>>> Zurich credit strength could give pension valuation edge over potential RSA

Deal Reporter

Zurich credit strength could give pension valuation edge over potential RSA rivals

AXA, Allianz, AIG could be logical rival bidders - banker

Funding structure, risk assessment could put break-up bidder at disadvantage
Zurich Insurance [VTX:ZURN] could have an advantage over potential RSA [LON:RSA] bidders with weaker credit ratings with regard to their ability to value the target’s UK pension liabilities, a source familiar with RSA and a sector banker said.

RSA’s pension liabilities could act as a “poison pill” for some potential buyers, an independent pension adviser said. Valuation of the liabilities could be “very different” depending on the buyer’s covenant strength, a source familiar with RSA’s pension schemes said.

Target pension liabilities may get revalued at varying rates after a takeover depending on the buyer’s credit strength, the two sources familiar said. As of 1H15, RSA’s UK pension liabilities amounted to approximately GBP 7bn.

A bidder may want to approach pension trustees quickly in the event it makes a bid, in order to value the liabilities correctly from the start, the pension adviser said. It would be up to the trustees, target and buyer to agree on if and how they want to start talks, the source familiar with RSA’s pension schemes said.

Under Rule 25.9 of the UK Takeover Code, pension trustees have the right to comment on a bid. RSA’s SALPS and RIGPS pension schemes are closely monitoring Zurich’s potential move, trustees said. They have been in communication with RSA and are working with advisors to ensure appropriate actions are taken to protect the members’ interests.

RSA’s most recent triennial valuation showed its three main UK funds had an aggregate funding deficit of GBP 477m at 31 March 2012, equivalent to a funding level of 93%. The Group and trustees agreed plans in 2012 to eliminate the deficit by 2022.

In its 1H15 report, RSA estimated its UK pension schemes were 97% funded on 31 March 2015 and had a GBP 106m surplus at 30 June. According to the report, RSA earlier this year started its latest triennial valuation, as of 31 March 2015, and expects the outcome around the time of its full-year 2015 results.

A takeover revaluation would depend on factors including the amount of debt financing required for the acquisition, the source familiar with RSA’s pension schemes, the pension adviser and the banker said. The valuation may not increase under the new owner if it has a stronger credit rating than RSA, they added.

Insurers including Germany’s Allianz [ETR:ALV], France’s AXA [EPA:CS] and US-based AIG [NYSE:AIG] could be logical rival bidders, the banker and an insurance analyst suggested. The European companies would see synergy potential while AIG could want access to RSA’s markets where pricing is more favourable than in the US. All could have the necessary firepower to launch a bid, they said.

Zurich is rated AA- with a positive outlook by Standard & Poor’s (S&P) and Aa3 (stable) by Moody’s, according to its website. S&P has an A rating with stable outlook for RSA, while Moody’s A2 (negative) according to its web site.

Among strategic players mentioned as potential rival bidders, Allianz is rated AA (stable) by S&P and Aa3 (stable) by Moody’s; AXA is rated A+ (positive) by S&P and Aa3 (stable) by Moody’s; and AIG A- (stable) by S&P and Baa1 (stable) by Moody’s, according to the companies’ web sites.

Private equity-led break-up consortia have also been reported as potentially interested in RSA. Private equity firms including Apollo [NYSE:APO] have been rumoured in the past to consider bidding for RSA, the banker noted.

A break-up consortium backed by private equity would typically take on significant debt financing for a deal, the banker said. This would weaken the covenants it could offer to the pension trustees, so pension valuation could become a hurdle, he added.

UK insurance companies also hold certain business units liable for certain pension schemes, the pension adviser noted. Public disclosure tends to be limited on which units back which schemes, so it could be difficult for a break-up bidder to assess various units’ risk before due diligence, he argued.

RSA was formed through a series of mergers so has several schemes, the pension adviser noted. Their valuation depends on how relaxed or prudent a discount rate pension trustees pushed for, he said.

If RSA were broken up, pension trustees could enter negotiations with the owner, the source familiar with RSA’s pension schemes said. They could ask, but not force through, for some scheme holders to be bought out with upfront payments. Otherwise the schemes could remain on the broken-out units’ balance sheets getting valued at steeper rates due to weakened covenants, he added.

