Shell for BG Group (BG/ LN)Key takeaways from expert meeting. A bump to terms is likely.
PDF attached
We held an expert meeting today to discuss the Shell /BG potential merger. My understanding of key takeaways follows:
Shell’s Chairman initiated the transaction and it was a chairman to chairman discussion which seems not to have included BG’s CEO until the deal was agreed. Little is known as to the future of Simon Lowth and Helge Lund post-merger. Losing them would be a blow to Shell/BG.
BG has been very successful at exploration but it is one thing to find oil (Deep water) it is another to bring it out. BG has world class engineering challenges that would be best met as part of a larger company.
However Shell is trying to get BG on the cheap. It would be surprising if the deal closed on the announced terms. The announcement seems to have been rushed and Shell is likely to find more synergies. A bump is likely.
A counter bid may have a low probability but in the West Exxon and Chevron could have the most to gain. A joint bid even, while not straight-forward, is possible. Chinese bidders (China is one of the largest producers in the North Sea) may wait for the UK election and test politicians support before any approach.
The stock for stock transaction (with little cash) serves to protect against oil price volatility because the cashflow metrics for the companies would move in tandem but an oil price increase would favour BG over Shell. As the oil price environment has declined BG has been writing down assets faster than Shell. In a reversal of fortunes one would expect BG to be writing up assets at a greater rate than Shell suggesting a re-rating.
Failing a counter or an improvement to terms, timing to completion seems to be the key risk.
There are no fundamental antitrust problems but timing to receive approvals may be an issue. Australia has the largest overlaps but the US is likely to be the most vocal as US competitors will want to ensure as many asset disposals as possible. China is unknown, and they could take their time to review or retaliate if blocked from bidding.
Brazil is more a change of operating licence than antitrust. The government is unlikely to oppose, as they want the asset to start producing. Once the assets in Brazil are up and running the government could change the economic agreements and increase the demand for royalty payments. If due to antitrust reviews, the timetable slips.
A delay to completion 3 or even 6 months could ensue because Shell has to issue a prospectus –audited- and the preparation can rapidly fall behind due to accounting checks. The SEC may also need to review documentation adding to pressures on timing.
Exec: expecting copper demand in China to peak after 2020, copper has a positive medium term outlook - will be opportunistic on M&A as its not a priority
DMG Mori Seiki domination waiting game as Elliott seen upping stake
• Elliott thought to have crossed 10% share
• Waiting time could hang on industry cycle weakening
DMG Mori Seiki AG [ETR:GIL] shareholders who did not tender to DMG Mori Seiki Company’s [TYO:6141] takeover offer are waiting for signs the Japanese company might move to gain full control earlier than it has publicly indicated.
DMG Co’s stated aim to fully combine both businesses by 2020 remains the general goal of the Japanese company, this news service understands. However, if the opportunity arises to secure a domination agreement (DA) in the meantime, this will be considered, it was said. No decision has been made.
This news service previously reported internal DMG Co. acknowledgement that a DA would make sense if DMG Co. ends up owning 75% of the German company. If it doesn’t reach the mark, then it could still gain the 75% of votes present/voting required at a general meeting with the help of minorities.
All eyes are on the final tender results for the offer due tomorrow (Thursday) after the second tender period closed on 13 April. DMG Co. had already gained 51% from the initial tender period, which concluded on 25 March. Shareholders who did not tender are believed to be holding out for how close DMG Co. gets to the 75% mark.
Hedge fund Elliott Advisors is thought to have been increasing its stake in DMG AG since it announced an initial 5.55% holding in January. DMG AG did not respond to repeated requests for comment on whether the hedge fund had notified crossing the 10% threshold. Elliott and DMG Co. declined to comment.
Shareholders are wary that DMG Co. could wait longer to move for full control if a four/five-year upcycle in the machine tools industry shows signs of weakening. This could take pressure off DMG AG’s share price. Alternatively, signs the cycle will remain strong could help minorities convince the bidder to make the move earlier.
One industry analyst said he would not bet on the cycle weakening even though the typical upcycle timeline looks to be nearing an end. Demand from China could actually increase on the back of slowing growth there as domestic manufacturers seek more sophisticated machinery to aid production, the analyst said. European demand is also thought to be recovering, he said.
There is a risk DMG Co. marginalises DMG AG minorities by shifting the company’s cash balances across to the parent entity and drive synergies at the Japanese end, said a fund manager following the situation.
