>>> Acciona mandates Morgan Stanley to sell EUR 1.5bn property division – report

Acciona mandates Morgan Stanley to sell EUR 1.5bn property division 

Acciona, the listed Spanish infrastructure group, has mandated Morgan Stanley to sell its property division, El Confidencial reported, citing unnamed sources. The US investment bank has been asked to look at options for the unit, including listing the assets as a SOCIMI (listed real estate investment company) or selling them to one or more buyers, the report said.

The assets have a book value of EUR 1.042.5bn, although, according to other sources, could be worth up to EUR 1.5bn, the report said.

El Confidencial

>>> What to look at today - 20th of July 2015

Greek banks are set to reopen today, allowing repayment of the ECB loan from higher ELA funding. German chancellor Merkel reiterated her opposition to any debt forgiveness for Greece, but added Germany is open to some flexibility on debt repayment schedule. Fin Min Schaeuble acknowledged there were differences of opinion with Merkel on Greece, and that he was prepared to resign if forced to go against personal convictions, though latest commentary also indicated he will remain on his post regardless. Nikkei225 was closed for holiday, with traders gearing up for more active earnings activity this week. Political risk is closely monitored after the administration pushed through the controversial defense legislation last week. Subsequently, local press saw PM Abe's approval rating fall to record low 35% from 42%. China property prices continue to rebound as policymakers' easing of the curbs are taking hold.Separately in China, researchers forecasted H2 GDP at 7%, which would assure the economy would meet the annual target of 7%. Pres Xi also remarked economic growth outlook remains promising despite downward pressure, and Fin Min Zhu was confident China can sustain 7-8% growth in next 5 years. Note that Gold was trading down heavily this morning on on speculative sellers betting on FED Hike and Dollar Slump

Nikkei Closed Hang Seng -0.27% Shanghai +0.08%

Eur$ 1.0833 JPY 124.13 GBP 1.5596 EURCHF 1.0433 RUB $57.3496 WTI $50.73

S&P +0.04% EuroStoxx -0.14% Dax -0.47% SMI -0.01%


Macro :
- Greek Banks to Reopen on Monday, Government Decree Says : full text attached
- Greek Bourse Will Not Resume Trading Monday: Spokeswoman
- Varoufakis Tells BBC That Greece’s Economic Reforms Will Fail
- Gabriel Says Schaeuble Shouldn’t Have Suggested Greek Exit: ZDF
- Germany to Spend EU2.7B on New Roads and Bridges Plan, Bild Says
- Germany’s Tauber Says Greek Exit Off Table For Now: Tagesspiegel

