NY Post : US regulators skeptical of huge food merger ahead of vote

--> SYY -1.36%

There’s a huge food fight expected in Washington on Wednesday.
Regulators are set to vote in the afternoon on the controversial $3.5 billion merger of the top two distributors of food to schools, restaurants and hospitals that critics charge will lead to higher foods costs across the country, The Post has learned.
But Sysco, the No. 1 food distributor, which is seeking to buy the No. 2 company, US Foods, claims the merger will lower its costs — allowing it to drop prices.
With little progress on the regulatory front over the 14 months since the merger was announced — and with a vote on the horizon — Sysco brass have been meeting individually this week with the five Federal Trade Commission leaders, sources said.
But the FTC is still leaning toward suing to block the deal, sources added, despite the move last week by Sysco to sell 11 US Foods facilities — with annual sales of $4.6 billion, or 21 percent of its US food revenue — to Blackstone-owned Performance Food Group, the No. 3 player in the sector.
Only Sysco and US Foods operate nationally. Including the debt Sysco would assume in the proposed acquisition, the deal is worth $8.2 billion.
Sysco hoped the side deal would allay FTC anti-trust concerns — but it has fallen short of its goal, sources said.
“More likely than not they are going to sue,” a well-placed DC source said.
“My impression is they are going to file a suit,” a direct source who would like to see the merger approved said.
The FTC vote is expected to take place at 2 p.m. The results could be announced later on Wednesday or on Thursday, sources said.
IF it does sue, the FTC will face the task of proving to a judge that Sysco’s remedy falls short of insuring robust competition.
There is some precedence to the FTC suing even after a remedy has been proposed.
The FTC in 2002 sued to block Libbey’s proposed $332 million acquisition of Anchor Hocking, a subsidiary of Newell Rubbermaid, despite Libbey offering to reduce the size of the acquisition to not include a certain division.
Two years later the FTC sued to block Arch Coal’s acquisition of Triton Coal despite a proposed Arch remedy to sell one of the acquired mines.
Sysco shares were down nearly 1 percent Tuesday to $39.80.
The company declined to comment for this story, as did the FTC.

>>> Genfit (GNFT FP) could attract takeover interest after Phase IIb result

Deal Reporter - Genfit could attract takeover interest after Phase IIb result

French biotechnology company Genfit [EPA:GNFT] could attract significant takeover interest in March if its lead pipeline product GFT505 produces favourable Phase IIb data, said three sector bankers.

Genfit’s involvement in treating non-alcoholic steato-hepatitis (NASH) is the main draw for a potential buyer and GFT505, an oral treatment for the disease, could deliver promising data in March, said one of the bankers. It would be difficult for buyers to take serious interest before it is known whether GFT505 can pass on to Phase III trials, said a second banker.

Genfit declined to comment.

Although Genfit’s main competitor Intercept Pharmaceuticals [NASDAQ:ICTP] is further along in clinical development with a Phase III ready NASH candidate, obeticholic acid (OCA), it has been clouded by a safety signal observed in its Phase II program, said a liver-disease expert. Intercept's Phase II trial named FLINT demonstrated promising efficacy, with improvement in liver disease among 45% of treated patients, but was also associated with elevations in LDL, or "bad" cholesterol.

So far, GTF505 has a very clean safety profile, the liver disease expert said. The FLINT trial "set the bar" for efficacy, and GFT505 has a good chance of matching that efficacy, he added.

Genfit, which has a market capitalization of EUR 1.2bn, would interest existing large-cap players in liver disease such as AbbVie [NYSE:ABBV] and Merck [NYSE:MRK], said the bankers. Gilead [NASDAQ:GILD] could potentially be interested, said the first and second bankers. But an analyst following Genfit questioned whether Gilead would be interested in another NASH acquisition. Gilead announced in the beginning of January that it would acquire privately-held Phenex Pharmaceuticals AG, which is in the early stages of developing a treatment for NASH.

As NASH is a disease that is present in obese patients and those with diabetes, Genfit could also be an attractive target for companies who also operate in these spaces, such as Eli Lilly [NYSE:LLY] and Novo Nordisk [SWX:NOVOB], said the analyst. Sanofi [EPA:SAN], which has a small stake in Genfit, could also be interested, said the second and a third banker. The fact that both companies are French should not be underestimated, the third banker added. Genfit has a longstanding research partnership with Sanofi.

Players in the gastro-intestinal space, such as Shire [LON:SHP] could potentially look at Genfit as well, said the first banker. The third pointed out, however, that Shire has been focused on rare diseases. But, with NASH affecting 12% of the US population, this disease could potentially be a very large market that any major pharmaceutical buyer could tap into, said the second banker. Pfizer [NYSE:PFE], for example, would be interested should GFT505 prove to have blockbuster potential, said the third banker.

