WSJ : Eurozone Finance Ministers Contemplate ‘Plan B’ for Greece

Eurozone Finance Ministers Contemplate ‘Plan B’ for Greece
Statements by Slovenia and German finance ministers break long-held taboo over possible exit of Greece from eurozone

RIGA, Latvia—Some eurozone finance ministers on Saturday acknowledged for the first time that they are considering plans on what to do if no deal on Greece’s future financing can be reached by the end of June.

The statements by the finance ministers of Slovenia and Germany break a long-held taboo during eurozone crisis talks, where policy makers have been insisting that they are entirely focused on keeping Greece in the currency union with the help of more bailout loans. Yet, with the country’s existing €240 billion ($261 billion) bailout deal expiring at the end of June, and technical discussions on future support all but stuck despite big debt repayments looming in July and August, some politicians are starting to look at alternative scenarios.

‘Time Is Running Out’ in Greek Bailout Talks, Says Mario Draghi
Slovenia’s finance minister confirmed that he raised the issue of a “Plan B” during Friday’s meeting with his eurozone counterparts, also known as the Eurogroup.

“What my discussion was about is what we will do if…the new program will not be achieved in time for Greece to be able to finance itself and improve liquidity,” Dusan Mramor said Saturday morning.

He denied, however, that the result of no new bailout deal would be an automatic exit of Greece from the eurozone. “A ‘Plan B’ can be anything,” Mr. Mramor said. Mr. Mramor’s suggestion was supported at Friday’s talks by the finance chiefs of Slovakia and Lithuania, according to a senior eurozone official.

Germany’s finance minister, Wolfgang Schäuble, was more oblique in his response to the question of whether his country had a ‘Plan B’.

“Of course there’s sufficient fantasy to imagine what kinds of things could happen” if no deal on Greece’s bailout can be reached, Mr. Schäuble said Saturday. ”But if a responsible member of the Eurogroup, or any responsible politician, were to answer this question with ’yes,’ we know what would happen. If he answered it with ’no,’ which I have done here by not even accepting the question, then we know that you won’t believe me."

Mr. Schäuble also likened the preparations for a potential Greek default or euro exit to the reunification of Germany—a process that commenced with the fall of the Berlin Wall in 1989.

“If I had said in advance that we had a plan for reunification, everyone would have said the Germans have gone completely mad,” Mr. Schäuble said.

The former German Democratic Republic adopted the German Mark, Germany’s currency before the introduction of the euro, in 1990.

>>> Weekly Market Update: Springtime for the Nasdaq

Weekly Market Update: Springtime for the Nasdaq

The March quarter earnings season hit its stride this week, and just about half of the S&P500 components have released quarterly results. Global indices remain at or near all-time highs: in Asia, a PBoC RRR cut helped neutralize fears of a Chinese selloff after last Friday's regulatory crackdown (although there was another round of similar fears regulators would be tightening the screws), while in the US a few rounds of strong earnings propelled the Nasdaq above its March 2000 all-time closing high and kept the S&P near its March all-time highs. In Europe, Greece missed another deadline to present its European partners with reforms to unlock funding, but equity and bond markets seem to be reacting much less severely to the story. Leading manufacturing indicators in Asia showed a difficult start for Q2, as advance PMIs for China and Japan saw significant deterioration. Beyond the unending Greek drama, Europe was looking slightly better, with a 10-month high in the Germany April IFO survey and another month of expansion in the preliminary Eurozone manufacturing PMI data. For the week, the DJIA added 1.4%, the S&P500 rose 1.7% and the Nasdaq surged 3.2%.

There was next to no progress made in resolving the Greek crisis at Friday's Eurogroup meeting and yet another deadline for Athens to unveil its reform proposals was missed. With Europe's patience running very thin, there was talk the ECB was mulling a plan to cut off the Greek financial system from ELA support and ECB President Draghi said the council would examine the issue at a May 6th meeting. In public statements, Greek and European officials continued to talk about the need to reach a deal and Greece made a few concessions, but press reports suggested talks were very heated and Greece's creditors were considering a "final ultimatum" for Greece, with no funds released short of a comprehensive deal. The next big payment faced by Athens is a €1.4 billion bill redemption on May 8th. EUR/USD tested lows around 1.0660 on Tuesday and Thursday then rose to its highs of the week at 1.0900 on Friday.