Keep an eye on :
- Pharma Sector : China May Stop Reimbursement for OTC Drugs: Medicine Eco. (Wed)
- ANA SM : Acciona Hires Morgan Stanley for Real Estate Sale: Confidencial
- AIR FP : Airbus to Build New A380 Version for $3B, CEO Tells Sunday Times
- ALO FP : Alstom 1Q Sales Beat Ests.; Says GE Process ‘Moving Ahead’
- ATC NA : Altice Says Not Interested in Carlos Slim’s KPN Stake
- ATL NA : Atlantia Weighing Potential Partners for Rome Airport Manager
- BAER VX : Julius Baer 1H AUM Drop 2.3% From End 2014; Net Income CHF39.7m
- BA/ LN : BAE Starting Search for CEO King’s Successor, Sky Says Link : http://bit.ly/1MhzU5d
- BG/ LN : Shell Seen Assuming BG Acquisition Viable at $70/bbl Oil: FT Link : http://on.ft.com/1SvK80F
- BT/A LN : BT Chief Warns Against Forced Sale of Network Unit: Telegraph Link : http://bit.ly/1CJwOnM
- FCA IM : Fiat Chrysler Considers Sale of Magneti Marelli Unit: Reuters Link : http://reut.rs/1MAgPbF
- GSZ FP : GDF Suez, Kansai Electric Join in LNG Sales, Nikkei Says
- GIVN VX : Givaudan CEO Andrier Says Rev Growth Not on Usual Level: FuW
- SDF GY : K+S bidder Potash might consider hostile takeover - Der Tagesspiegel
- LAD LN : Ladbrokes and Gala Coral set to agree merger as soon as this week
- LHA GY : Germanwings Families Want EU200,000 Per Victim, Bild Says
- OCI NA : CF Industries Said to Be in Talks for Merger With OCI, DJ Says --> Confirmed talks this morning
- POP IM : Ubi, Banco Popolare Have Discussed Possibility of Merging: Sole
- RBS LN : UK government could begin selling Royal Bank of Scotland stake as soon as early August 
- RR/ LN : Rolls-Royce to Supply Trent 700s to IAFC, Gets Saudi Order
- SIK VX : Sika Chairman Says Courts -- Not Finma -- Decide on Groups: SamS
- STAN LN : Standard Chartered Reorganizes Management to Achieve Cost Cuts
- SU FP : Aveva to Buy Schneider Software; Schneider to Own 53.5% of Aveva
- SYNN VX : Syngenta Holders Ask Board to Consult Them on Monsanto: FuW Link : http://bit.ly/1MAhiKG
- SYNN VX : Syngenta Said to Plan Meetings With Investors: WSJ Link : http://on.wsj.com/1I37ftx
- SYNN VX : Monsanto’s Grant Says Investors Impatient for Syngenta Talks
- TKA AV : Telekom Austria Has No Plans for Rights Issue: America Movil
- TKA AV : Slim May Offer to Buy Austria’s Lottery Co.: Standard
- TLW LN : Tullow Says Jubilee Field Export to Atuabo Gas Plant Suspended
- VIB3 GY : Villeroy & Boch 1H Rev. Up 4%, Confirms 2015 Targets
- VOW3 GY : Volkswagen Brand Deliveries Rise 7.5% in West Europe Ex. Germany
- VOW3 GY : Audi Said to Give 1.2 Billion Yuan to China Dealers, Cut Target

>>> Europe : Brokers Upgrades & Downgrades - 20th of July 2015

>>> Up
*AEGON RAISED TO BUY VS HOLD AT JEFFERIES
*ERSTE RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
*EVRAZ RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
*FORTUM RAISED TO HOLD AT NORDEA
*HSBC RAISED TO BUY FROM NEUTRAL AT CITI, PT +1.6% TO 635P
*HUHTAMAEKI RAISED TO BUY AT NORDEA
*KONECRANES RAISED TO HOLD VS SELL AT DNB
*VOLVO RAISED TO BUY AT NORDEA
*WAERTSILAE RAISED TO HOLD AT NORDEA

>>> Down
*BAYER CUT TO HOLD AT JEFFERIES
*BHP BILLITON CUT TO HOLD VS BUY AT MORNINGSTAR
*MEDIASET CUT TO NEUTRAL VS OUTPERFORM AT MEDIOBANCA
*PRUDENTIAL CUT TO HOLD VS BUY AT JEFFERIES
*TOMRA CUT TO HOLD VS BUY AT DNB

>>> PT Change


>>> Initiation
*GOOD ENERGY RATED NEW BUY AT INVESTEC, PT 250P
*HAVAS RATED NEW BUY AT JEFFERIES, PT EU8.85
*PORR RATED NEW BUY AT HSBC, PT EU32
*PUBLICIS ASSUMED BUY AT JEFFERIES, PT EU82
*SILTRONIC RATED NEW NEUTRAL AT CREDIT SUISSE, PT EU37
*SPIE RATED NEW BUY AT NATIXIS, PT EU22
*SPIE RATED NEW BUY AT UBS, PT EU22.50
*SPIE RATED NEW OVERWEIGHT AT JPMORGAN, PT EU21.3
*SPIE RATED NEW BUY AT HSBC, PT EU20
*SPIE RATED NEW EQUALWEIGHT AT BARCLAYS, PT EU20.50
*SUNRISE COMMUNICATIONS RATED NEW SELL AT CITI, PT CHF70
*WPP ASSUMED BUY AT JEFFERIES, PT 1,780P

>>> Call

>>> Asian iodate

Asian Mid-session Update: China property prices recover further; Gold plunges to 5-year lows

