(Bernstein) Nokia and Alcatel-Lucent: The Merger...A Bumpy Ride or smooth

Nokia and Alcatel-Lucent: The Merger...A Bumpy Ride or Smooth Sailing? (Full note attached)

Highlights
In today's note we present our view on how bumpy the ride could be through to completion and execution of
the merger between Nokia and Alcatel-Lucent.
We find the risk of the deal being renegotiated or falling through is real but slim; playing more the Alcatel-
Lucent than the Nokia side is an easy way to hedge one's self against it. On the commercial front, China is
the only place where we see material pain looming. In particular, we happily ignore comments by Nokia's
CEO on pricing pressure – they are to us just ways to limit the bargaining power of Alcatel-Lucent's
shareholders and to signal coming pain in China. In terms of demand, we actually expect the second half of
the year to be supportive, although newsflow risk related to China could hurt the stocks and will need to be
carefully monitored in 2H. Lastly, the IPO of Alcatel-Lucent's submarine business and the sale of Nokia's
maps business are likely to progress in the meantime, driving some upside on our current expectations.
In conclusion, we reiterate our strong conviction: playing the merger now makes sense, preferably on the
Alcatel-Lucent side. Recent valuation levels offer significant upside and we expect the stocks to work
rapidly as the longer term potential of the merger gets recognised by investors.

Timing of the close and related risks:
* The deal is expected to close in the first half of 2016. Although the "red tape" around the merger is heavy
and justifies a long lead time, we don't see material regulatory risks in any region.
* There is a risk that Alcatel-Lucent shareholders ask for better conditions or refuse to bring their shares to
the deal. Some have expressed dissatisfaction with the exchange ratio and we agree that Alcatel-Lucent
could have received better conditions. We nevertheless believe chances of a renegotiation to succeed or
to lead to the deal falling through are slim: Alcatel-Lucent shareholders have limited long term
alternatives and Nokia's Board understands that well.
* Given the real nature of this risk, we believe that Alcatel-Lucent remains the better way to play the
merger and hedge these risks: it would benefit from a renegotiation and is marginally more attractive on a
standalone valuation basis.

>>> Plus500 shareholder Odey thinks Playtech offer too low

Plus500 shareholder Odey thinks Playtech offer too low

Plus500 shareholder Odey Asset Management is said to be looking for a takeover bid nearer to 500p per share than the 400p per share offered by Playtech, The Independent reported. The newspaper did not cite a source for the speculation.

Odey, the largest shareholder in Plus500, does not have sufficient shares to block Playtech’s offer, the item added.

Plus500, a listed UK-based spread betting company, on Monday, 1 June, recommended a 400p per share cash bid from the listed Isle of Man-based gambling software group Playtech. The offer values Plus500 at GBP 459.6m (EUR 625.3m).

The report noted that Plus500 is the subject of a review by the UK’s Financial Conduct Authority (FCA). This news service reported on Monday that the FCA is reviewing the company’s products and platform provider under anti-money laundering controls.

The Independent report quoted an analyst at Numis who believed that Playtech’s takeover of Plus500 remains subject to “significant uncertainties.” The analyst thinks the FCA review could be lengthier than expected and that the regulator could widen its review to other parts of Plus500’s business.

Separately, The Daily Telegraph’s market report section noted that a US broker valued Plus500’s shares at just 52p each.

Plus500’s share price closed 14.75p up at 370.00p in London yesterday, valuing the company at GBP 425m.

Independent, Daily Telegraph

(BFW) UBS Strategists Turn More Bullish on European Equity

UBS Strategists Turn More Bullish on European Equity
2015-06-04 06:28:53.613 GMT


By Blaise Robinson
(Bloomberg) -- UBS raises its Stoxx 600 end-2015 index
target to 440 from 380, according to strategy note.

* Forecasts 10% earnings growth in 2015, 10% in 2016
* Strong 1Q earnings season, analyst upgrades, improved macro
conditions will help fuel rally
* On derivatives, UBS drops recommendation for a put spread on
the Euro Stoxx 50 and instead suggest a 3700 Euro Stoxx 50
call with expiry in Dec 2016 to capture more upside for
European stocks
* Says call still good way to limit downside risk as Greek
talks continue
* Less positive on U.K. market, targets 7,200 FTSE 100 for
year-end
* NOTE: Earnings for Stoxx 600 companies expected to rise ~40%
in next 12 mths, according to Bloomberg data

For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Blaise Robinson in Paris at +33-1-3365-5008 or
brobinson58@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-3525-2645 or
jludden@bloomberg.net

(Exane) Aerospace & Defense : On Air: Connectivity – the end of "Airplane Mode"?

