>>> Macerich may look to Ontario Teachers' to deliver return, bankers say

Deal Reporter

Macerich may look to Ontario Teachers' to deliver return, bankers say

• Pension fund may need prompt to pursue
• Deal would offer US operating platform


Ontario Teachers’ Pension Plan is a potential white knight suitor for Macerich (NYSE:MAC) as the premium mall REIT works to best the value proposition made by Simon Property Group (NYSE:SPG) earlier this year, said two industry bankers and a Simon shareholder.

The Santa Monica, California-based REIT’s second largest shareholder increased its stake to 14% last week. Macerich rejected multiple bids from Simon this year, arguing it could deliver better value to investors as an independent company.

Ontario Teachers' Pension Plan’s purchase of additional shares could signal a desire to stock up on Macerich shares ahead of a bid, said one of the bankers. Alternatively, it may suggest that the pension plan has faith that Macerich will produce additional value for shareholders that is not yet priced into the stock, he said.

Pension funds are generally slow to move on acquisitions of public companies, and the most likely catalyst for an Ontario Teachers’ Pension Plan bid would be a direct solicitation by Macerich, the first banker said. The fund signed an agreement with Macerich last year that gave it a board seat and permits it to acquire up to a 14.9% stake in the company.

Simon withdrew its offer for Macerich on 31 March and is unlikely to engage again with Macerich until closer to the target’s 2016 AGM in which activist investors could run a slate of up to four new independent directors, the bankers and shareholder said.

Under a May 2015 settlement, activists Land and Buildings and Orange Capital secured two independent board seats and a commitment by Macerich to de-stagger its board immediately after the 2016 AGM.

Simon Property declined to comment. The Ontario Teachers’ Pension Plan did not respond to requests for comment.

The settlement has provided Macerich CEO Arthur Coppola with a one-year window to boost shareholder value in a manner that is more palatable than a sale to a competitor, said the first banker and the shareholder, who also owns stock in Macerich.

In Macerich’s 30 April earnings call, Coppola outlined five initiatives to enhance shareholder value, including hastening the pace of same store NOI growth, increasing margins by up to 400 basis points, and recycling capital, among other initiatives.

However, the mall REIT is unlikely to produce a stock price commensurate with the USD 95.50 “best and final offer” from Simon Property without arranging for the sale of the company, the banker and the shareholder said. Shares currently trade at around USD 82 per share.

The Ontario Teachers’ Pension Plan could potentially offer a bid higher than Simon Property’s because it could pay a premium for Macerich’s operating platform, which it could leverage to help drive performance at its other retail real estate assets, the shareholder said.

Through its wholly owned subsidiary, Cadillac Fairview, the pension plan owns and operates CAD 26bn in commercial real estate, including about 50% of the top 25 performing malls in Canada, according to Cadillac Fairview’s website. Cadillac Fairview has an additional CAD 4bn in the development pipeline.

In addition, a Macerich acquisition could benefit the Ontario Teachers’ Pension Plan by paving the way for further expansion into the U.S. real estate market, a fourth banker said.

U.S. real estate has become increasingly attractive to Canadian pension funds, whose rapid increase in real estate allocations over the past ten years has produced a shortage of domestic investment opportunities, especially in coveted urban centers, the banker said.

Only 6% of Cadillac Fairview’s current real estate portfolio is located in the United States. Nearly 90% is based in Canada, of which the majority is concentrated in retail properties, according to its website.

Although the pension fund’s allocation to real assets is currently in line with its 23% target, Ontario Teachers’ Pension Plan is willing to increase its allocation to a maximum of 28%, according the fund’s statement of investment policies and procedures.

>>> Croda is trading higher (+3%) on potential interest from a suitor

- I have flagged the stock on Monday because was trading on strong support level (50dMA)

- Rumor around today that Evonik could be interested by Croda - Evonik is doing a road show today...
- see note attached of HSBC from yesterday, they are pushing teh stock on few points
* Raw material re-inflation an upside risk for Croda…
* … and a negative for richly valued flavours & fragrance
players while customers start to see more demand tailwinds

--> See note attached

(HedgeFundWisdom) HF 13F Filing Reports

HF Consensus New Positions
* Kraft Foods (KRFT)
* Actavis (ACT)
* Micron Technology (MU)
* Precision Castparts (PCP)
* Summit Materials (SUM)

HF Consensus Increased Positions
* Actavis (ACT)
* Delta Air Lines (DAL)
* JD.com (JD)
* Charter Communications (CHTR)
* Micron Technology (MU)

HF Consensus Sold Positions
* Alibaba Group (BABA)
* Shire (SHPG)