The liver disease expert, who is an industry consultant, said at least four large pharmaceutical companies have expressed interest in acquiring NASH assets, to his knowledge. Any company that doesn't have an in-house NASH pipeline product would likely be interested in Genfit, he continued.

One question is whether Genfit management would be willing to sell, said the analyst. Co-founder and CEO Jean-Francois Mouney is the company’s largest shareholder through his holding in SAS Biotech Avenir. Since July, he has sold down his stake incrementally. Biotech Avenir stated on 4 November that it held 7.43% of the capital and 13.06% of the voting rights in Genfit.

Both the first banker and the analyst foresaw the prospect of a rights issue if Genfit does not sell itself and GFT505 successfully moves on to Phase III. The size of the rights issue will depend on the money needed to set up the trial, they said.

>>> Cemex CEO says company could sell Latam stake, assets in northern Europe, th

Cemex CEO says company could sell Latam stake, assets in northern Europe, the Mediterranean and Asia, to pay off debt 

Cemex could consider selling a 5% to 10% stake in its Cemex Latam Holdings subsidiary, as well as assets in northern Europe, the Mediterranean and Asia, to pay off debt, CEO Fernando Gonzalez was cited as saying in a 10 February newswire report.

The Reuters report cited Gonzalez as saying Cemex could earmark half of the proceeds from the sales for debt payments. The report noted that Cemex is trying to recover its previous investment grade credit rating after suffering ratings downgrades from a combination of expensive acquisitions and the downturn of the US housing market towards the end of last decade.

Gonzalez was cited in a 5 February report by this news service as saying the USD 1bn to USD 1.5bn in asset sales Cemex plans to conduct over the next 12 to 18 months would see the sale of non-core items. The plans will repay at least USD 500m worth of debt this year, with most of the funds coming from asset sales, Gonzalez noted.

The 10 February Reuters report cited Gonzalez as projecting a 10% to 12% increase in the price of Cemex products in the US and that Cemex could generate USD 4.7bn in EBITDA in 2018.

>>> US Gapping up

Gapping up
In reaction to earnings/guidance: GNW +11.4%, GNRC +7.9%, PAYC +6.4%, CG +6.1%, THOR +4.4%, SGMO +4.2%, AKAM +3.8%, WIX +3.8%, AFSI +3.8%, ARMH +3.5%, PEP +3.4%, CRL +2.9%, TSRA +2.8%, ING +2.7%, ING +2.7%, COVS +2.5%, BDL +2.4%, WU +2.2%, EZCH +2%, MDLZ +1.9%, MOS +1.4%, FSRV +1.3%, (also announces plan to separate into two independent public companies), ZTS +1.3%, VOYA +1.1%, NNA +0.6%, TWX +0.5%

M&A news: INXN +12.5% (InterXion and TelecityGroup reach non-binding agreement on all-share merger), CHS +9.3% (WSJ reporting that Sycamore Partners may buy Chico's)

Other news: BLDP +36.1% (entered into a Technology Solutions transaction with Volkswagen Group (VLKAY) for an aggregate amount of ~$80 mln), PME +34.2% (Pingtan Marine Enterprise has entered into an Investment Agreement with China Agriculture Industry Development Fund pursuant to which China Agriculture will invest ~$64.0 million into Pingtan Fishing for an 8% equity interest in Pingtan Fishing's operating company), HTBX +20.5% (presents positive preclinical data on a novel approach to combination immunotherapy at the Keystone Symposia on tumor immunology), MSTX +11.6% (announces Vepoloxamer alone and in combination with tPA improved neurologic function and reduced brain tissue loss compared to tPA alone and saline controls), PSTR+7% (co engaged Evercore Group to explore strategic alternatives), ONCY +6.5% (confirms receipt of orphan drug designation from the FDA for REOLYSIN, for the treatment of ovarian cancer), NLST +6.3% (announced a U.S. Court of Appeals decision denying an emergency motion from Diablo Technologies), FCEL +5.5% (in sympathy with BLDP), PLUG +4.9% (in sympathy with BLDP), PLKI +3.6% (to replace TDY in the S&P SmallCap 600), CVM +3.4% (announced that the Philippines Regulatory Agency (PFDA) cleared co to commence patient enrollment of Phase III head and neck cancer trial of Multikine in the Philippines), EGY +3.2% (announced first production from Etame 10-H, the second development well drilled from the newly installed Etame platform, offshore Gabon), DHRM +3% (announces strategic cooperation agreement in China with the Clinical Sleep Medicine Center of the Air Force General Hospital), HLF +2.5% (in symp with NUS), UNIS +2% (CEO on Fast Money), CSIQ +1.4% (in symp with FSLR), FSLR +1.3% (late move higher on Apple partnership news), BT +1.3% (rival b sky b outbid co for Premier League TV right),QIWI +1.3% (QIWI and MegaFon announce strategic partnership by launching a co-branded wallet), TDY +1% (to replace CVD in the S&P MidCap 400)

