WSJ : Adidas Investors Losing Patience, Want Faster Turnaround


Adidas Investors Losing Patience, Want Faster Turnaround
Shareholder Says Management Deserves ‘Yellow Card’ for Poor Performance

FRANKFURT— Adidas AG shareholders are getting vocal about their discontent with the company’s performance.

Shares in the German sports brand fell roughly 40% last year after two profit warnings within 10 months. Chief Executive Herbert Hainer has taken some steps to reverse the decline at the company he has led since 2001, but a growing number of investors and analysts say Adidas must do more.

“We have no trust in the management anymore,” said Ingo Speich, a fund manager in Frankfurt at Union Investment, one of Adidas’s largest and most outspoken shareholders, with a stake of roughly 1.2%. “We want Hainer to leave the company.”

Adidas “categorically rejects” criticism from Mr. Speich and Union Investment, a spokeswoman said. Adidas “is and will remain a healthy growth company,” she added.

Group sales at Adidas rose 6% last year, adjusted for currency fluctuations, but the company’s performance in the U.S. and Russia—two of its largest markets—is sliding fast. Those troubles are part of the reason the world’s second-largest sporting-goods company last summer cut its 2014 profit goal almost 30%, to €650 million ($737 million), which it achieved.

Some Adidas shareholders are calling for the ouster of longtime Chief Executive Herbert Hainer. ENLARGE
Some Adidas shareholders are calling for the ouster of longtime Chief Executive Herbert Hainer. PHOTO: GETTY IMAGES
Shareholders last fall began pressing Mr. Hainer to accelerate a turnaround. They argued he should have reacted faster to sliding sales at the TaylorMade golf division and the collapse of Russian demand.

Adidas’s management “deserves a yellow card but not yet a red one,” said Stefan Grüner-Bauknecht, a fund manager at Deutsche Asset & Wealth Management, a large Adidas investor. A yellow card is a referee’s warning in a soccer game, and a red card sends a player off the field.

Mr. Grüner-Bauknecht blamed Adidas’s slide on a mix of poor judgment and bad luck, particularly in the collapse of the Russian ruble.

Adidas shares have risen almost 11% this year after the company met its reduced 2014 financial targets and in expectation of a new five-year strategy that the company plans to announce next month. But its share price is still almost 25% below its level one year ago, while Germany’s broader DAX index is up roughly 20% over the period.


Several analysts have said during interviews over recent months that many large Adidas investors they talk to are dissatisfied with management.

Many Adidas investors also hold stakes in larger U.S. rival Nike Inc., said Cedric Rossi, an analyst at investment bank Bryan Garnier. Nike shares are up more than 30% over the past 12 months.

“It’s easy for [investors] to compare the performance of both groups, and the conclusion is easy to make,” Mr. Rossi said.

Adidas’s struggling U.S. business has been a strong focus of investor dissatisfaction. Adidas last fall fell behind Baltimore-based Under Armour Inc. to the No. 3 spot among U.S. sports brands, and Adidas’s North American sales dropped 10% in euro terms in the first nine months of 2014.

An Adidas shoe on display in Moscow. Adidas group sales rose 6% last year, adjusted for currency fluctuations, but its performance in the U.S. and Russia—two of its largest markets—is sliding fast. ENLARGE
An Adidas shoe on display in Moscow. Adidas group sales rose 6% last year, adjusted for currency fluctuations, but its performance in the U.S. and Russia—two of its largest markets—is sliding fast. ILLUSTRATION: BLOOMBERG
Adidas’s board decided last March to extend Mr. Hainer’s contract by two years, to 2017. The company said the extension offered time to find a successor before Mr. Hainer’s planned retirement.

“The Adidas Group has made excellent progress in the past 13 years under the leadership of Herbert Hainer,” Igor Landau, Adidas’s supervisory board chairman, said in March.

Mr. Hainer is the longest-serving chief executive ever among companies in Germany’s blue-chip DAX index. Between 2001 and 2013, company earnings quadrupled, and in several years it reported growth of as much as 20%.

Investors’ outspokenness could add to pressure on Mr. Hainer, who has so far weathered criticism. Adidas is widely held, and all its shares trade openly. Its largest shareholder, Thornburg Investment Management Inc., holds roughly 4.8% of the company.