On Air: Connectivity – the end of "Airplane Mode"?

The internet takes to the air
The advent of external and internal connectivity has stimulated change in in-flight entertainment
services. On-board internet access is now possible via Wi-Fi signals in the passenger cabin and
external connectivity provided by either satellite communications or air-to-ground systems. The
continuing drop in satcom prices, helped by a new generation of satellites, supports this cycle.

Connectivity may not be the hoped-for bonanza…
Cash-rich airlines see connectivity as a possible differentiator and may be tempted to look for a
customized service proposition. However, they are struggling to define a viable business model, as
passengers seem unwilling to pay for a service that is at risk of becoming a commodity (as in
hotels). The connectivity equipment ramp-up will continue, but the boom is not yet in sight.

…until it wins an audience
The future of the in-flight entertainment connectivity (IFEC) market depends on making the service
attractive and affordable. Volume leverage is still absent but may develop by making the service
cheaper and more reliable and adding new capabilities to prompt passenger purchases. This may
drive a double-digit CAGR in IFEC revenues at most stakeholders for the next 10 years.

IFEC of strategic importance for many A&D / satellite players
We estimate that global IFEC may account for up to 50% or more of the MT sales growth of Thales
(when adding in revenue synergies in satellites, cybersecurity, etc.) and Eutelsat, our two preferred
stocks to play this theme. It is also of key importance for other players such as SES, Zodiac
Aerospace and Cobham, influencing their top lines as well as R&D and M&A strategies.

(Re/Code.net) A T-Mobile-Dish Deal Could be The Ultimate Marriage of Convenience

A T-Mobile-Dish Deal Could be The Ultimate Marriage of Convenience / http://on.recode.net/1IfdiOz

A deal between Dish and T-Mobile is akin to two people who hook up because they are the last ones left in the bar at closing time.

Both had their eye on other combinations but saw their efforts foiled. And more than anything, neither company wants to go home alone.

Plus, while not the perfect catch, each partner has its good parts. T-Mobile is an aggressive, fast-growing upstart in wireless, while Dish has deep spectrum holdings. Together, they can offer a combination of services that neither was able to do solo.

Both companies have long sought merger partners, with Dish having previously sought to buy Sprint, and T-Mobile having tried to sell itself to AT&T and to merge with Sprint. Dish was outmaneuvered by SoftBank, while regulators shot down T-Mobile’s deals with AT&T and Sprint. Dish had also approached rival DirecTV for a possible tie-up last year.

A Dish-T-Mobile deal, though, is also unlikely to encounter the same degrees of regulatory scrutiny that T-Mobile encountered in those prior efforts. A Dish deal would maintain four national wireless carriers and arguably strengthen the No. 4 wireless carrier while the other two transactions would have removed a competitor from the market.

The Wall Street Journal reported earlier Wednesday that the two companies were in early-stage talks on a deal that would see outspoken CEO John Legere running the combined company, with Dish chief Charlie Ergen serving as Chairman.

Ergen, a gambler as both hobby and profession, has been continuing to amass spectrum even without having a clearly outlined strategy for how it would be used.

A T-Mobile transaction would effectively answer that long-running question.

One big uncertainty though, is whether the combined entity would have access to the cash it needs in what is a very expensive business demanding a consistent huge investment in network improvements.

Both Dish and T-Mobile have been perennially on the list of tech’s most eligible bachelors.. Dish’s core video business has been weakening for years, and without access to broadband that it can sell, its prospects haven’t been appealing. So Ergen has been steadily stockpiling wireless spectrum, presumably in the hopes of either flipping it or using it as bait to sell his entire company.

Dish’s video business, which boasts 14 million subscriber does have some value for T-Mobile since it would give the company a new revenue stream. And Ergen has been experimenting with Sling TV, an “over the top” service that delivers TV over the Internet, and can be used by customers who don’t subscriber to Dish (or T-Mobile).

T-Mobile, meanwhile, has been gaining subscribers due to an aggressive turnaround effort spearheaded by Legere. But T-Mobile, for all its successes is still far smaller than AT&T or Verizon in wireless and lacks the other sorts of services to bundle such as TV or high-speed Internet. Verizon and AT&T both offer TV in some regions, while AT&T is in the process of acquiring Dish’s satellite rival, DirecTV.

But a hookup won’t solve all of the combined companies’ issues. Neither company offers high-speed wireless to the home, though Dish has at times talked about using its airwaves to offer a type of broadband service known as fixed wireless.