***Economic Data***
- (CN) CHINA JUN HOME PRICES M/M: FALL IN 34 OUT OF 70 CITIES VS 43 PRIOR; Y/Y: FALL IN 68 OUT OF 70 CITIES V 69 PRIOR
- (NZ) NEW ZEALAND JUNE PERFORMANCE SERVICES INDEX: 58.2 V 58.1 PRIOR
- (UK) UK JULY RIGHTMOVE HOUSE PRICES M/M: 0.1% V 3.0% PRIOR, Y/Y 5.1% V 4.5% PRIOR

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.1%, Kospi -0.1%, Shanghai Composite +0.6%, Hang Seng flat, Sept S&P500 flat at 2,119

***Commodities/Fixed Income***
- Aug gold -2.3% at $1,105/oz, Sept crude oil -0.2% at $51.12/brl, Sept copper -0.7% at $2.48/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 11.6 tonnes to 696.3 tonnes; biggest decline since Dec 2014 and lowest since Sept 2008 - update
- GLD: Aug gold falls below $1,100; 5-year lows
- (KR) South Korea Finance Ministry sells 10-yr bonds at average yield of 2.48%
- USD/CNY: PBoC sets yuan mid point at 6.1197 v 6.1192 prior setting; weakest Yuan setting since Jun 8th
- USD/CNY: (CN) Chinese Academy of Social Sciences (CASS) researchers suggest removing Yuan fixing - Chinese press

***Market Focal Points/FX***
- China property prices continue to rebound as policymakers' easing of the curbs are taking hold. June home price declines were in 34 cities, down from 43 prior, while the number of risers was up to 27 from 20. Across top-70 cities, prices were up 0.4% v 0.2% prior, and y/y the decline slowed to -4.9% v -5.7% prior. Stats Bureau noted the trend of polarization was evident, with top-tier cities seeing the most pronounced demand. Among first tier cities, new home prices in Shenzhen recorded the highest monthly and annual growth of 7.1% and 15.7% respectively. Separately in China, researchers forecasted H2 GDP at 7%, which would assure the economy would meet the annual target of 7%. Pres Xi also remarked economic growth outlook remains promising despite downward pressure, and Fin Min Zhu was confident China can sustain 7-8% growth in next 5 years.

- Ahead of this week's RBNZ decision, local press reports stating analysts are now unanimous in expectation for RBNZ to cut rates by 25bps to 3.00%, with conversation now shifting to the likelihood of a 50bp move and mention of a subsequent easing next month as well. NAB economists see NZD falling as low as $0.60. NZD/USD and AUD/USD were right around their 6-year lows today, testing $0.65 and $0.7330 respectively.

- Australia's bank regulator (APRA) announced widely anticipated capital requirement adjustments for residential mortgages, raising avg risk weighting on mortgages to at least 25% v 16% currently. Change is effective in mid-2016 and will be the equivalent of increasing minimum capital requirements for the major banks by approximately 80 basis points or around A$11B across the big four banks. Banking shares were not greatly impacted, however all of Australia's top names revealed the extent of impact on their CET1 ratios.

- Nikkei225 was closed for holiday, with traders gearing up for more active earnings activity this week. Political risk is closely monitored after the administration pushed through the controversial defense legislation last week. Subsequently, local press saw PM Abe's approval rating fall to record low 35% from 42%.

- Greek banks are set to reopen today, allowing repayment of the ECB loan from higher ELA funding. German chancellor Merkel reiterated her opposition to any debt forgiveness for Greece, but added Germany is open to some flexibility on debt repayment schedule. Fin Min Schaeuble acknowledged there were differences of opinion with Merkel on Greece, and that he was prepared to resign if forced to go against personal convictions, though latest commentary also indicated he will remain on his post regardless.

- Diminished possibility of Grexit has played out in the precious metals markets - Aug gold fell sharply by 3.5% to 5-year lows below $1,090. Note that on Friday, SPDR gold trust also announced ETF daily holdings falling 11.6 tonnes to 696.3 tonnes - the biggest decline since Dec 2014 and lowest since Sept 2008. Meanwhile, China's PBoC had reportedly boosted its holding for the first time since Apr 2009 to 53.31M troy oz vs. 33.89M prior (end-May).