The March home sales reports were mixed. March US existing home sales bounced higher, improving on the flattish February numbers that had been impacted by the harsh winter weather. Sales of previously owned homes climbed to the highest level since September 2013, up 13.5% y/y. Conversely, March new home sales disappointed with a 10% decline from February's relatively good level. Analysts highlighted that both reports are highly erratic and subject to big revisions. Two major homebuilders also reported contrasting quarterly results this week. DR Horton met expectations in its second quarter and offered slightly improved FY guidance, with orders up ~30% y/y. Pulte Homes widely missed earnings and revenue targets. Pulte's performance was weighed down with construction delays, which impeded closings.

In big tech, Microsoft and Amazon saw impressive gains in cloud computing revenue. Amazon's quarterly revenue rose 12% and its quarterly loss was slightly smaller than expected. Investors were happy to see the firm break out AWS metrics for the first time: AWS had revenue of $1.5 billion in the quarter, with a run rate of $5 billion a year and profits of $265 million. Microsoft's results showed CEO Nadella's turnaround well under way, with mobile hardware and cloud services revenue up sharply even as legacy licensing and PC revenue continued to decline. IBM saw its 12th straight quarter of revenue contraction, exacerbated by lower hardware sales and the strength of the dollar

Facebook's results were very good across the board, with advertising revenue up 46% y/y and user metrics up double digits. The social network joined the chorus of firms complaining about the effects of the strong dollar, saying forex headwinds would be even greater in Q2 than the 7% crimp in Q1. Google's revenue and paid clicks rose slightly less than expected, although costs were lower. Analysts had been criticizing the firm for swelling expenses over recent quarters.

Industrial names showed stress from the strength of the dollar and overseas economic weakness. Caterpillar crushed earnings expectations, however the firm warned sales and profit in each of the remaining three quarters of 2015 would be lower than the first quarter. General Motors meanwhile widely missed on earnings and revenue, with significant losses in key overseas markets. Lockheed and United Technologies both missed on revenue, although Lockheed also slightly increased its FY guidance. Boeing's revenue missed and the backlog shrank.

Consumer names Pepsi and Procter & Gamble saw flat profits and declining revenues; PG's revenue fell for the fifth quarter in a row. McDonalds disclosed grim first-quarter results: revenue declined 11% y/y and guest traffic was down in all major segments. Shares rose post-earnings after the firm said it would disclose a major turnaround plan soon and said it closed another 220 locations worldwide in the quarter. YUM! Brands saw lower profits and continuing drag in China, but tweaked its FY outlook slightly higher. Coke had a solid quarterly report. Airlines United Continental and Southwest reported very good results, citing lower fuel prices and growing demand.

Dow Chemical saw its earnings bulked up by asset sales, even as its revenue declined 14% y/y. Competitor 3M missed earnings expectations and cut its FY guidance. Both names warned FX negative impacts on sales would be substantial for the full year. Steel firms Nucor and Reliance Steel disclosed very strong first quarter results, with both companies widely beating earnings expectations. Executives from the two firms cited improving industry conditions, although they also warned pricing remains under pressure.

Comcast officially abandoned its $45 billion deal to acquire Time Warner Cable. The announcement does not come as much of a surprise, as the consensus emerged that after the FCC's net neutrality gambit the deal was next to impossible. The FCC was gearing up for hearings on the merger and press reports out this week suggested that DOJ lawyers were close to a decision to recommend blocking the merger. There is no breakup fee for either firm for walking away from the deal. Charter Communications (which is controlled by Liberty Media Corp) is widely understood to be interested in making a bid for Time Warner now that Comcast is out of the way, but reports indicate that TWC would demand a higher price than the $159/share that Comcast offered.

After weeks of rumors, Teva launched a $40.1 billion offer for rival Mylan. The cash-and-stock bid is valued at $82/share, a 48.3% premium compared to Mylan's stock price on March 10, the last trading before speculation of a link-up between the two companies. The contest won't likely be a friendly one: just last week, Mylan said a merger with Teva would be unlikely to win antitrust approval because of "significant overlap" among the two businesses. Mylan's first line of defense was making its own offer for Perrigo. However, Perrigo rejected the initial unsolicited offer of $205/share and then also spurned a formalized cash and stock offer on the grounds that Mylan's stock has been inflated by the Teva bid.

The PBoC started the week off with a bang, cutting its Reserve Requirement Ratio (RRR) by 100 bps to 18.5%, which eased some of the anxiety caused by new limits placed on margin trading last week. The economic data didn't cooperate, however. The China flash HSBC PMI registered its fourth consecutive contraction and a one year low as the headline number missed estimates. Meanwhile, Japan's preliminary April Markit manufacturing PMI missed expectations as well, and slipped into contraction for the first time in nearly a year. Japan monthly trade data saw its first surplus in almost three years, but that was at least in part due to the crash in oil prices pushing down import values.