It has to be kept in mind that the bidder did everything possible to gain the 50% plus one share mark that will allow it to consolidate DMG AG’s accounts and control board nominations, the fund manager said.
DMG Company originally offered EUR 27.50 per share, but has bumped this twice to EUR 30.55 on the back of shareholder pressure. It has also lowered a 50% acceptance condition to 40%.
DMG AG was trading up 2.28% at EUR 31.81 on Wednesday afternoon, giving it a market capitalisation of EUR 2.49bn.
The fund manager, who sold his stake in DMG AG, said he is still following the situation in case DMG Co. indicates an earlier-than-expected move for a DA, in which case he might re-enter the stock. A Domination Agreement requires an independent valuation of the company that has to be offered to minorities. Those who do not tender into a domination agreement are guaranteed an annual dividend.
Gapping down
In reaction to disappointing earnings/guidance: PCP -3.6%, PNC -1%, MRTN -0.8%, USB -0.8%, BAC -0.5%
M&A news: ALU -15.2% (Alcatel-Lucent and Nokia (NOK) confirm agreement to combine; stock weakness due to dilution from all stock merger)
Other news: PAL -21.6% (announces recapitalization), HNR -20.8% (discloses update to discussions with PDVSA toward reaching an agreement for an 'amicable' exit from Petrodelta), WLT -7.7% (announces an update on its efforts to improve its capital structure), NGB -6.6% (cont uncertainty in Greece), MRCC -4.3% (announces the public offering of common shares; size and price of offering not disclosed), STWD -2.5% (priced 12 mln share common stock offering for total estimated gross proceeds of ~$286 mln), KLAC -2.4% (lowered INTC CapEx guidance), LRCX -1.5% (lowered INTC CapEx guidance), SAGE -1.2% (prices 2,285,714 shares of its common stock at $52.50 per share), NEWM -1.1% (filed mixed securities shelf offering), AKBA -0.8% (announces proposed public offering of $60 mln in common stock ), SFS -0.8% (prices 10.0 million shares common stock by certain stockholders, including affiliates of Ares Management, at $18.50 per share)
Analyst comments: SD -1.9% (resumed with a Sell at Goldman), VALE -1.3% (downgraded to Neutral from Overweight at JP Morgan), MPEL -1.1% (downgraded to Equal Weight from Overweight at Barclays), TREX -1.1% (initiated with a Neutral at Wedbush), OAS -1.1% (initiated with a Sell at Goldman), TPLM -1% (downgraded to Neutral at Robert W. Baird), CXO -1% (downgraded to Neutral from Buy at Goldman; downgraded to Neutral from Outperform at Macquarie), CMI -0.9% (downgraded to at ), SC -0.9% (downgraded to Neutral from Overweight at JP Morgan), DNR -0.8% (initiated with a Sell at Goldman)
In reaction to disappointing earnings/guidance: PCP -3.6%, PNC -1%, MRTN -0.8%, USB -0.8%, BAC -0.5%
M&A news: ALU -15.2% (Alcatel-Lucent and Nokia (NOK) confirm agreement to combine; stock weakness due to dilution from all stock merger)
Other news: PAL -21.6% (announces recapitalization), HNR -20.8% (discloses update to discussions with PDVSA toward reaching an agreement for an 'amicable' exit from Petrodelta), WLT -7.7% (announces an update on its efforts to improve its capital structure), NGB -6.6% (cont uncertainty in Greece), MRCC -4.3% (announces the public offering of common shares; size and price of offering not disclosed), STWD -2.5% (priced 12 mln share common stock offering for total estimated gross proceeds of ~$286 mln), KLAC -2.4% (lowered INTC CapEx guidance), LRCX -1.5% (lowered INTC CapEx guidance), SAGE -1.2% (prices 2,285,714 shares of its common stock at $52.50 per share), NEWM -1.1% (filed mixed securities shelf offering), AKBA -0.8% (announces proposed public offering of $60 mln in common stock ), SFS -0.8% (prices 10.0 million shares common stock by certain stockholders, including affiliates of Ares Management, at $18.50 per share)