***Equities***
US equities / ADRs:
- UTX: Lockheed Martin said to acquire Sikorsky unit for over $8B - financial press

Notable movers by sector:
- Consumer discretionary: Genting Singapore Plc 678.HK +7.8% (H1 guidance); China ZhengTong Auto Services Holdings 1728.HK -2.2% (possible spin-off)
- Consumer staples: A2 Corp ATM.NZ -2.6% (FY16 guidance)
- Financials: Macau Legend Development 1680.HK -2.5% (H1 guidance); Commonwealth Bank of Australia CBA.AU +0.1%, Westpac Banking WBC.AU -0.3%, ANZ Bank ANZ.AU +1.0%, National Australia Bank NAB.AU -0.1% (APRA to raise requirement for residential mortgages)
- Industrials: Weihai Guangtai Airport Equipment 002111.CN +1.7% (H1 result)
- Technology: Hithink Flush Information Network Co 300033.CN +0.4% (internet banking guidelines)
- Materials: Sinofert Holdings 297.HK +7.3% (H1 guidance); Perseus Mining PRU.AU -10.2% (Q4 result); Ramelius Resources RMS.AU +2.2% (FY15 guidance);
-Utilities: China Power International 2380.HK -3.7% (H1 result)
- Telecom: China Mobile 941.HK +1.2% (June operation data)
-Healthcare: Sonic Healthcare SHL.AU -3.8% (FY15 guidance)

(ZeroHedge) "The Streets Of Athens Will Fill With Tanks": Kathimerini Reveals Gr

"The Streets Of Athens Will Fill With Tanks": Kathimerini Reveals Grexit "Black Book" Shocker
Over the course of six painful months, round after round of fraught negotiations between Greece and its creditors produced all manner of speculation about what a "Grexit" would actually entail.

With no precedent to turn to for guidance, mapping out the implications of an exit from the currency bloc was (and still is) a virtually impossible task, but the collective efforts of the sellside, the mainstream media, political analysts, and economists did manage to produce a veritable smorgasbord of diagrams, decision trees, flowcharts, and schematics, in a futile attempt to map the complex interplay of politics, economics, and financial concerns that would invariably follow if Athens decided to finally break off its ill-fated relationship with Brussels.

And it wasn’t just outside observers drawing up Grexit plans. Despite the fact that EU officials denied the existence of a “Plan B” right up until German FinMin Wolfgang Schaeuble’s “swift time-out” alternative was “leaked” last weekend, no one outside of polite eurocrat circles pretends that a Greek exit wasn’t contemplated all along and indeed Yanis Varoufakis contends that Athens was threatened with capital controls as early as February if it did not acquiesce to creditor demands.

Now, in what is perhaps the most shocking revelation yet about what EU officials really thought may happen in the event Greece crashed out of the EMU and unceremoniously reintroduced the drachma, Kathimerini is out with a description of what the Greek daily calls the "Grexit Black Book," which purportedly contained the suggestion that civil war would breakout in Greece in the event the country was forced out of the currency bloc.

Here’s more (Google translated):