Analyst comments: NUS +3.4% (upgraded to Buy from Neutral at Citigroup), YELP +1.9% (upgraded to Buy from Hold at Brean Capital), VMW +0.6% (upgraded to Mkt Perform from Underperform at Bernstein)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: PIR -33.3%, ( lowers FY15 EPS guidance; also names Laura Coffey Executive Vice President ,Interim CFO effective immediately; replacing retiring Cary Turner ), AWRE -20.7%, JIVE -12.2%, WBAI -8.8%, ATEN -8%, ACCO -7.1%, MKTO -6.2%, TRMB -5.1%, RKUS -4.9%, CSTE -4.1%, LOCK -3.8%, ANDE -3.5%, XOOM -3.2%,ARMK -3.1%, PXD -2.1%, OXLC -2%, VSAT -1.4%, GHDX -1.3%, USNA -1.3%, KGC -1.2%, LPX -1.2%, WEC -1.1%, ICL -1%, TMH -0.8%, CERN -0.7%

Select Brazil related names showing weakness: VIV -7.6%, GOL -5.5%, SID -4.1%, ABEV -2.7%, EBR -2.3%, TSU -2.1%, CBD -1.8%

Select oil/gas related names showing early weakness: SN -3%, WLL -2.7%, RDS.A -2.7%, BP -2.7%, SSL -2.5%, STO -2.1%, RIG -1.9%, TOT -1.9%, HAL -0.8%

Other news: DCTH -18.2% (announces proposed public offering of common stock and warrants), JONE -9.5% ( provides 2014 year-end reserves, operations update, and 2015 guidance; launches public offering of common stock), NBG -8.5% (concerns over Greece/EU meetings today), ACHN -4.5% (commenced an underwritten public offering of 10 mln shares of its common stock),TSLA -2.3% (China VP of Communications has left the company, according to reports), EFC -2.2% (lowered Q4 div to $0.65/sh from from $0.77/sh prior), VIAB -1.7% (John Stewart will be leaving 'The Daily Show' (Comedy Central is owned by VIAB)), TXMD -0.5% (pricing of an underwritten public offering of approximately 13.6 million shares of its common stock, offered at a price of $4.05 per share)

Analyst comments: TCK -2.3% (downgraded to Underperform from Neutral at BofA/Merrill), NICE -1.9% (downgraded to Neutral from Overweight at JP Morgan), CR -1% (downgraded to Sector Perform from Outperform at RBC Capital Mkts), WMT -0.7% (downgraded to Neutral from Overweight at HSBC Securities)

>>> US Early premarket gappers

Early premarket gappers
Gapping up: PME +37.6%, BLDP +32%, GNW +16.5%, INXN +14.3%, CHS +10.7%, GNRC +7.8%, PSTR +7%, AKAM +4.8%, THOR +4.4%, PLKI +4.3%, SGMO +4.2%, NUS +3.6%, PEP +3.4%, EGY +3.2%, EGY +3.2%, COUP +3%, CRL +2.9%, TSRA +2.8%, PAYC +2.5%, ZTS +2.5%, MOS +2.4%, BDL +2.4%, ING +2.3%, UNIS +2%, MOS +2%, YELP +1.9%, WU +1.9%,FSLR +1.8%, CSIQ +1.5%, CSIQ +1.5%, YNDX +1.3%, BT +1.3%, FSRV +1.3%, TWX +1.2%, TDY +1%

Gapping down: PIR -31.1%, AWRE -20.7%, DCTH -18.2%, JIVE -12.2%, JONE -9.4%, NBG -8.5%, ATEN -8%, MKTO -6.2%, RKUS -4.9%, ACHN -4.6%, TXMD -4%, TRMB -4%, SDRL -3.6%, ANDE -3.5%, XOOM -3.2%, WLL -2.6%, RDS.A -2.5%, SSL -2.4%, LOCK -2.3%, LOCK -2.3%, REXX -2.2%, BP -2%, OXLC -2%, NICE -1.9%, STO -1.7%, TSLA -1.6%, ARMK -1.5%, RIG-1.4%, VSAT -1.4%, VOYA -1.4%, TOT -1.3%, USNA -1.3%, ACCO -1.3%, SAN -1.2%, KGC -1.2%, SN -1.1%, WEC -1.1%, AU -1%, HAL -0.9%, CERN -0.9%, BHP -0.8%, PXD -0.8%