(BN) NuVasive CEO’s Departure Opens Door to Takeover Offers: Real M&A

NuVasive CEO’s Departure Opens Door to Takeover Offers: Real M&A
2015-04-08 10:00:00.3 GMT


(For a Real M&A column news alert: SALT REALMNA <GO>.)

By Brooke Sutherland
(Bloomberg) -- NuVasive Inc. may be one step closer to a
takeover.
The $2 billion company’s chief executive officer, Alex
Lukianov, is stepping down amid compliance issues related to
expenses and personnel. His more than 15-year tenure started
when the maker of spinal devices was just a venture-backed
startup. Lukianov had talked about growing sales at NuVasive to
$1 billion -- something analysts didn’t see happening for at
least a few years -- and was perceived as not likely to sell in
the meantime, said Michael Matson of Needham & Co.
“He kind of viewed it as his baby,” Matson said in a
phone interview. “I don’t think he would have said that he
would never sell it, but I don’t think he was ready. With just a
lot of M&A happening, this will draw the attention of potential
acquirers.”
Stryker Corp. may be interested in buying NuVasive to shore
up its position as a top-tier provider of medical devices for
spinal surgery, Matson of Needham said. A bid in the range of
$50 to $55 a share, at least an 18 percent premium to NuVasive’s
closing price Tuesday, is probably an appropriate starting
point, said Jeffrey Johnson, an analyst at Robert W. Baird & Co.
A merger with its $2.4 billion peer Globus Medical Inc. would
give both companies more scale and negotiating power with
hospitals.
Stacy Roughan, a spokeswoman for NuVasive, said the company
doesn’t comment on speculation, adding that “all of us at
NuVasive are excited by the opportunities that lie ahead and are
committed to building on our record of growth and value
creation.”
Representatives for Stryker and Globus didn’t respond to
requests for comment.

Industry Consolidation

Adding further fuel to the prospect of M&A is the
dealmaking past of NuVasive’s interim CEO, Greg Lucier. He was
at the helm of Life Technologies Corp. when it agreed to be
taken over by Thermo Fisher Scientific Inc. in 2013.
There have already been more than $90 billion in
pharmaceutical, biotechnology and health-care product takeovers
announced so far in 2015. Last year brought record volume of
more than $300 billion, including Medtronic Plc’s offer to buy
Covidien Plc for more than $40 billion. Zimmer Holdings Inc.
also agreed last year to purchase Biomet Inc. for about $13
billion.
“The orthopedic landscape is one that continues to be ripe
for consolidation,” Richard Newitter, a New York-based analyst
at Leerink Partners, said in a phone interview. “Spine in
particular falls into that category. NuVasive is the largest
amongst the smaller players and could offer a potential way for
a mid-sized player to get some scale.”

Selling Points

NuVasive is one of the leaders in minimally invasive spine
surgery devices, a faster-growing segment of the market, and
it’s a relative bargain. The company’s enterprise value of $2
billion is about 2.6 times its revenue in the past 12 months,
according to data compiled by Bloomberg. That’s a lower multiple
than all but two of almost two dozen U.S. medical device makers
with market values of more than $1 billion.
Its operating margin is below the median for peers, so a
larger company taking it over could cut out a lot of excess
costs and reap the benefits of the savings.
“There’s a lot that would be attractive about NuVasive
from a takeover standpoint,” Johnson of Baird said in a phone
interview. “That’s what investors are talking about.”
Stryker said last May that it had been evaluating a
takeover of London-based Smith & Nephew Plc to expand its share
of the hip- and knee-replacement market. Stryker decided against
making an offer at the time.

New Leadership

The six-month waiting period under U.K. takeover laws has
since expired but a deal may be tougher to pull off now from a
regulatory standpoint because the rest of the market has already
begun consolidating. NuVasive could be an appealing alternative.
Zimmer and Medtronic could also be interested in a takeover
of NuVasive, though Zimmer is still trying to close its purchase
of Biomet and Medtronic is digesting Covidien, Matson of Needham
said.
There are reasons for NuVasive to attract takeover
interest, Leerink’s Newitter said. And now, with the leadership
change, there may be a perception that “you have someone who’s
in who might give it a fresh look and consideration should a bid
come along,” he said.

For Related News and Information:
Pharma’s Comeback Deals Keep Drug M&A on Track to Reach Records
Stryker Buyback Plan Damps Speculation of Smith & Nephew Deal
Wright Medical Takeover Prospects Enhanced After Mako: Real M&A
Bloomberg Intelligence, medical devices: BI MDEV <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>

--With assistance from Cristin Flanagan in New York.