On the 13th floor of the building Verlaymont in Brussels, a few meters from the office of the European Commission President, Jean-Claude Juncker, stored in a special security room and in a safe Greece's exit plan from the Eurozone. There, in a multi-page volume, written in less than a month from 15-member team of the European Commission, answered questions on how to tackle such an outflow, including, as shocking as it may sound, even the possibility of the country out of the Treaty Schengen, and not only being driven outside the euro, but also outside the EU
According to European official, in that the European Commission Summit already had a bound volume, a multi-page document, which described the Greek prime minister, before the start of the session, by the same Mr. Juncker with all the details of a Grexit , giving him to understand the legal and political context of such a decision. In multipage document in accordance with European official who has the ability to know its contents, there are detailed answers to 200 questions that would arise in case Grexit.
These questions, as he explains official, are interrelated, as an exit from the euro would create a cascade of events, which would evolve in a relatively short time. From the drachmopoiisi economy to foreign exchange controls that would take place at the country's borders and which will ultimately lead at the exit of Greece from the Schengen Treaty.
The authors of the draft, according to European official, conducted under conditions of absolute secrecy. A special group of 15 people of the European Commission, by direct contact with Greece started to prepare, and was also in direct contact with a number of senior officials and DGs in the European Commission who had expertise in specific areas. The writing of the project started when the expiry date of the program (end of June) was approaching, so it is the Commission prepared for every eventuality, and by the time the referendum was announced, Friday, June 26, the relevant procedures were accelerated. The weekend of the work referendum intensified, so now two days later, Tuesday of that Synod, the project has been finalized.
According to well-informed source, involved in creating the plan worked "suffer the pain" as typically describe the "K" and "overwhelmed" because they could not believe that things had reached this point, and most of them had direct involvement with the Greek rescue programs. The European Commission also was hoped that even until the last minute solution would be found as members of this group knew better than anyone the consequences exit of Greece from the Eurozone and understand the cost of such a decision. One of those involved with direct knowledge of Greek reality in the critical phase of the training, he said the rest of the group that "if implemented this plan, the streets of Athens will sound tracks of tanks."
Sight unseen, it's not entirely clear what is meant by "will sound the tracks of tanks," and we assume the suggestion is not that the EU and its constituent member states would somehow seek to orchestrate a military takeover of the Greek state in the event Athens makes the 'wrong' decision about EMU membership.

Rather, the suggestion seems to be - and again this is simply an interpretation based on the information presented by Kathimerini - that Brussels was of the opinion that the referendum results together with the divergent rhetoric emanating from Greek lawmakers on the right and far-left betrayed the degree to which the Greek people were deeply divided. Although Tsipras' concessions will undoubtedly have far-reaching implications for politics and Greek society in general, it looks as though Brussels feared that the economic malaise that would have resulted from redenomination might have triggered widespread social unrest that would ultimately have to be brought under control by the Greek army.

We'll leave it to readers to determine both the accuracy of our interpretation and the degree to which the "secret" document's mention of "tanks" represented an accurate assessment of the situation versus yet another attempt to scare Tsipras into capitulating, but one thing is for sure, even mentioning the possibility that "the streets of Athens" will be occupied by the military doesn't seem like something one "partner" would say to another.

>>> UK government could begin selling Royal Bank of Scotland stake as soon as ea

UK government could begin selling Royal Bank of Scotland stake as soon as early August 

The UK government could begin selling its 79% stake in Royal Bank of Scotland (RBS) as soon as early August, The Sunday Times reported.

The newspaper cited sources close to the Treasury and RBS who said the initial tranche of shares could be sold to major institutional investors in the first couple of weeks in August. The sources were quoted at the end of a report about a potential relaxation of "ring-fence" regulation of UK banks.

RBS was the subject of a GBP 45.8bn (EUR 65.98bn) bailout by the UK government during the financial crisis. The Treasury has a break-even point of 502p on its RBS shares, which closed 0.5p down at 360.2p in London on Friday 17 July.

UK chancellor George Osborne has indicated plans to raise up to GBP 2bn by the year's end, the item noted.

A Mail on Sunday report said it is predicted that Osborne will approve the placement of a small portion of RBS shares in September, but did not cite a source for the claim.

RBS will at the end of July post its 1H15 results, which will include a fresh provision for probable fines, according to the newspaper. City analysts cited by the report expect RBS to report a GBP 300m loss.

Royal Bank of Scotland’s market capitalisation stood at GBP 41.67bn at the close of trading on Friday.

Sunday Times, Mail on Sunday

>>> Ladbrokes and Gala Coral set to agree merger as soon as this week


Ladbrokes and Gala Coral set to agree merger as soon as this week

The UK-based bookmakers Ladbrokes and Gala Coral are about to agree a merger as soon as this week, The Sunday Times reported. The newspaper did not cite a source for the claim.

Ladbrokes and Gala Coral confirmed last month that they were holding discussions regarding a potential merger. It is expected that Ladbrokes will finance the deal via a share issue, according to the newspaper.