Zurich Insurance said on 28 July it is evaluating a potential offer for RSA, which has a market cap of GBP 5.14bn as of today (11 August). The offer will be all-cash, it later confirmed.

RSA, AXA, Allianz and AIG declined to comment. A spokesperson for Apollo declined to comment.

>>> Konecranes/Terex to file in US, Europe and China

Deal Reporter

Konecranes/Terex to file in US, Europe and China

The tie-up between Konecranes [HEL:KCR1V] and Terex [NYSE:TEX] is likely to need competition approval from the US, the European Commission and China, according to the Finnish company’s chairman Stig Gustavson.

Today, 11 August, the two companies announced an all-share merger that will result in Terex investors owning 60% of the combined group and Konecranes shareholders owning 40%.

The groups undertook a thorough analysis and received significant advice on the competition aspects of the deal, Gustavson said during a conference call in presentation of the deal. Terex’s CEO Ron DeFeo added that there would be a “positive outcome” and any consequences would be dealt with as the deal progressed.

China was quite slow at processing competition review, according to Gustavson, but he stopped short of saying the deal timetable would depend on the length of the Chinese review. The deal is expected to close in the second quarter of 2016.

The deal will trigger a change of control clause on existing notes issued by Terex, said Terex CFO Kevin Bradley. “We have all the financing in place to face this situation and will start a consultation with bondholders,” he added.

Gustavson has dismissed a suggestion that the deal was not a merger of equals, in response to a question on whether the split was equal and reflective of the companies’ revenues, employees and of the stock market multiple Konecranes.

“This is a genuine merger of equals and that is the end of that story,” Gustavson said. The all share deal will mean Terex shareholders receive 0.80 Konecranes shares for each share owned in the US group.

The 0.80 ratio was irrespective of dividends, according to DeFeo. The expectation is that Konecranes will pay its dividend before the deal closes in the middle of 2016, he said. The business combination agreement allows for Terex to match this for its shareholders.

When quizzed on how a post-deal EUR 1.4bn (USD 1.5bn) share buy-back would be financed, DeFeo said that the group would “throw off” substantial free cash flow and leverage ratios of the combined company would be “quite reasonable”, but they would assess matters along the way.

Asked about the potential tax benefits for Terex, Gustavson said there would be some financial benefits but declined to comment further, adding that with such a complex matter it would “take the whole day to go through the benefits”. The combined group will be incorporated in Finland with headquarters in both Finland and the US.

In a later call the companies said that the combined group would have a tax rate percentage in the mid-20s in two-to-three years’ time, compared to their current rates in the low-30s.

Annual operational synergies of at least EUR 110m (USD 121m) in EBIT contribution and an additional EUR 32m (USD 35m) post-tax income benefit from financing and other means are expected to be implemented within three years.

“This is an outstanding transaction” with clear near-term and long-term benefits, DeFeo said. The two companies share important cultural similarities and have a focus on technology, he added.

DeFeo and Gustavson first met around 25 years ago, according to the latter. “Good things come slowly but they come,” he said.

The timing was right as the current environment is challenging and as a combined group, the companies could withstand global headwinds and any impact on tailwinds, DeFeo said. “We think we’ll have a very well-balanced business from a geographical perspective,” he said.

DeFeo added that industrial lifting and port solutions would be a very significant part of the business. Alongside industrial lifting and port solutions, the combined group’s offering will consist of aerial work platforms (under Terex’s Genie brand), cranes, materials processing and some smaller divisions.

>>> Opera Software’s browser customer base could attract Chinese bids

Deal Reporter

Opera Software’s browser customer base could attract Chinese bids
Opera Software’s [STO:OPERAO] 350m strong customer base is expected to attract bid interest from Chinese internet companies, a source close to the situation and an industry source said.

These companies are looking to expand overseas and would be particularly attracted to Opera’s presence in emerging markets, such as India, the source close said.

Bidders, such as Cheetah Mobile [NYSE:CMCM], Baidu [NASDAQ:BIDU], Tencent [HKG:0700] and Alibaba [NYSE:BABA] are among those who could be interested in Opera Software as a whole, the two sources and a top-ten shareholder said.

Opera Mini, the company’s flagship mobile browser, reached 50m users in India last year to become the third most popular mobile application there behind Facebook and WhatsApp.