HF Consensus Decreased Positions
* HCA (HCA)
* Valeant Pharmaceuticals (VRX)
* eBay (EBAY)
* Dollar General (DG)
* Charter Communications (CHTR)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: XNET -14%, NTAP -12.6%, (Also - disclosed it committed to a realignment designed to drive efficiency, eliminate cost and redirect resources; expects to reduce headcount by ~500 employees RXN -11.5%, BRS -5.9%, SMRT -5.8%, SCVL -4.9%, DLTR -4.3%, AAP -4.1%, SNPS -3.5%, BONT -3.2%, MNRO -2.8%, BKE -2.6%,OTEX -2.4%, ( announces Mark Barrenechea, President and CEO resumed full involvement in day-to-day operations; sees Q4 EPS and revs below consensus)

Other news: LL -17.4% (CEO resigns), BRKR -10% (CFO Charles Wagner has submitted his resignation), FATE -8% (prices 6,000,000 shares of its common stock at $5.00 per share), OXGN -5.8% (filed for $75 mln mixed securities shelf offering), DRNA -5.3% (prices 2,750,000 shares of its common stock at $17.75 per share), AETI -5.2% filed for $25 mln offering of common stock, warrants, and units), AGEN -4.2% (intends to offer shares of its common stock in an underwritten public offering ), OCUL -2% (filed for $125 mln common stock offering by selling shareholders), SABR -1.8% (prices 24,000,000 shares of common stock by existing stockholders at a price of $26.00 per share), ARCI -1.7% (announced the return of Edward Cameron as President and CEO), SYT -1.2% (cont vol surrounding M&A spec), TRUE -1.1% (following late move lower on reports of California Dealers lawsuit), ARMK -1% (announces a 25 mln share secondary offering of common stock by selling stockholders)

Analyst comments: WBAI -5.6% (downgraded to Sell at Deutsche Bank ), SRPT -3.7% (downgraded to Neutral from Buy at BofA/Merrill), SFUN -1.8% (downgraded to Hold at Brean Capital), DDD -0.9% (downgraded to Perform from Outperform at Oppenheimer)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance: BBY +8.4%, QSII +8.1%, KZ +7.8%, TSL +6.4%, CRM +5.3%, NM +4.2%, WSM +4%, YOKU +3%, KIRK +3%, ACXM +2.9%, (also plans to sell IT Infrastructure Management Business), NGG +1.4%, EGHT +1.2%, .

M&A news: CTP +45.6% (agreed to exclusive negotiations to be acquired by DHR International; pricing and other terms not disclosed, but indicated preliminary price below the $7 per share DHR previously proposed), OCR +1.5% (to be acquired by CVS Health (CVS) for $98.00/share), .

Select pharma/biotech related names showing strength: AVEO +8.7%, ONCY +6.5%, CYCC +3.6%, CTIC +2.8%, GSK +1.8%, TKMR +1.8%, OSUR +1.7%, AZN +1.5%, SHPG +1.3%

Select oil/gas related names showing early strength: SDRL +2.1%, SDRL +2.1%, BP +1.4%, RDS.A +1.3%, STO +1.2%

Other news: AMPE +37.4% (announced positive results of its OptimEyes trial for DME), CALA +19.8% (reports positive initial Phase I safety data for CB-839, used to treat Acute Leukemias), PRAN +17.4% (announces the publication of minutes from the EMA regarding the previously announced Orphan Drug Designation for PBT2), ISR +17% (following ~100% move higher yesterday), ATNM +10.4% (following late move higher yesterday), MNGA +9.4% (announces that a major producer of painting systems viewed a MagneGas2 demo and has requested an immediate supply of the fuel for metal cutting), BLUE +8% (released abstract highlights including updated data for its Phase 1/2 HGB-205 study of LentiGlobin BB305), IPCI +7% (intends to accelerate its Rexista Oxycodone XR development program on the basis of positive feedback from the FDA), ACXM +2.9% (entered into an agreement to sell its IT Infrastructure Management business to Charlesbank Capital Partners and M/C Partners for total cash consideration of up to $190 mln; co also reported preliminary Q4 results), NBG +2.9% (cont vol surrounding Greece negotiations), QCOM +1.5% (announces an accelerated share repurchase agreement for $5 bln of its common stock, or ~57.7 mln shares), TTWO +1.3% (favorable commentary on Wednesday's Mad Money), REGN +0.9% (Regeneron Pharms and Sanofi (SNY) reports results from Phase 3 studies with Sarilumab in patients with Rheumatoid Arthritis met its co-primary efficacy endpoints)

Analyst comments: TNAV +3.8% ( initiated with a Outperform at Northland Capital; tgt $15), SSYS +3.3% (upgraded to Outperform at Oppenheimer), VOD +1.7% (upgraded to at ), ICPT +1.2% (initiated with an Overweight at Barclays; $425 tgt), BABA +1.1% (initiated with a Outperform at Bernstein)

WWD : Luxury Seen Growing 2-4% in 2015: Study

Luxury Seen Growing 2-4% in 2015: Study

MILAN — Luxury is seen growing in 2015, although the fluctuations in exchange rates continue to be a significant determining factor, according to the Worldwide Luxury Markets Monitor 2015 Spring Update by Bain & Co. and Fondazione Altagamma presented in Milan on Thursday.