The merged group would probably be valued at approximately GBP 3.5bn (EUR 5.04bn) and would have around 4,000 shops, making it the largest high street bookmaker in the UK, the item continued.

It is expected that the deal will attract attention from the competition regulator, the article said, noting that Ladbrokes’ attempted takeover of Gala Coral in 1998 was blocked by the UK government due to competition concerns.

Private equity groups including Cerberus and Apollo Global Management own Gala Coral.

Ladbrokes’ market capitalisation stood at GBP 1.86bn (EUR 2.68bn) at the close of trading in London on Friday, 17 July.


Sunday Times

>>> What to look at this Week-End - 18th & 19th of July 2015

Dow +1.84% S&P+2.41% Nasdaq+4.25% Russell EuroStoxx+4.01% FTSE+1.52% CAC+4.51% Dax+3.16% Ibex+4.03% MIB+3.61% SMI +3.42% Nikkei+4.40% Hang Seng +2.06% Shanghai +2.05%
After a couple of weeks of uncertainty and crisis, global equity markets got what they needed to resume an uptrend. Chinese authorities delivered a pristine, +7.0% annualized second quarter GDP beat and several more rounds of liquidity for troubled equity markets, while the Shanghai Composite appeared to calm down. Iran and the US brokered an historic deal to put Tehran's nuclear program on ice in exchange for sanctions relief. Just a week after the Greek referendum rejected Europe's terms for a new bailout, the leaders of Greece accepted even harsher terms. The irony has been lost on nobody and political forces on all sides are struggling over terms, however markets clearly like the idea of leaving behind Greek headline roulette. The dollar soared, with EUR/USD headed for four-month lows around 1.0800, and USD/JPY back at 1.2400. Fed officials reiterated they were at the very cusp of rate hikes, followed close behind by the BoE, as Governor Carney said the decision on rate tightening would come into focus near year end. WTI crude is back near $50 and gold is at five-year lows below $1,150. Treasury curves flattened as buyers congregated at the long end for both US Treasury and German Bund markets. The US benchmark 10-year yield declined some 5 basis points on the week. For the week, the DJIA added 1.8%, the S&P gained 2.4%, and the Nasdaq surged 4.3%.


Macro :
- Greek Banks to Reopen on Monday, Government Decree Says : full text attached
- Greek Bourse Will Not Resume Trading Monday: Spokeswoman
- Varoufakis Tells BBC That Greece’s Economic Reforms Will Fail
- Germany to Spend EU2.7B on New Roads and Bridges Plan, Bild Says
- Germany’s Tauber Says Greek Exit Off Table For Now: Tagesspiegel

Keep an eye on :
- Pharma Sector : China May Stop Reimbursement for OTC Drugs: Medicine Eco. (Wed)
- AIR FP : Airbus to Build New A380 Version for $3B, CEO Tells Sunday Times
- ATC NA : Altice Says Not Interested in Carlos Slim’s KPN Stake
- ATL NA : Atlantia Weighing Potential Partners for Rome Airport Manager
- BA/ LN : BAE Starting Search for CEO King’s Successor, Sky Says Link : http://bit.ly/1MhzU5d
- BG/ LN : Shell Seen Assuming BG Acquisition Viable at $70/bbl Oil: FT Link : http://on.ft.com/1SvK80F
- BT/A LN : BT Chief Warns Against Forced Sale of Network Unit: Telegraph Link : http://bit.ly/1CJwOnM
- FCA IM : Fiat Chrysler Considers Sale of Magneti Marelli Unit: Reuters Link : http://reut.rs/1MAgPbF
- GSZ FP : GDF Suez, Kansai Electric Join in LNG Sales, Nikkei Says
- GIVN VX : Givaudan CEO Andrier Says Rev Growth Not on Usual Level: FuW
- SDF GY : K+S bidder Potash might consider hostile takeover - Der Tagesspiegel
- LHA GY : Germanwings Families Want EU200,000 Per Victim, Bild Says
- OCI NA : CF Industries Said to Be in Talks for Merger With OCI, DJ Says
- POP IM : Ubi, Banco Popolare Have Discussed Possibility of Merging: Sole
- SIK VX : Sika Chairman Says Courts -- Not Finma -- Decide on Groups: SamS
- STAN LN : Standard Chartered Reorganizes Management to Achieve Cost Cuts
- SYNN VX : Syngenta Holders Ask Board to Consult Them on Monsanto: FuW Link : http://bit.ly/1MAhiKG
- SYNN VX : Syngenta Said to Plan Meetings With Investors: WSJ Link : http://on.wsj.com/1I37ftx
- SYNN VX : Monsanto’s Grant Says Investors Impatient for Syngenta Talks
- TKA AV : Telekom Austria Has No Plans for Rights Issue: America Movil
- VOW3 GY : Volkswagen Brand Deliveries Rise 7.5% in West Europe Ex. Germany
Syngenta Said to Plan Meetings With Investors: WSJ