>>> US Close Dow +0,12% S&P +0,23% Nasdaq +0,71% Russell-0,31%


Closing Market Summary: S&P 500 and Nasdaq Set New Record Highs

The stock market wrapped up a strong week with a record finish even as economic data remained weak. The S&P 500 settled higher by 0.2% and registered a fresh record closing high at 2117.69 while the Nasdaq Composite (+0.7%) outperformed and posted another record close. Tragically, the Dow Jones Industrial Average could only add 0.1%, remaining 1.2% below its nominal record closing high from early March.

The Nasdaq surged out of the gate with several large components registering large gains in reaction to earnings. Amazon.com (AMZN 445.10, +55.11) surpassed revenue estimates and reported better than expected operating income. The retailer's loss of $0.12/share did not deter investors from sending the stock higher by 14.1%. Meanwhile another consumer discretionary component—Starbucks (SBUX 51.84, +2.41)—surged 4.9% after its in-line report overshadowed cautious guidance. Thanks to the two names, the consumer discretionary sector (+1.4%) ended well ahead of other groups.

However, Amazon and Starbucks were just partially responsible for the relative strength in the Nasdaq. Two tech sector (+0.9%) heavyweights—Google (GOOGL 573.66, +16.20) and Microsoft (MSFT 47.87, +4.53)—spiked 2.9% and 10.5%, respectively following earnings. Microsoft soared in reaction to better than expected results, while Google missed on earnings and revenue, which may explain why the stock "only" went up 2.9%.

It is worth noting that the handful of giants overshadowed a weak performance from many other Nasdaq components. For instance, chipmakers retreated across the board. The PHLX Semiconductor Index fell 1.7% with Maxim Integrated (MXIM 32.78, -1.96) leading the group lower. Shares of MXIM fell 5.6% after disappointing revenue overshadowed a bottom-line beat. Meanwhile, KLA-Tencor (KLAC 58.89, -0.96) beat estimates and announced plans to reduce its workforce, but still ended lower by 1.6% amid some concerns about the company's outlook.

Similar to chipmakers, biotech names struggled with iShares Nasdaq Biotechnology ETF (IBB 363.70, -3.98) falling 1.1%. Most notably, Biogen (BIIB 401.71, -28.57) fell 6.6% after missing earnings and revenue estimates even though the company still reported 20.0% year-over-year revenue growth. However, the bar was set even higher for this large component of an industry group that has made a major contribution to the Nasdaq's rally to record highs, today notwithstanding. For its part, the health care sector (-0.3%) spent the day in the red as biotech weighed.

Staying in the health care sector, Mylan (MYL 76.06, +2.37) made an intraday offer to acquire Perrigo (PRGO 192.89, -8.74) for $205/share in cash and stock, but Perrigo was quick to reject that offer. Elsewhere, another potential deal fell through with antitrust concerns likely playing a part as Comcast (CMCSA 59.64, +0.41) terminated its pursuit of Time Warner Cable (TWC 155.26, +6.50). Shares of TWC rallied 4.4% amid speculation the company may now be an attractive target for Charter Communications (CHTR 185.75, +2.17).

As mentioned earlier, consumer discretionary and technology sectors posted solid gains, which kept the S&P 500 in the green. Materials (+0.8%) and utilities (+1.0%) also posted solid gains, but the two groups account for just over 6.0% of the entire market.

Going back to influential sectors, financials (-0.2%), industrials (-0.4%), and energy (-0.6%) spent the entire day in negative territory. The energy sector was pressured by crude oil, which fell 1.0% to $57.18/bbl, while Dow component, ExxonMobil (XOM 86.97, -0.57), kept pace with the sector.

Moving on, the industrial sector was pressured by some of its large components like Dow member, Boeing (BA 148.40, -1.47), which fell 1.0% while transport stocks also lagged following disappointing results and guidance from Landstar (LSTR 64.49, -1.44). The freight carrier lost 2.2% while the Dow Jones Transportation Average shed 0.3%. To be fair, airlines bucked the trend after American Airlines (AAL 52.70, +1.25) beat estimates; however, the stock is not a member of the DJTA so its strength in that arena showed up through peers like Delta Airlines (DAL 46.98, +0.55) and United Continental (UAL 63.51, +0.71).

On the international front, representatives from Greece met with the Eurogroup in Riga today, but once again, the meeting ended without any concrete solutions. The prolonged negotiations appear to be getting more tense with Bloomberg reporting that unnamed euro area finance ministers have called Greek Finance Minister a "time-waster, gambler, and an amateur."