Beijing-based mobile phone distributor Telling Telecom [SHE:000829] could be interested in purchasing the browser business alone, a private equity source said. Telling formed a joint venture with Opera in 2011 to develop the mobile browser business in China.

The JV ranked third in terms of mobile browser market share in China, according to a local news report in 2014. Telling’s interest could be limited to just the Chinese browser division, however, the private equity source said. A spokesperson at Telling Communication said he has no knowledge of the situation.

Opera, which provides cloud-based mobile services to operators, publishers and advertisers, launched a review of its business on Friday 7 August after receiving “strategic interest” from a number of parties.

The two most likely outcomes of the review are a sale of its mobile advertising division, Opera Mediaworks, or a sale of the whole company, the source said. The preferred result would be a sale of its mobile advertising division, he added.

After seeing impressive growth at the start of 2014, the division is now seen as in decline, the source said. In August last year, the company said Opera Mediaworks was responsible for over 50% of the company’s revenues.

Opera Mediaworks reported revenues of USD 51.1m in the second quarter of 2014, up 83% on the same period in 2013.

Opera Software’s revenue growth led Dealreporter to identify the company as an attractive investment for private equity firms in August last year. The Flash said any private equity bidders would face competition from strategic buyers, noting historic speculation that Facebook, Google and Yahoo could bid.

The mobile advertising business is thought to have attracted several approaches over the last few years, the shareholder said.

Companies openly looking for advertising technology expertise could approach Opera for the division, the source suggested. These include Facebook, Yahoo, Microsoft and Google, the source said. Facebook and Microsoft declined to comment. Yahoo and Google did not respond to requests for comment.

US-based telecommunications company Verizon could eye Opera, the source and the shareholder said. Verizon’s AoL was reported in July to be prepping a bid for mobile advertising business Millennial Media. It could shift its attentions to Opera Mediaworks, the source and shareholder speculated. Millennial Media and Opera Software are both strong players in the ad tech space. Verizon declined to comment.

One private equity firm was thought to have been approached regarding the sale of Opera earlier this year.

Opera declined to comment. Cheetah Mobile, Tencent and Baidu did not respond to requests for comment.

Alibaba declined to comment. A source close to Alibaba’s web search and browser company UCWeb said the company perceived Opera as for sale but would not comment on whether an approach would be made.

WSJ : RWE Plans to Cut 2015 Profit Outlook

RWE Plans to Cut 2015 Profit Outlook

The German energy utility has been hit by a surge in renewable energy generation

FRANKFURT—Energy utility RWE AG plans to cut its profit outlook for 2015 when it reports first-half earnings on Thursday, people familiar with the matter said.

The German company, which has been hard hit by a surge in renewable energy generation, already foresees a significant decline in full-year profit.

RWE currently forecast a decline of up to 14% in full-year earnings before interest, taxes, depreciation and amortization, and a fall of up to 10% in its operating profit. This forecast will probably be trimmed further, two people familiar with the situation said.

At 1542 GMT, RWE shares traded 3.3% lower at €18.63, while the DAX traded down 2.7%.

Although RWE’s struggles are well known, a profit warning should take many investors by surprise, as most analysts have so far expected a confirmation of the official forecast.

In light of RWE’s declining profits, there is a rising risk that dividends will be cut too. RWE paid a dividend of €1 per share for 2014 and 2013, half of what it paid in 2012.

Power prices in Europe have fallen due to an electricity glut fed by renewable energy subsidies. The trend has made power generation from conventional plants unprofitable, badly hurting utility companies.

As a response to the continuing crisis in the sector, RWE Monday said it plans to simplify its structure by reducing the number of its domestic units.

With this restructuring RWE’s Chief Executive Peter Terium is paving the way for a company split—a move which would follow domestic peer E. ON’s decision last year to siphon off its conventional generation.

(El Economista) Abengoa / RWE - Rumors in the spanish press...



From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: Aug 11 2015 17:36:21
Subject: (El Economista) The fall in stock market strength Abengoa owners to give more gu
The fall in stock market strength Abengoa owners to give more guarantees to banks {http://bit.ly/1J1OXOb}

The sharp drop in stock market Abengoa since last August 3 announced a capital increase of 650 million euros has been left in a very difficult situation to Benjumea and other partners that make up the core of the company. These families, who control 57.5% of Abengoa through Corporate Investment, will have to introduce new guarantees to banks for loans to that company if the fall of the action persists.