FT : Shell says BG deal will produce ‘billions’ in savings

Shell says BG deal will produce ‘billions’ in savings

Royal Dutch Shell expects billions in savings from its proposed £55bn takeover of BG Group as it uses the enlarged company’s scale to slash costs in its deepwater oil business and natural gas trading arm.
Stung by a slide in Shell’s share price, which has tumbled 13 per cent since the BG deal was announced in early April, chief financial officer Simon Henry has sought to turn round investor scepticism over the economics of the deal.
The Anglo-Dutch energy company has told investors and analysts that so-called “value synergies” — benefits that cannot yet be quantified under City takeover rules — are likely to be “a multiple” of the $1bn in annual projected savings from merging head offices and other cost-cutting.
Ben van Beurden, Shell’s chief executive, is also likely to use the company’s interim results on July 30 to outline a substantial cut to this year’s capital investment, as it adjusts to a 50 per cent plunge in oil prices since last summer.
Few in the City have questioned the deal’s logic, which gives Shell huge deepwater Brazilian reserves and cements its position as the world’s biggest supplier of liquefied natural gas after Qatar.
But concerns have grown that Shell needs oil prices of $90 a barrel for the deal to work, its projected savings are too low and new LNG supplies will send Asian prices even lower.
In what one person present called an “impassioned” speech over a lunch with about 40 investors and analysts at Wimbledon on men’s quarter-finals day, Mr Henry insisted that the deal worked at $70 a barrel. The chief financial officer said it would add immediately to cash flow and the dividend would be maintained.

Another person said: “There is a frustration in Shell that people are not understanding the oil price that this deal works at and that the reason it works at that lower oil price is there are much greater synergies.”
A third person present at the speech said: “This was a tacit admission that they had underestimated, or missed, the importance of selling it hard to investors.”
Several analysts seized on Mr Henry’s remarks that “value” synergies were likely to be a multiple of initial operational cost savings of $1bn.
They suggested that the enlarged group’s Brazilian deepwater oil portfolio and its combined LNG trading and marketing operations would lead to economies of scale. These would include reduced procurement and supplier costs in Brazil and, in the trading arm, savings on shipping and logistics.
Under takeover rules, Shell can only set out initial cost reductions from eliminating clear duplication in areas which accountants are able to verify, such as headquarters, IT and human resources.
Irene Himona, energy analyst at Société Générale, said she expected the company to announce value synergies “amounting to a potential ‘high multiple’ of the original $1bn”, and as much as $5bn, on the deal’s completion.

Shell’s shares have in the past year underperformed those of a group of “supermajors” including BP, whose share price rose after it announced steep spending cuts.
This year’s capital spending budget at Shell is expected to be revised lower, by several billion dollars from the $33bn announced at the end of April, reflecting project deferrals.

WSJ : Syngenta’s Refusal to Negotiate With Monsanto Irks Shareholders

Syngenta’s Refusal to Negotiate With Monsanto Irks Shareholders Link : http://on.wsj.com/1I37ftx
Some investors complain of inadequate communications from the Swiss company

Syngenta AG plans a series of meetings with investors as it contends with frustration from some shareholders over its rejection of a roughly $45 billion takeover effort by rival agribusiness giant Monsanto Co.
Executives for Syngenta, including Chief Executive Michael Mack and Chief Financial Officer John Ramsay, plan to meet with investors in Europe and the U.S. after the Basel, Switzerland-based company reports its first-half financial results, which are scheduled for Thursday, people familiar with the matter said.