To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman

>>> Family Dollar beats by $0.01, reports revs in-line --> flat pre-market

Family Dollar beats by $0.01, reports revs in-line -- DLTR intends to close FDO merger by the end of May (79.13)
4/8/2015, 8:04:51 AM ET
Reports Q2 (Feb) earnings of $0.74 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $0.73; revenues rose 3.0% year/year to $2.8 bln vs the $2.8 bln consensus.
  • Comparable store sales for the 13-week period increased 0.5% as a result of an increase in the number of customer transactions which was offset by a decrease in the average customer transaction value.
  • Dollar Tree (DLTR) has informed Family Dollar that Dollar Tree intends to close the merger by the end of May 2015. In light of the pending transaction, the Company has not provided earnings guidance for fiscal 2015 and will not hold a conference call to discuss its second quarter results.

FT : Car manufacturers take a hammering in Russia

Car manufacturers take a hammering in Russia

Car manufacturers may be enjoying boom times in Britain but in Russia it is quite a different story.

Sales of new passenger cars and LCVs — light commercial vehicles — fell by 42.5 per cent in March to 139,850, as Russian consumers feel the pinch of slowing GDP growth, sky high inflation at 16.9 per cent and a rouble which has fallen 33.75 per cent against the dollar in the last year and 15.76 per cent against the euro.

This picture is in stark contrast to the rest of Europe, where car manufacturers are enjoying a rapid recovery. Data published earlier today showed the UK rang up its best March car sales ever.

As the FT's Andy Sharman wrote earlier, each of the European Union's big five markets recorded strong growth last month, with France and Germany up almost 10 per cent year on year, Italy up 15 per cent and Spain up more than 40 per cent in March.

The Association of European Businesses (AEB), which produces the data for Russian car sales, said all of the ten bestselling models in Russia last month were locally produced.

Joerg Schreiber, chairman of the AEB's automobile manufacturers committee, which is in charge of the data, said:

Total market performance in March is bad, of course, but not much worse than expected. What we are seeing now in the sales statistics is the long-predicted 'hole' in consumer demand, caused by the pull-ahead of car purchases at the end of last year, and compounded by heavy price inflation in the current year. Sooner or later, the situation will stabilise, but we are not at this point yet.

(ZeroHedge) The Shell-BG Megadeal: All You Need To Know, And Why The Initial Res

link to article : {http://bit.ly/1O8bjOA}

The Shell-BG Megadeal: All You Need To Know, And Why The Initial Response Is Not Enthusiastic

As previously reported, overnight oil giant Royal Dutch Shell agreed to buy BG Group for £47 billion ($69.6 billion) in cash and shares, the 14th largest ever corporate takeover, the largest energy transaction in the past decade, and as the WSJ put it, "the latest sign of how tumbling energy prices are shaking up the global oil-and-gas industry."
The catalyst for the rushed, and unsolicited, deal: the sharp drop in oil and gas prices since last summer, with the hope being that thousands of layoffs and operations synergies would enable the two European energy giants to eliminate overlapping costs to lower the breakeven oil production cost.
As the WSJ, which broke news of the deal first, adds, the combination "furthers Buying BG will add 25% to Shell’s proved oil and gas reserves and 20% to production and give it access to BG’s highly prized offshore oil fields in Brazil’s Santos Basin, significant undeveloped natural gas resources in East Africa and a huge liquefied natural gas project in Australian that is ramping up this year."
Here are the key deal terms and conditions:
  • 0.4454 Shell B shares and 383p in cash per BG share
    • Represents a value per BG ordinary share of 1350p, a premium of 52%
    • Values BG equity at £47.0 billion3
    • BG shareholders to own 19% of Shell
  • Equity increase:
    • 1,532 million new B shares
    • Election option for A shares
  • ‘Mix and match’ election between cash and shares
  • Purchase price allocation (IFRS 3 + 13)
    • ~ - $2 billion post-tax P&L annual impact
  • To be implemented by Scheme of Arrangement
  • Key conditions: shareholder + regulatory approvals
Here is Shell's pitch to its shareholders why they should endorse the deal:
  • Mildly accretive to earnings per share in 2017 and strongly accretive from 2018
  • Accretive to cash flow from operations per share from 2016
  • Accelerates deep water + LNG strategy
  • Accretive to earnings and cash flow per share
  • Complementary portfolios: synergy opportunity
  • Enhanced portfolio: springboard to high-grade Shell + BG
  • Improved cash flow enhances future dividends + buyback potential
Some, see below, disagree with the proposed corporate assessment.
The combination as summarized by Shell:
  • Enhanced position in our growth priorities: LNG + deep water
  • Complementary fit in 15 countries
  • ~$2.5 billion/year synergies* identified + further potential
Why pay a massive premium for BG Group? Here is the politically correct slide explainer:

The full investor slidedeck is presented below:



To be sure, while BG Group soared 37% following the announcement, Shell stock is less than enthused and was down 2% at last check.
Why? The following initial response note from BMO may provide some color on why deals of desperation are never good for investors or management.