In the last month engineering titles they have plummeted 61.7%. This decline is intensified when the company announced the capital increase, reaching registering falls of up to 30% during that time. From that day Abengoa has lost 46.9% of its value and today it ranks as the company's Ibex 35 falls in the year, 40.6%.

Corporate investment support in their latest annual accounts the existence of a risk for the development of the market value - "a large decrease of the share price of Abengoa (...) could mean increasing the number of shares pledged by reason of loans credit institutions ", he says, but yesterday from the company, also insisted that there is still sufficient margin. "As Corporate Investment and its subsidiaries have a much higher share of A shares and B (to those already pledged) there is a significant number of shares for which no guarantees granted".

Financing
To go to expansion and not be diluted, the equity of Benjumea need 370 million, which is currently looking at the market. The problem is that this is not the first time that recourse to external funding to maintain their participation. So, dated October 14, 2013 Corporate Investment signed a syndicated loan, maturing in 2018, for EUR 65 million, of which 63 million were allocated to subscribe to the capital increase carried out then by 450 million.

In that operation, the company issued 250 million shares to 1.8 euros each, representing a discount to the market price of 11 percent.

Total debt amounted to Corporate Investment December 31, 2013 to 153 million euros, representing 72% more than a year earlier. Of the total, 109.9 million corresponded to debts to credit institutions and 41.2 million in financial commitments to group companies and associates.

Although the 2014 accounts are not yet public, official sources admitted yesterday that Abengoa Corporate Investment keeps you pledged shares of the company as a result of bank debt of 39.7 million at the end of last year, to which must be added another 100 million euros over its subsidiary Ibisa (Initiatives Real Property). In total, according to these sources, there are now 11.3 million mortgaged same Class A shares and 32.6 million class B other for the first half and 16.9 million Class A and 83,000,000 Class B by debt of Ibisa.

Not all are, in any case, bad news and, beyond the fall in the stock market, there are other ratios for now if you are being met. Corporate investment is set at the banks, for example, compliance with a financial ratio of debt to equity, which hitherto has not tripped. The maximum limit of this ratio, fixed in the financing agreement of 65 million loan and applicable for the years 2013-2018, is 1.50, and December 31, 2013 was of 1,161.

Meetings with banks
To cope with the new extension of Abengoa, the Benjumea and other families are keeping for days meeting with banks to ensure the operation, and trading, among others, Citi, Bank of America Merrill Lynch, HSBC and Banco Santander to sign it. But the results do not seem clear.

In fact, one of these entities, Bank of America Merrill Lynch, which can be considered bank head of engineering, last week issued a note calling into question the ability of Benjumea going to enlargement. Thus, the company claimed that "there is a very limited visibility in the liquidity position of the family unit Corporate Investment, has agreed to participate in the capital increase."

Waiver most
One of the key issues in negotiations with banks to ensure that enlargement is the amount of capital that will be able to bring this society to enlargement. In the market they warn that if they fail this time the amount they need, it is likely that the Benjumea family have to give up control most of the capital of Abengoa.

The Benjumea are major shareholders of Corporate Investment. They have a 24.34% through nine Palmera and another 7.81% with Royblanca. The following are the Aya Abaurre that have a 15.20% with Inayaba, and Abaurre Llorente, who have a 9.86% with Olajangua.

(El Economista) The fall in stock market strength Abengoa owners to give more gu

The fall in stock market strength Abengoa owners to give more guarantees to banks {http://bit.ly/1J1OXOb}

The sharp drop in stock market Abengoa since last August 3 announced a capital increase of 650 million euros has been left in a very difficult situation to Benjumea and other partners that make up the core of the company. These families, who control 57.5% of Abengoa through Corporate Investment, will have to introduce new guarantees to banks for loans to that company if the fall of the action persists.

In the last month engineering titles they have plummeted 61.7%. This decline is intensified when the company announced the capital increase, reaching registering falls of up to 30% during that time. From that day Abengoa has lost 46.9% of its value and today it ranks as the company's Ibex 35 falls in the year, 40.6%.