Some Syngenta shareholders are voicing discontent over the pesticide maker’s steadfast refusal over the past three months to enter negotiations with Monsanto, and over Syngenta’s communications with its own shareholders on the matter.

“Most of the investor community cannot understand why they are not sitting down, or sitting together at a table and starting to talk to one another,” said Martin Lehmann, a partner and fund manager with 3V Asset Management AG, a Zurich-based firm that owns Syngenta shares.

Monsanto, the world’s largest seller of seeds, proposed in late April a deal that would refashion the global agriculture industry by creating a world leader in both seed and pesticide sales. The St. Louis-based company says the new entity would be better equipped to formulate new products and bring them quickly to farm fields. Its offering price of 449 Swiss francs ($467) a share was a 43% premium to Syngenta’s share price before Monsanto’s approach became public, and remains higher than Friday’s closing price of 407 francs.

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Syngenta’s board has refused to open formal talks. Company officials have raised antitrust concerns and argued that Monsanto was trying to scoop Syngenta up at a cut-rate price. Agricultural suppliers are struggling with weak crop prices that have pinched profits for farmers and the companies that sell them seeds, sprays and tractors.

Shares of Syngenta had declined about 10% in the year before Monsanto’s approach became public, while Monsanto’s stock had increased 3%, versus an 11% increase in the S&P 500 index.

Monsanto has tried to pressure Syngenta by taking its case to the Swiss company’s shareholders, dispatching top executives including Chairman and Chief Executive Hugh Grant to meet Syngenta investors in Europe and the U.K. over the past month. To canvass shareholders, Monsanto has retained proxy specialists at Georgeson Inc. in the U.S. and Vontobel Holding AG in Zurich.

Syngenta has been constrained from some communications with shareholders in part because it has been in a “quiet period” ahead of its earnings report on Thursday. The company typically speaks with and meets investors and analysts after releasing its financial results.

While Syngenta’s management hasn’t held face-to-face meetings with shareholders since Monsanto’s approach became public, the company in late June posted a video online in which its chairman, Michel Demaré, detailed Syngenta’s reservations toward Monsanto’s proposal and the virtues of a stand-alone strategy. Mr. Demaré also discussed the matter directly with some shareholders, according to a person close to the discussions.

Some investors complain that Syngenta’s communications have been inadequate. A top five shareholder of Syngenta expressed frustration in private talks with the management that it didn’t discuss Monsanto’s approach with investors first before refusing it. The investor, which didn’t want to be named, also urged management to ask shareholders about their considerations first should Monsanto float a new offer.

Another Syngenta shareholder, London-based Henderson Global Investors, told Syngenta in an email this month that Monsanto’s takeover proposal is “credible and deserves serious consideration,” according to a person familiar with the message. The email was first reported by Reuters.

“Whilst we have not yet taken a firm position to support [Monsanto], the lack of any opportunity to engage with Syngenta is likely to be an important factor in our decision making,” Henderson officials wrote. “We were therefore very surprised to learn that the company is currently limiting shareholder engagement to a very small group of shareholders, and relying on a YouTube video to communicate with the rest of the investor base.”

A spokeswoman for Henderson said “we believe the long-term Monsanto strategy is credible for Syngenta stakeholders.”

A Syngenta spokesman declined to comment on the email.

Syngenta’s financial results this week also could affect investors’ attitudes. Analysts polled by Thomson Reuters expect the company to report a 4% decline in first-half profit to $1.3 billion, on an 8% slide in revenue to $7.8 billion. Monsanto last month said its latest quarterly profit soared by nearly a third from a year earlier to $1.1 billion, thanks partly to a new sales partnership centered on its Roundup weedkiller.

Jeremy Redenius, analyst with Sanford C. Bernstein & Co., said Monsanto’s approach has increased pressure on Syngenta’s management after several years of disappointing earnings growth.

“They need to deliver a good result and say the right things to instill some confidence among their investors that they’re running the business well and looking out for the best interests of shareholders,” Mr. Redenius said.