Treasuries posted modest gains with the 10-yr yield falling three basis points to 1.92%. The entire advance occurred in the wake of today's Durable Orders, which seemed ok at first glance:
  • Durable goods orders increased 4.0% in March after declining an unrevised 1.4% in February while the consensus expected an increase of 0.5% 
    • The entire March gain resulted from increased transportation demand, specifically from the defense-related aircraft sector 
      • Defense aircraft orders increased 112.8% in March with total aircraft orders increasing 43.8% after declining 8.3% in February 
      • Motor vehicle and parts orders increased 5.4% 
    • Excluding transportation, durable goods orders declined 0.2% in March after declining a downwardly revised 1.3% (from -0.6%) in February while the consensus expected an increase of 0.4% 
      • After declining 2.2% in February, orders of nondefense capital goods excluding aircraft declined 0.5% in March 
      • Shipments, which factor into first quarter GDP growth, declined 0.4% in March after increasing 0.1% in February 
There is no data scheduled for Monday. 
  • Nasdaq Composite +7.0% YTD 
  • Russell 2000 +5.0% YTD 
  • S&P 500 +2.8% YTD 
  • Dow Jones Industrial Average +1.4% YTD

>>> Volkswagen chairman Piech still planning to oust CEO Winterkorn; undermines

Volkswagen chairman Piech still planning to oust CEO Winterkorn; undermines position as chairman
Volkswagen Chairman Ferdinand Piech is still looking to oust Martin Winterkorn from his position as CEO of the listed German auto-manufacturer, Der Spiegel online reported. The German publication said several unnamed members of the VW supervisory body said Piech is still planning to oust Winterkorn, and is no longer tenable as chairman. Spiegel said it had learned that at the beginning of the week Piech had asked Porsche Matthias Mueller to get ready to takeover at VW, which would be a clear breach of the decision of the executive committee of the supervisory board.

The six member executive committee of the supervisory board forms the core of the 20 member supervisory body. Its members are Piech, Lower Saxony Minister President Stephan Weil, Wolfgang Porsche, former IG-Metall chief Berthold Huber, works council chief Bernd Osterloh and his deputy Stephan Wolf, the report noted.

Earlier this week Piech had denied planning to oust Winterkorn, the report stated.

Link to article in German : {http://bit.ly/1I8QYHK}

>>> Mediaset Premium was approached by Sky Italia

Mediaset Premium was approached by Sky Italia 

Mediaset, the Italian broadcacsting company, was approached by Sky's Italian arm about purchasing its pay-TV unit Mediaset Premium, according to a newswire report.

The offer for the unprofitable business was rebuffed, Reuters reported, citing two sources close to the matter, one of whom said informal contact has still been maintained between Sky Italia and Mediaset.

Qatar-based Al Jazeera has been in contact again with Silvio Berlusconi-controlled Mediaset about the same unit, the sources told the newswire as well.

Spain-based Telefonica bought an 11% stake in Mediaset Premium last year, and the same year Mediaset also announced it was negotiating a cooperation in pay-TV with Al Jazeera, France's Vivendi, and others. These negotiations came to naught, Mediaset announced last month.

Mediaset Premium had EUR 538.4m in revenues in 2014, a 2.5% fall year-over-year, although Mediaset said in March that it would reach break-even in 2015 and be profitable thereafter.

>>> Teva seeks Mylan shareholder support for bid, sources say

DEAL REPORTER

Teva seeks Mylan shareholder support for bid, sources say

Teva Pharmaceutical (NYSE:TEVA) is meeting with Mylan (NASDAQ:MYL) shareholders to persuade them on the merits of a deal in the hopes they will pressure Mylan management to engage in talks with Teva, according to two sources familiar with the situation.

The Israel-based generics major has been on the road to discuss its bid with some shareholders and plans to continue to meet more shareholders over the next few weeks to explain the value proposition of the deal, the sources said.

The Mylan shareholders that Teva management has met with so far have been supportive of Teva’s move, both sources said.

On 21 April, Teva proposed to acquire Mylan for USD 82 per share, with the consideration to consist of approximately 50% cash and 50% stock. Teva’s proposal for Mylan implies a total equity value of approximately USD 43bn and an enterprise value of approximately USD 50bn.

Teva said its board and management team are committed to consummating a transaction as soon as possible.

Teva had decided to send the public letter to Mylan as there was substantial press speculation regarding Teva’s interest in acquiring Mylan, both sources said. The letter was “just a function of investor demand due to the rumors”, the first source noted.