BG Group and Shell have announced this morning following a leak in the Wall Street Journal last night that BG has agreed to be acquired by Royal Dutch Shell in a cash and shares transaction. If this deal is completed this would be the end game of a pursuit that began shortly after the listing of the original British Gas group in the 1980s. Shell is paying a very large premium of c 50% to the current 30 share price of 910.4p, which would value BG at US$70bn, which would be one of the largest oillgas deals in recent history. The deal will add 29% to Shell's reserves, 20% to its current production and 27% to its LNG liquefaction volumes. Shell is saying that it has identified US$2.5bn of annual synergies from 2018. Shell is also expecting the deal to be mildly accretive to EPS but strongly accretive to cashflow in 2016. There will by two conference calls at 9am and 2pm London time today.

Our View:
  • We think the prime attraction of BG for Shell is its LNG position, which makes up 39% of our current asset value of the company of 1,027p. Combining the two companies would result in LNG liquefaction volumes of 33mtpa, based on 2014 numbers, well ahead of Exxon, the No. 2 player. There is significant growth coining from BG, which is about to start up its QCLNG project, which would add a net 6 mtpa., plus the potential of Tanzania. Shell is forecasting pro-fornia liquefaction combined volumes of 45 mtpa in 2018.
  • BG will also bring a solid position in the Brazilian pre-salt, which should amount to net production of 486 kboe/d in 2020 and is 45% of our asset value. The wrinkle in this is that Shell would be the non-operating partner of Petrobras, which is currently in turmoil due to the widespread corruption allegations. It would add, however, to Shell's existing Brazil position, which includes a 20% share of the giant Libra project.
  • Other operational benefits include BG's North Sea assets, its position in Karachaganak in Kazakstan, and less important assets in India, Thailand, North Sea, Egypt.
  • From our valuation perspective for RDS the BG deal is significantly dilutive, both from a multiple and asset value perspective. Shell is paying a P/E of 66.6x for BG at the acquisition price, although RDSA was trading at only a 12.1x 2016 multiple pre-deal. On an EIT/DACF basis, Shell's 2016 multiple is 6.2x,whilst it will be paying 11.7x for BG. RDS would also be paying a premium of 26% of BG's asset value, we estimate, even after the synergies are accounted for. We estimate that our PDS NAV is diluted by 8% as a result of this the deal. For these reasons we think the market will be sceptical about this deal and we believe Shell will have to work very hard to convince shareholders that the strategic benefits outweigh the premium offered.
All valid points, especially the bolded, however as long as starved for yield bond investors are willing to throw money away, more deals like this one will take place. Ironically, mega mergers like these which cut overhead and boost productivity and efficiency (at the cost of tens of thousands of workers) mean the oil glut will persist for much longer than even the most pessimistic estimates.

WSJ : Luxury-Auto Makers in China Target Buyers With Smaller Cars

Luxury-Auto Makers in China Target Buyers With Smaller Cars
Daimler, BMW , Audi among companies producing smaller high-end vehicles locally

BEIJING—Daimler AG’s Mercedes-Benz joined the ranks of high-end car brands manufacturing small luxury vehicles in China, seeking new avenues for growth as demand for ritzy rides ebbs.

Chinese car buyers usually equate luxury rides with big cars, but as the nation’s economy slows, growth in demand for such vehicles has declined significantly. Last year, the broader market for high-end cars in China grew around 22%, down from 43% in 2011, according to consultancy IHS Automotive, which expects growth for the broader luxury segment to decline to 14% this year.

To sustain growth, high-end auto makers are turning to locally produced smaller vehicles such as the Audi A3, BMW X1 and Land Rover Evoque.

Daimler started production Wednesday on its GLA compact sport-utility vehicle at a new plant just outside Beijing dedicated to producing a range of such small luxury vehicles.

Hubertus Troska, the member of Daimler’s Board of Management responsible for China, said the German auto maker found consumer reaction to the imported GLA in recent months had been “phenomenal.” He said he expected China-made versions of the SUV to contribute significantly to Mercedes-Benz’s future sales growth.

“Now we’re getting serious,” he told reporters at an event to mark the production of the first China-made model.

Daimler said Wednesday that first-quarter sales of its Mercedes-Benz cars in China rose nearly 17% to 78,183 cars, outpacing growth in Europe and the U.S., which posted growth of 16% and 7.6%, respectively.