Analyst comments: SD -1.9% (resumed with a Sell at Goldman), VALE -1.3% (downgraded to Neutral from Overweight at JP Morgan), MPEL -1.1% (downgraded to Equal Weight from Overweight at Barclays), TREX -1.1% (initiated with a Neutral at Wedbush), OAS -1.1% (initiated with a Sell at Goldman), TPLM -1% (downgraded to Neutral at Robert W. Baird), CXO -1% (downgraded to Neutral from Buy at Goldman; downgraded to Neutral from Outperform at Macquarie), CMI -0.9% (downgraded to at ), SC -0.9% (downgraded to Neutral from Overweight at JP Morgan), DNR -0.8% (initiated with a Sell at Goldman)
RTRS - GERMANY'S SCHAUBLE SAYS CANNOT SEE ANY CONTAGION IN THE MARKET FROM GREECE TROUBLES, MARKETS HAVE PRICED IN ALL POSSIBILITIES
Early premarket gappers
Gapping up: MCP +39.8%, LXRX +18.7%, OTIV +11.7%, ALJ +11.5%, RSYS +8.6%, FOMX +6.4%, BLDR +4.4%, PNK +3.8%, INTC +3.6%, FRO +3.4%, FXCM +3.2%, CSX +3.1%, BIIB +2.2%, DAL +2.1%, NOK +1.9%, LLTC +1.9%, SDRL +1.7%, BP +1.1%, RIO +1.1%, ABBV +1%, PBR +1%, BIOD +1%, PNC +0.9%
Gapping down: ALU -15.2%, NGB -9.1%, MRCC -3.9%, STWD -3.2%, STWD -3.2%, KLAC -2.4%, USB -2%, LRCX -1.5%, NEWM -1.1%, MPEL -1.1%, PCP -1.1%, VOD -1%, AKBA -0.8%, SAGE -0.8%, MRTN -0.8%, BAC -0.8%, AMAT -0.6%
Gapping down: ALU -15.2%, NGB -9.1%, MRCC -3.9%, STWD -3.2%, STWD -3.2%, KLAC -2.4%, USB -2%, LRCX -1.5%, NEWM -1.1%, MPEL -1.1%, PCP -1.1%, VOD -1%, AKBA -0.8%, SAGE -0.8%, MRTN -0.8%, BAC -0.8%, AMAT -0.6%
Flextronics in talks to buy part of Alcatel-Lucent's China business -sources
SHANGHAI, April 15 (Reuters) - Singapore's Flextronics International Ltd FLEX.O is in advanced talks to buy part of the Chinese business of Alcatel-Lucent SA ALUA.PA, the French telecoms firm currently being taken over by Nokia Oyj NOK1V.HE, two people told Reuters.
The contract electronics manufacturer plans to buy the manufacturing unit of Alcatel-Lucent Shanghai Bell, the French firm's largest joint venture (JV), the people with knowledge of the deal said.
The unit employs around 1,000 staff, the people said, and is part of the JV which, with its subsidiaries, generated revenue of 3.1 billion euros ($3.28 billion) last year.
Telecoms equipment makers like Alcatel-Lucent and Finland's Nokia have been grappling with a sector suffering slow growth prospects and pressure from low-cost Chinese rivals.
On Wednesday, Alcatel-Lucent agreed to a takeover by its larger rival in an all-share transaction valued at 15.6 billion euros. The firms will look to streamline the enlarged business, aiming for 900 million euros of operating cost savings by the end of 2019. (Full Story)
The two people did not disclose the value of the deal for Shanghai Bell's manufacturing arm, which makes products such as wireless devices. They said the price was under negotiation and would depend on what was finally included in the deal.
The people declined to be identified because the deal is not yet public.
Flextronics, which has supplied clients such as Microsoft Corp MSFT.O, Google Inc GOOGL.O and Siemens AG SIEGn.DE, did not immediately comment.
Alcatel-Lucent and its Shanghai JV declined to comment.
Confirms 2015 outlook; Expects to lower CAPEX in 2015 - AGM comments - Sees higher profits for commercial vehicles and construction units.- Sees negative impact from trading conditions in agricultural unit.
federal government is working on plans without bankruptcy Euro-Off
How could run a sovereign default without that Greece would have to withdraw from the monetary union? According to information of a scenario TIME is it developed.
Last week, Greece could barely afford a due payment to the International Monetary Fund (IMF). The now-discussed plan aims to enable the ECB to finance Greece in case of a failure further . For this, the Greek banks would be restored to the extent that they can participate in the financial transactions of the central bank even after a bankruptcy.
Prerequisite for such a concession is but how it is said that Greece are cooperatively show and was ready to meet the reform requirements. If this is not the case, will take a secession from the monetary union in buying the federal government. Even then Greece will but as far as possible be tied to Europe - through aid flows from Brussels to facilitate the transition to its own currency.