The first source did not say whether Teva would increase its offer for Mylan, but said that, given Mylan shares were trading in the USD 50s before M&A speculation arose, Teva put a “big number” on the table.

Teva’s commitment to this deal is evident from the fact that it already kickstarted the regulatory review process by making a Hart-Scott-Rodino filing this week, the first source said. However, he described Teva is a disciplined buyer.

Teva’s USD 82-per-share offer not only represents a steep premium but would also provide Mylan shareholders with continuing ownership in pro-forma Teva, which is a well-capitalized and higher-growth company, the same source argued.

If Mylan does not agree to a deal with Teva and Mylan’s proposed acquisition of Perrigo (NYSE:PRGO) does not come through, Mylan stock will likely slump back into the USD 50s, he said.

On 8 April, Mylan proposed to acquire Perrigo for USD 205 per share in cash and stock, which Perrigo subsequently rejected on 22 April. This morning, Mylan formally launched a bid for Perrigo for USD 60 per share in cash and 2.2 Mylan ordinary shares for each ordinary Perrigo share, which was again rejected by Perrigo.

An investor who owns all three stocks said, “Mylan does not want to be acquired. I like the Mylan-Perrigo combination. Mylan is going to benefit from a few big drugs going off patent, including AstraZeneca’s Nexium.”

The first source familiar said Mylan’s bid for Perrigo would be dilutive, would raise the company’s leverage, and would not have as much synergies as a Teva-Mylan combination. Teva is claiming it can realize USD 2bn synergies through this deal.

However, an investor in Perrigo said that since Teva’s offer is 50% in stock, and with its key multiple sclerosis drug Copaxone 20mg patent expiring in September and its 40mg formulation patent being viewed to have a “relatively weak IP protection”, Mylan’s board could argue that Teva stock is unlikely to be as valuable a currency for its investors.

In addition, he said, its "stichting" poison pill bolsters Mylan’s case to remain independent.

Mylan, which redomiciled in the Netherlands after acquiring European assets of Abbott Laboratories (NYSE:ABT) in 2014, put the poison pill defense in place on 3 April. The maneuver, if exercised, allows Mylan to issue preferred shares to the Dutch foundation in the event of a hostile bid.

Under the stichting agreement, the foundation’s board of directors can exercise a call option to receive a block of preference shares amounting to up to 50% of Mylan’s voting rights if it believes Mylan is under credible threat or it receives a proposal it considers to not be in the best interests of the company.

Both sources, however, said the threat of a poison pill is not a surprise in a situation like this. “The Dutch poison pill compared to the US poison pill is less restrictive and is legally limited to a certain time period only, unlike a poison pill in the US,” the second source said.

The call option is controlled by the foundation, which is meant to represent shareholder interests. “It is not beholden to the management or the board,” the same source said. Mylan’s stichting can exercise its rights however it wants, so long as its board can explain and convince a court that such an action is reasonable, this news service reported on Friday.

The stichting is unlikely to exercise its option on price issues alone or just on the basis that the US listed generics drugmaker wants to remain independent. It considers a variety of factors, including R&D concerns and loss of talent, before doing so, the report said.

Stichtings typically cite corporate governance, unequal treatment of shareholders, or investment concerns as reasons to invoke the poison pill. Teva may try to circumvent the stichting exercising its call option by offering concessions such as retaining certain management and R&D sites and committing to friendly employment practices, the same report said.

>>> Deutsche Bk : Announces next phase of strategy, including deconsolidating Po

DB Announces next phase of strategy, including deconsolidating Postbank; to announce Q1 results on Sunday and hold call on Monday 

The Management Board today decided upon the next phase of the Bank's strategy. This reaffirms the Bank's commitment to remain a leading global bank based in Germany. The Bank will reduce leverage in Corporate Banking & Securities (CB&S); deconsolidate Postbank; invest in its transaction banking, asset and wealth management, and retail businesses; and continue to redesign its operating and governance models to achieve greater efficiency and a more robust control environment. Furthermore, it will increase its investments in digital banking and rationalize its geographic footprint.

The Supervisory Board today decided unanimously to support the proposal submitted by the Management Board.

Details of the strategy will be announced on Monday, April 27, on an analyst call at 8:00 a.m. CET and at a press conference in Frankfurt at 10:30 a.m. CET.

The Bank will also disclose its first quarter results on Sunday afternoon, April 26, at approximately 15:00 CET. Management will discuss these on Monday's analyst call.