moves normally come when the economy is humming along well. When animal spirits are high, a rate rise can even be seen as a declaration of faith in the economy from the Fed.
But earnings growth has flattened out this year, stocks have already suffered a correction, and a rate rise would not be taken that way. People are nervous.

Ultimately, equities’ reaction will depend on what happens to the fixed income and credit markets. Here, the effect is less open to conjecture. Higher target rates set by the Fed will send bond yields higher, which means bond prices must go down.
With yields already low, the proportionate falls in prices need to be that much greater. Further, the greatest falls will come for the assets with the greatest duration — the technical term for measuring bond price sensitivity to changes in interest rates.
Worryingly, the long-duration assets that would be worst affected tend to be widely perceived as less risky, because they carry a lower risk of default — for example, high quality corporate bonds, or municipal bonds. (High-yield or ”junk” bonds, which carry greater credit risk, should be less sensitive to a rise in interest rates.)
Generally, risks are greatest when they are not perceived. People who have bought a security believing it to be high-risk tend to guard themselves against that risk; those who think they have a low-risk investment do not.
This could therefore amplify the risk of a full-blown financial “accident”. Unexpected and unhedged losses can lead to knock-on effects.
There are countervailing forces. Rate rises would attract capital into the “haven” of Treasury bonds, and this would alleviate the pressure (and support the stock market)
But the credit market is lumpier than the stock market. Rather than trading on an exchange, those who want to buy or sell bonds do so through a dealer, generally at a bank.
When rates rise

The most powerful central bank in the world is considering whether to raise its record-low interest rates for the first time in nearly a decade. Even before the US Federal Reserve makes a move, the effects are reverberating throughout the global economy. Our project explores how.
Go to hub page
Since the financial crisis, banks have cut back drastically on the capital they allow their dealers to spend holding bonds or credit instruments. This has been done in large part under regulatory pressure, and it means there is far less money available for buying bonds.
Meanwhile, the amount of bonds in issue has increased in the years after the crisis, as part of the financial engineering encouraged by low interest rates. Companies have issued debt and used it to buy back stock.
That raises the spectre of many eager sellers failing to find a willing buyer, and watching as prices plummet. Again, there have been dress rehearsals for an incident like this, both in the past few weeks, and during the bond market “flash crash” last October.
Credit markets drive financial crises. If they freeze, then stocks will come thudding down — as happened during the crisis of 2008. That is the imponderable “nightmare scenario” that faces markets. Just how badly would the credit market react to a rate rise? It can only be answered once rates rise.
And that is why many in markets do not want to find out just yet — and why the bet is on that the Fed will decide not to find out either.
Now, all that remains is to wait a few more days and find out what the Fed decides. And those of us who are not central bankers should probably offer up prayers of thanks that we do not have to make the decision.

NY Post : Blackstone Group planning bid for ATM-maker NCR

NCR has reopened the auction to sell itself — and the Blackstone Group is part of a group that plans to make a bid for the ATM maker, The Post has learned.
Having cancelled its investor day on Thursday, NCR sparked speculation it had reopened sales talks — and, in fact, it has, said to two sources close to the situation.
NCR shares spiked 7 percent on the news, to $26.46.
In fact, NCR has already signed a deal with a mystery buyer who has not yet lined up financing, a third source close to the situation said.
As reported exclusively by The Post on July 29, private equity firm Thoma Bravo dropped its bid to buy NCR — quickly ending what had been a belabored sales process.
Thoma Bravo had offered roughly $31 a share, and the seller was looking for $35.
Now, Thoma Bravo is deep in the action to buy Solera Holdings in a $3 billion auction and likely could not afford both, a source said.
The new auction process includes a lower asking price, sources said.
Blackstone, which is led by Chief Exec Stephen Schwarzman, declined comment. NCR did not return calls.

>>> Syngenta sale of vegetable seeds business not sufficient to appease sharehol

Syngenta sale of vegetable seeds business not sufficient to appease shareholders
Shareholders question rationale of vegetable seeds sale
Change of management possible catalyst for renewed Monsanto approach
Syngenta has no plans to detail strategy on R&D day

Some Syngenta [VTX: SYNN] shareholders have expressed discontent with management’s plans to sell its vegetable seeds business following the withdrawal of Monsanto’s takeover approach, it is understood.

The sale of its global seeds business and an initial USD 2bn share repurchase programme was seen as a measure to appease shareholders after Monsanto [NYSE:MON] withdrew its CHF 470 per share bid. The US group pulled its approach after the Syngenta management refused to engage following two improved proposals.

But, the sale of the seeds business is not the best deal for shareholders, according to two sector bankers and two Syngenta shareholders.

“This is a clumsy move from Syngenta management to compensate and make up for their lack of flexibility during the negotiations with Monsanto. There’s nothing for us to gain in the sale of the vegetable seeds business and the share buyback is irrelevant. We were ready for a deal,” said one shareholder.

He also described the sale of the seeds business and buyback plans as dilutive on EPS. “We are massively losing on that one,” he concluded.

A second shareholder described a sale of the seeds business as lacking any business strategy. “I don’t understand why they would do that,” this shareholder said. “The vegetable seeds business is one of the most attractive assets in their portfolio (good margin and good market value), so why would you want to get rid of it.”

Syngenta declined to comment.

The sale of the vegetable seeds business is an attempt by Syngenta management to get back in its shareholders’ good books but it is not the best deal for investors, the first sector banker said. Shareholders would have got more out of a deal with Monsanto, the second banker agreed.

Had Syngenta invited Monsanto or another party to the table, it would have led to a potential bidding war, a third banker added. There were two or three other strategic bidders, including BASF [ETR;BAS] following the situation, but they did not want to go hostile, this banker said.

All three bankers believed Monsanto was still interested in Syngenta and waiting on the sidelines. But, given opposition from the US group’s own shareholders, a renewed approach was unlikely in the near term in the absence of a major catalyst, such as a change of management at Syngenta, they said.

During its pursuit of Syngenta, Monsanto had committed to divest all of the Swiss group’s seeds business to secure regulatory clearance of the proposed merger. Syngenta had received some inbounds for the vegetable business, so some of these suitors will still want to get it, the first banker pointed out.

All the key seeds players, Agrium, Bayer [FRA: BAYN], BASF AG, Limagrain and Vilmorin [EPA:RIM] are said to have showed interest in the business which is thought to be valued at around USD 2.5bn, the bankers said.

The second shareholder had not been contacted by Syngenta’s management since Monsanto announced the withdrawal of its bid last month. The shareholder hoped the sale of the seeds business would be addressed at Syngenta’s R&D day on 16 September. But, Syngenta plans to focus solely on its R&D pipeline and showcase new and existing products it is understood.

“We don’t understand the decision from the board of Syngenta,” said the first shareholder. “With the latest developments they’ve definitely lost popularity and shareholders’ trust along the way.”

Syngenta’s share price slumped from highs of CHF 398 prior to Monsanto’s withdrawal to close at CHF 309.9 on news of the pulled approach on 26 August. The shares have since made some recovery, currently trading at CHF 343.2, giving it a market capitalisation of CHF 31.84bn.