A T-Mobile representative declined to comment. Dish representatives were not immediately available for comment.

>>> Debenhams could be bid target for Landmark Group or Sports Direct

Debenhams could be bid target for Landmark Group or Sports Direct 

Debenhams shares gained 0.7% yesterday, 3 June on renewed talk that the UK-based department store operator might attract a bid from either Landmark Group or Sports Direct, the Financial Times reported. The newspaper’s market report section did not cite a source for the speculation.

The item noted the investment firm Milestone Resources is the second-largest investor in Debenhams with a stake of 7.2%. Milestone’s owner Micky Jagtiani is the chairman of Landmark Group, the report added.

As previously reported, Mike Ashley is the controlling shareholder in Sports Direct.

Debenhams’ share price closed 0.7p up at 94.8p in London yesterday, giving the company a market capitalisation of GBP 1.16bn (EUR 1.57bn).


Financial Times

>>> What to look at today - 4th of June 2015

Dow+0.36& S&P+0.19% Nasdaq+0.45% Russell+0.99%
US Market Closed higher with light volume again today, 670 mil shares traded today. Still no agreement in Greece, euro Rallying even with no agreement, Six of ten sectors registered gains with a few cyclical groups holding the lead throughout the day. Specifically, consumer discretionary (+0.7%), financials (+0.7%), and industrials (+0.5%) kept the market afloat with the industrial sector receiving support from transport stocks. Six of ten sectors registered gains with a few cyclical groups holding the lead throughout the day. Specifically, consumer discretionary (+0.7%), financials (+0.7%), and industrials (+0.5%) kept the market afloat with the industrial sector receiving support from transport stocks...US After Hours FIVE +7.8%, DRWI -17.4%, VRNT -3.5 following earnings/guidance...Despite the rally in the US markers, trading in Asia is considerably more mixed, with the closely watched Shanghai Composite bringing up the rear. Worries over drying up decline in volume that took the mainland markets on their spectacular rallies so far this year are at the forefront, with another brokerage - Golden Sun Securities - reportedly suspending margin financing for all stock on GEM board...Ahead of Friday's IMF deadline, Greek PM Tsipras said his govt is still not in agreement with certain requests made by creditors. Eurogroup's Dijsselbloem said talks will continue in a few days, and that some progress had been made.

Nikkei -0.07% Hang Seng -1.10% Shanghai -3.08%

Eur$ 1.1268 GBP 1.5331 JPY 124.30 EURCHF 1.05225 RUB $54.4925 WTI $59.62 (-0.03%)

S&P -0.21% EuroStoxx -0.53% Dax -0.6% SMI -0.43%

Macro :
- Merkel Seeks Speedy Resolution on Greece as Tsipras Talks Begin
- France’s Macron Tells CNBC a Greek Default Is Unlikely
- Euro Area Said to Want Greece Deal by June 14: Greek Official

Keep an eye on :
- AIR FP : Airbus confirms 3 of 4 engines failed in A400M crash in May - FT
- AREVA FP : French State Supports Sale of Areva Reactors to EDF: Figaro
- BAS GY : BASF Said to Mull Potential Bid for Syngenta: Reuters http://reut.rs/1RK6psY --> SYNN+4.4% in the US
- CFG SM : Alfa Bought 37% Stake in Campofrio From WH Group for $354m
- DTE GY : Dish Said in Talks to Merge With T-Mobile US, WSJ Reports (in your inbox)
- DTE GY : German Mobile Spectrum Auction Reaches EU2.4b After 70th Round
- EDF FP : EDF, Areva Reactor Ops To Be Combined in Separate Co.: Elysee
- HSBA LN : HSBC Shares Unlikely to Outperform on Investor Day: Bernstein
- ISAT LN : FTSE 100 to Include Inmarsat, Exclude Aggreko
- LAD LN : Paddy Power (PAP LN) could offer 175p/share for Ladbrokes (+43% premium vs yest. close) - Daily Mail
- MRK GY : Merck KGaA Isn’t Looking for Major Purchase, Deputy CEO Says
- MONY LN : Moneysupermarket.com May Be Included in Ofgem Investigation
- PC IM : Pirelli Minorities Could Seek Higher ChemChina Bid: Repubblica
- PNL NA : PostNL seen packaging foreign assets on country-by-country basis - Deal Reporter
- RDSA LN : Shell CEO Interested in Iran Opportunities Once Sanctions Lifted
- ROG VX : Roche Wins FDA Clearance for Cobas Tests for Genital Herpes
- SAN FP : Sanofi Gets FDA Breakthrough Therapy on Genzyme’s Olipudase Alfa
- SHP LN : Shire Loses Patent Appeal Again Over Generic of Lialda Drug
- SYNN VX : BASF Said to Mull Potential Bid for Syngenta: Reuters http://reut.rs/1RK6psYwei --> SYNN +4.4% in the US
- TIT IM : Telecom Italia Sets Inwit IPO Price Range at EU3.25-EU3.90
- ZAL GY : Zalando to Replace Bertrandt in MDAX Amid Index Reviews