For example, prices of Audi AG’s A3 Sportback start around 185,000 yuan (about $30,000), whereas the next-size-up A4L sells for around 273,000 yuan, according to prices listed on Audi’s Chinese website.

Many buyers of smaller luxury cars are first-time buyers, and auto makers are hoping that by luring them early, they will become long-term loyal customers.

Local production also fits with China’s policy goals of promoting the country’s auto industry.

Producing the smaller luxury cars in China means Audi,BMW AG and Daimler can avoid import duties of 25%, allowing them to sell the cars more cheaply. Almost all imported cars also face a value-added tax of 17%.

BMW began producing its premium compact X1 SUV in China in 2012. The company is also planning to add a locally produced smaller luxury car in the future but it declined to provide specifics.

Last year, more than 1.8 million high-end cars were sold in China, up from 1.5 million the previous year, according to data from consultancy Automotive Foresight.

Sales of premium compact cars-including imported vehicles-reached 318,000 cars in 2014, up 60% from the previous year, according to IHS Automotive analyst Lin Huaibin, who forecasts the segment will grow 22% this year.

With more car companies producing in China, locally made cars are expected to account for an ever increasing proportion. IHS data shows around 70% of the cars in the segment are currently made in China, but expects that to increase to 83% by the end of this decade.

For Audi, sales of such cars in the first two months of this year accounted for 23% of its China sales, compared with 14% in the year-earlier period.

Audi began producing smaller luxury cars in northern China in April 2013 with its compact SUV Audi Q3. Later that year, it added production of the A3 Sportback in the southern city of Foshan, followed by the A3 Sedan in 2014.

In the first two months of this year, Audi sold close to 20,000 vehicles in this segment, up 88% from the year-earlier period, according to the company.

Jochen Siebert, managing director of consulting firm JSC Automotive, said he doesn’t see a boom in compact luxury vehicles.

“The time is not right,” he said, adding that the middle-income earners who would buy such cars are particularly susceptible to economic slowing and a cooling of China’s property market. “It could take a decade before the small luxury car market takes off, even in the best case scenario,” he said.

Daimler’s Mr. Troska said that at a 7% rate of annual gross domestic product growth—around China’s target for this year—he didn’t see an overall economic downturn, adding that he was confident that sales of smaller luxury Mercedes-Benz cars would grow.

“Locally built enables us to be more competitive to price the vehicles and position them properly in order to grow,” he said.

>>> US Early premarket gappers

Early premarket gappers
Gapping up: PSTR +11.3%, RGLS +10.7%, PHMD +8.2%, ONVO +7.1%, TS +4.6%, TSLA +3.3%, BP +3.2%, HLT +3.1%, RIO +2.8%, MGM +2.8%, STO +2.5%, LVS +2.3%, SFUN +2%, PBR +1.9%, BHP +1.9%, GPN +1.9%, ELLI +1.7%, CPHD +1.5%, YY +1.5%, TWTR +1.5%, HABT +1.5%, RAD +1.5%, CLF +1.4%, HSBC +1.4%, LULU +1.3%, ARMH +1.3%, MIND+1.3%, GOLD +1.2%, GSK +1.2%, TOT +1.2%, DYAX +0.7%

Gapping down: AMZG -17.3%, ATNM -10.3%, MUX -7.5%, LGF -4.6%, CPTA -4.2%, CPTA -4.2%, BIP -3%, TSL -2.2%, TISI -1.5%, RDS.A -1.2%

>>> US Early premarket gappers

Early premarket gappers
Gapping up: PSTR +11.3%, RGLS +10.7%, PHMD +8.2%, ONVO +7.1%, TS +4.6%, TSLA +3.3%, BP +3.2%, HLT +3.1%, RIO +2.8%, MGM +2.8%, STO +2.5%, LVS +2.3%, SFUN +2%, PBR +1.9%, BHP +1.9%, GPN +1.9%, ELLI +1.7%, CPHD +1.5%, YY +1.5%, TWTR +1.5%, HABT +1.5%, RAD +1.5%, CLF +1.4%, HSBC +1.4%, LULU +1.3%, ARMH +1.3%, MIND+1.3%, GOLD +1.2%, GSK +1.2%, TOT +1.2%, DYAX +0.7%

Gapping down: AMZG -17.3%, ATNM -10.3%, MUX -7.5%, LGF -4.6%, CPTA -4.2%, CPTA -4.2%, BIP -3%, TSL -2.2%, TISI -1.5%, RDS.A -1.2%

Read more: http://www.briefing.com/InPlayEq/InPlay/InPlayDual.htm#ixzz3WiWnLN1q