Corporate investment support in their latest annual accounts the existence of a risk for the development of the market value - "a large decrease of the share price of Abengoa (...) could mean increasing the number of shares pledged by reason of loans credit institutions ", he says, but yesterday from the company, also insisted that there is still sufficient margin. "As Corporate Investment and its subsidiaries have a much higher share of A shares and B (to those already pledged) there is a significant number of shares for which no guarantees granted".

Financing
To go to expansion and not be diluted, the equity of Benjumea need 370 million, which is currently looking at the market. The problem is that this is not the first time that recourse to external funding to maintain their participation. So, dated October 14, 2013 Corporate Investment signed a syndicated loan, maturing in 2018, for EUR 65 million, of which 63 million were allocated to subscribe to the capital increase carried out then by 450 million.

In that operation, the company issued 250 million shares to 1.8 euros each, representing a discount to the market price of 11 percent.

Total debt amounted to Corporate Investment December 31, 2013 to 153 million euros, representing 72% more than a year earlier. Of the total, 109.9 million corresponded to debts to credit institutions and 41.2 million in financial commitments to group companies and associates.

Although the 2014 accounts are not yet public, official sources admitted yesterday that Abengoa Corporate Investment keeps you pledged shares of the company as a result of bank debt of 39.7 million at the end of last year, to which must be added another 100 million euros over its subsidiary Ibisa (Initiatives Real Property). In total, according to these sources, there are now 11.3 million mortgaged same Class A shares and 32.6 million class B other for the first half and 16.9 million Class A and 83,000,000 Class B by debt of Ibisa.

Not all are, in any case, bad news and, beyond the fall in the stock market, there are other ratios for now if you are being met. Corporate investment is set at the banks, for example, compliance with a financial ratio of debt to equity, which hitherto has not tripped. The maximum limit of this ratio, fixed in the financing agreement of 65 million loan and applicable for the years 2013-2018, is 1.50, and December 31, 2013 was of 1,161.

Meetings with banks
To cope with the new extension of Abengoa, the Benjumea and other families are keeping for days meeting with banks to ensure the operation, and trading, among others, Citi, Bank of America Merrill Lynch, HSBC and Banco Santander to sign it. But the results do not seem clear.

In fact, one of these entities, Bank of America Merrill Lynch, which can be considered bank head of engineering, last week issued a note calling into question the ability of Benjumea going to enlargement. Thus, the company claimed that "there is a very limited visibility in the liquidity position of the family unit Corporate Investment, has agreed to participate in the capital increase."

Waiver most
One of the key issues in negotiations with banks to ensure that enlargement is the amount of capital that will be able to bring this society to enlargement. In the market they warn that if they fail this time the amount they need, it is likely that the Benjumea family have to give up control most of the capital of Abengoa.

The Benjumea are major shareholders of Corporate Investment. They have a 24.34% through nine Palmera and another 7.81% with Royblanca. The following are the Aya Abaurre that have a 15.20% with Inayaba, and Abaurre Llorente, who have a 9.86% with Olajangua.

Tass Agency : Lavrov: Proposal from London, Paris for limiting veto power in UN

Lavrov: Proposal from London, Paris for limiting veto power in UN has no future

The veto power is enshrined in the UN Charter without any reservations, and it is to be respected by all those who ratified it, the Russian Foreign Minister notes


MOSCOW, August 11. /TASS/. Proposals by France and Britain for restricting or cancelling the power of veto in the UN Security Council in certain cases have no future, Russian Foreign Minister Sergey Lavrov has said in reply to a question from TASS.

"As far as the ideas of restricting or canceling the veto power in the UN Security Council are concerned, this is not the first time one hears them," he said. "They have no chances to succeed. The veto power is enshrined in the UN Charter without any reservations, and it is to be respected by all those who ratified it."

Earlier, Britain’s UN envoy Matthew Rycroft told TASS in an interview he supported the idea of voluntary restrictions on the use of veto powers, which French President Francois Hollande put forward back in 2013. In particular, he referred to special cases when urgent measures for stopping mass crimes were required. France and Britain are permanent UN Security Council members alongside Russia, China and the United States.

"Even if one makes a hypothetical supposition this idea may be discussed, a number of questions instantly arises. If the abdication of the veto power is presumed when mass crimes on the agenda, who will decide what a mass crime is? A hundred people, a thousand? If the limit is one hundred, then 99 is not enough and 100 is OK?" Lavrov said.