>>> Europe : Brokers Upgrades & Downgrades - 4th of June 2015

>>> Up
*EDP RENOVAVEIS RAISED TO BUY VS NEUTRAL AT UBS
*ERICSSON RAISED TO OVERWEIGHT AT JPMORGAN
*KINGFISHER RAISED TO NEUTRAL VS UNDERPERFORM AT BOFA
*NORDEA RAISED TO BUY AT GOLDMAN

>>> Down
*CREDIT AGRICOLE CUT TO UNDERPERFORM VS NEUTRAL AT MEDIOBANCA
*RED ELECTRICA CUT TO NEUTRAL VS BUY AT UBS
*SWEDBANK CUT TO SELL AT GOLDMAN

>>> PT Change
*VOLKSWAGEN PT RAISED FROM €189 to €240
*VOLKSWAGEN PREF. PT LOWERED TO €240 from €250

>>> Initiation
*CARREFOUR RATED NEW BUY AT BERENBERG, PT EU37
*CASINO RATED NEW HOLD AT BERENBERG, PT EU82

>>> Call
>> Index
*STOXX 600 END-2015 TARGET RAISED TO 440 FROM 380 AT UBS (11.4% upside)
*FTSE 100 END-2015 TARGET CUT TO 7,200 VS 7,300 AT UBS (5% upside)

(BarCap) Volkswagen : Not Right Now

* Timing is still our key dilemma with VW: The bull case on VW is persuasive – MQB should hit its stride in ‘16, FutureTracks is set to deliver €5bn of savings by ‘17, a raft of new SUVs and more localized product should see the VW brand turnaround in North America beyond ’17 and there is also a substantial FX tailwind coming as hedging rolls in the next few years. The debatable point is when these will hit the P&L and to what degree emerging markets woes (now including China) will offset the positives. We don’t see material earnings progression in 2015, but ’16 and ’17 look compelling. Recently, stalling sales and price cuts in China have spooked the market and whilst we think this is a reflection of the market normalizing, the next couple of months are likely to remain soft. For now we stick to our EW rating and trim our price target on the pfds to €240 while raising the PT on the ords to €240 on the narrowed liquidity discount.

* We think VW is well placed in China, but there are challenges ahead: We continue to believe the China auto market is maturing, becoming more normal as it were. In the short term there are headwinds for VW given sentiment in the premium segment is being dampened by anti-graft investigations and in the mass-market segment cheap, local brand SUVs are taking share. Whilst we think these issues are temporary and largely offset by a sizeable currency tailwind in 2015, we think weakening sales are likely to hold the stock back given how important China is to earnings.

* MQB is working, but EM woes are obscuring the benefits: We remain MQB believers even if there is little evidence of the expected savings in the group’s account thus far. We think that is down to a greater than €2.5bn profit slump thanks to collapsing volumes and exchange rates in Brazil, Russia, Turkey and India. We think there is at least another €500m of headwind in 2015 (this might be light given the CFO indicated it was that much in Q1), but we think the pain eases in 2016 at which point MQB will underpin roughly 3m units and deliver on our estimates €1.5bn of savings.

* Management changes point to changing narrative: On July 1st the VW brand will no longer share its CEO with the group. Dr Herbert Diess joins from BMW to head up the namesake brand and he arrives with a CV that shows particular strength in purchasing and development. In addition new joiner Andreas Renschler is now running all the truck businesses under the one holding company. It is easy to forget that VW is a goliath and changes take time, but there’s a good chance the message for both of these group trouble spots is set to change as the new managers conduct their own reviews.

* Not expensive, but earnings momentum is the key: VW is currently trading on a ’16 EV/Sales of 28%, EV/EBITDA of 2.4x and a PE of 8.1x. All of which are 20-30% below its German peers. Good as this may seem relative to the sector VW’s forward earnings have fallen 6% YTD and the stock has underperformed the sector by the same amount.
In short we continue to believe VW will track the sector until earnings upgrades arrive.