The luxury market is expected to grow between 2 and 4 percent at constant exchange in 2015.

The devaluation of the euro supported luxury’s performance at the end of 2014 and has been even more relevant since the beginning of 2015. Last year is expected to close with industry revenues of 224 billion euros, or $249 billion at current exchange rates. That represents 3 percent gain at current exchange rate and a 4 percent rise at constant exchange rate.

In the first quarter of 2015, sales are seen growing 2 to 3 percent at constant exchange and 12 to 13 percent at current rates.

Armando Branchini, vice chairman of Altagamma and author of the luxury association’s Consensus study, also presented on Thursday, noted reported numbers are “most likely sparkly, but to have a correct indication of the growth of real consumer spending, it’s best to present forecasts at constant exchange.”

Using this parameter, the study forecasts 5 percent growth in Europe and Japan; a 4 percent gain in the Middle East and in the rest of the world; a 3 percent rise in the America; and a 2 percent uptick in Asia. In terms of categories, shoes and bags are seen up 4 percent as well as jewelry and watches, while clothing, perfumes and cosmetics are seen gaining 3 percent.

Claudia D’Arpizio, partner at Bain in Milan, underscored how the luxury consumer “is increasingly more global and aware of the pricing dynamics. The big differences in price between the markets, such as the over distribution in certain countries and cities, appear unsustainable and require an immediate rethinking of some key industry dynamics.”

Currency fluctuations are seen as a real challenge, impacting price differentials and tourist flows.

Last year, mature markets and the Middle East showed a positive performance, while Asia presented a mixed scenario as Greater China stagnated and South Korea grew briskly.

The Asia Pacific region registered a 3 percent rise at constant exchange and a 2 percent gain at current exchange. Europe was up 2 percent as the weakening euro boosted tourist flows in the second half. The Americas grew 3 percent thanks to sound local and touristic consumption and the currency effect offset a slight slowdown in the second half. Japan showed a 9 percent growth in real terms, although a VAT increase softened local spending in the second half. At current exchange, sales rose 1 percent in the country.

The rest of the world was up 5 percent at constant and 4 percent at current exchange. A slowdown in the Middle East in the second half was driven by a decline in Russian spending and the oil price drop impacting locally.

According to the study, accessories remained a leading category, rising 4 percent and accounting for 29 percent of business. In particular, shoes stood out. The men’s segment outperformed across the board. Apparel was up 2 percent, accounting for 25 percent of total. Women’s wear was more dynamic while men’s wear was dented by the negative impact of Mainland China. Hard luxury was up 2 percent with watches showing stability.

The euro’s devaluation in the second half versus the Swiss Franc partially offset the worsening situation in Asia. Jewelry outperformed on solid fundamentals. Hard luxury represented 22 percent of total sales, versus a 23 percent in the previous year. Beauty was flat, accounting for 20 percent of total, with cosmetics outperforming fragrances. The U.S. and emerging markets were the main growth drivers in the beauty category.

The study also took the 2012-2015 period into consideration and gave some insight into the full-year 2015.

At constant exchange rates, Europe is seen to grow between 3 and 5 percent; the Americas between 1 and 3 percent; Japan 5 to 7 percent; Asia Pacific excluding Mainland China, from a 1 percent drop to a 1 percent gain; Mainland China between 2 and 4 percent; and the rest of the world 1 percent.

The weak euro is supporting inbound tourism in the euro zone, especially from China and the U.S. Italy is starting to recover, with a timid rebound of the multi-brand channel and Milan is the number one shopping destination, also lifted by initiatives associated with the Expo running until the end of October. Spain has rebounded above expectations, while the Swiss Franc’s appreciation is redirecting touristic and local flows from Switzerland to Italy and France. Eastern Europe is still suffering, with Russia still on a negative trend in 2015.

The U.S. so far is below expectations in 2015 with exceptional cold weather impacting the first quarter and a slow rebound of spending by the upper middle class. Also, a decrease in tourist shopping and the strong dollar was only partially offset by selected price adjustments. A drop in the number of Chinese travelers impacted the West Coast and Hawaii, Las Vegas and New York, while less tourists from Latin America and Russia impacted Miami. E-commerce outperformed across formats.

Japan is the fastest growing market in real terms, becoming the top tourist destination for the Chinese (up 160 percent year-on-year in February 2015). In Asia Pacific, D’Arpizio sees the year 2015 as a transitional one for Mainland China with Hong Kong and Macao the worst performers, Taiwan gaining traction, and a very dynamic South Korea thanks to Chinese flows redirected from Hong Kong.

“This is China’s moment of truth: all key market actors are struggling to revamp the market,” D’Arpizio said, highlighting the still negative impact of clampdown on lavish spending and increasing overseas purchase driven by price differentials and currency fluctuations. “Brands are testing price differentials reduction; real estate developers are turning malls into entertainment spots, and consumers are looking for bargains . While Chinese consumer spending continues to grow, it’s more skewed towards foreign and cheaper shopping.”