He recalled that such problems emerged over the notorious concepts of humanitarian intervention and the responsibility to protect.

"We are very much worried by the growing attempts to provoke a confrontation in the UN Security Council by proposing unilateral resolutions over certain issues, be it Srebrenica or Malaysia’s flight MH17," Lavrov said. "That’s not diplomacy but a wish to make the UN Security Council a propaganda tool, if the spade is to be called a spade."

The five permanent members of the UN Security Council bear great responsibility, he said.

"That responsibility is to be remembered and no serious problems generated within the quintet. We are for reviving the culture of the dialogue. It yields concrete results, of which the solution of the Iranian nuclear program issue and various aspects of chemical disarmament in Syria are clear evidence. This is the path worth following. It is less noticeable for the public at large, it is more effort-consuming, but also it is far more productive and fruitful in international relations than attempts to provoke scandals," Lavrov said.

France’s idea of voluntary restrictions on the veto power does not imply formal amendments to the UN Charter. Instead, a special procedure is proposed: at the request of no less than 50 member-countries the UN secretary-general is to assess the situation proposed for consideration by the UN Security Council. If the events in question are qualified as serious and widely spread violations, for instance, genocide or war crimes, then a "gentlemanly arrangement" implying the voluntary abdication of the veto right will be employed. This initiative implies that this mechanism will not operate whenever the national interests of at least one permanent member of the UN Security Council is at stake.

FT : Cranes deal lifts tally of tax inversions


Terex, the industrial crane maker, has become the third US-based company in a week to strike a cross-border deal that will allow it to redomicile to Europe and escape the reach of US tax authorities.
In the latest blow to the Obama administration’s efforts to limit so-called tax inversions, the Connecticut-based lifting equipment group said it had reached an all-stock deal with Finnish rival Konecranes to create an industry leader with $10bn in annual revenues and a combined market value of $5.7bn.

Once the deal is completed, the new company will be based in Finland and able to take advantage of that country’s 20 per cent corporate tax rate — rather than the 35 per cent rate for US companies.
Terex has paid an average tax rate of about 28 per cent over the past three years, according to its annual reports.
By carrying out a tax inversion, Terex will also gain low-cost access to its offshore cash pile, which has grown since it outbid Konecranes to buy European rival Demag in 2011.
If Terex had it sought to repatriate those funds to the US under its existing structure, it would again have been liable to tax at 35 per cent.
However, such is the political sensitivity of tax inversion deals that the press release and slides released to announce the deal made little reference to its tax benefits.
News of the Terex-Konecranes merger comes just days after Coca-Cola Enterprises, a bottler of Coke products in western Europe, and the US fertiliser maker CF Industries announced separate deals under which each will redomicile to the UK.
Tuesday’s transaction also brings the total of tax inversion deals struck since the US Treasury sought to crackdown on the practice to six.
Many more are being discussed, dealmakers have said, including Monsanto’s $45bn pursuit of its Swiss agribusiness rival Syngenta.
Last week, the US Treasury said in a statement that it is continuing to review a broad range of option for further anti-inversion measures.
However, the Obama administration has failed to muster the support it needs to pass legislation through the Republican-controlled Congress to clamp down on the practice.

Billed as “merger of equals”, the Terex deal will involve its shareholders receiving 0.80 Konecranes shares for each of their existing shares.
They will own 60 per cent of the combined company, with investors in the Finnish company holding the remaining 40 per cent.
Konecranes chairman Stig Gustavson will take up the same role in the new company, while Terex will pick a chief executive. It is unclear whether Ron Defeo, Terex chief executive, will stay with the combined company.
Terex will nominate five directors to a new nine-member, while Konecranes will elect the remainder.
A share buy-back programme worth up to $1.5bn will be launched after the deal closes in the first half of 2016.
Both groups are seeking cost savings and aim to cut $121m within three years. An additional $35m boost to post-tax income is expected “from financing, cash management and structure optimisation, implemented within first year after closing”, they said.
Shares in Konecranes rose 19.3 per cent to €33.43 while Terex climbed 22 per cent to $26.67 in premarket New York trading.
Perella Weinberg Partners and Skadden Arps advised Konecranes.