Adidas is now preparing a new five-year strategy that will be presented by the end of March.

The company plans next month to release more details of its 2014 earnings, which it outlined in January. Its long-troubled Reebok unit, purchased in 2006, posted 5% sales growth last year, adjusted for currency fluctuations.

Analysts remain cautious. J.P. Morgan recently cut its forecast for Adidas’s results this year, saying that the continued devaluation of the Russian ruble would hurt profits. It also said it feared the strengthening of the U.S. dollar against the euro would “more than offset” lower commodity prices.

>>> US Close Dow+1,20% S&P+1,02% Nasdaq+1,03% Russell+1,44%

Closing Market Summary: S&P 500 Turns Positive For 2015

The major averages zoomed higher on Thursday, allowing the S&P 500 (+1.0%) to reclaim its loss from yesterday and then some. The benchmark index erased the remainder of its decline from January while the Dow (+1.2%) and Russell 2000 (+1.3%) outperformed.  

Equity indices made the bulk of their advance during the opening hour and spent the rest of the trading day in narrow ranges near their highs. The opening spike took place after investors realized that yesterday's ECB decision to lift a waiver that allowed for the acceptance of Greek government bonds as collateral was political at its core.

For the time being, Greek banks are still allowed to turn to the Bank of Greece, which in turn has access to funds through Emergency Liquidity Assistance from the European Central Bank. To that point, Germany's Die Welt reported that the ECB has granted up to EUR60 billion in funding to the Bank of Greece through ELA channels.

That being said, the negotiations are unlikely to unfold without a hitch, evidenced by today's press conference after Greece's Finance Minister Yanis Varoufakis met with his German counterpart Wolfgang Schaeuble. Mr. Schaeuble said he was advised to say the two "Agreed to disagree," but Mr. Varoufakis countered, saying "We didn't even agree to disagree."

The S&P 500 opened just above its 50-day moving average (2,044) and built on its early gain with the assistance from most sectors. The materials space (+2.4%) finished in the lead while health care (+1.6%) and energy (+1.4%) also outperformed.

The energy sector received a helping hand from crude oil, which followed yesterday's 9.3% plunge with a 4.2% spike to $50.47/bbl. Despite the surge, the energy component remains below its 50-day moving average, which resides in the $55.00/bbl area.

Meanwhile, the health care sector benefitted from strength in the biotech group with the iShares Nasdaq Biotechnology ETF (IBB 319.91, +7.36) climbing 2.4% to snap its four-day losing streak. Furthermore, Dow component Pfizer (PFE 32.99, +0.92) added 2.9% after agreeing to acquire Hospira (HSP 87.64, +22.84) for $90/share, which represents a 38.9% premium to HSP's closing price from yesterday.

Elsewhere among influential sectors, financials (+1.0%), industrials (+1.0%), and technology (+0.9%) finished near the broader market while the consumer discretionary sector (+0.6%) underperformed. Homebuilders struggled amid today's increase in Treasury yields with the iShares Dow Jones US Home Construction ETF (ITB 26.20, -0.15) shedding 0.6%. Also of note, apparel names ended in mixed fashion with Michael Kors (KORS 69.77, -1.61) falling 2.3% after cautious guidance and below-consensus comparable store sales overshadowed a bottom-line beat.

Treasuries retreated, ending near their lows with the 10-yr yield higher by six basis points at 1.81%.

Today's participation was below average with roughly 775 million shares changing hands at the NYSE floor.

Economic data included Initial Claims, Trade Deficit, Productivity/Unit Labor Cost Data, and Challenger Job Cuts:
  • The initial claims level increased to 278,000 from an upwardly revised 267,000 (from 265,000) while the consensus expected an increase to 290,000 
    • For the first few weeks of January, the initial claims level suddenly accelerated above 300,000. There was no supporting evidence that explained the increase, but we assumed that it must have been the result of increased layoff activities in the oil and gas sector 
  • The trade deficit widened to $46.60 billion in December from a downwardly revised $39.8 billion ($39.0 billion) in November while the consensus expected a decrease to $38.00 billion 
    • According to the advance fourth quarter GDP report, the BEA assumed that the trade deficit would widen in December to roughly $45.00 billion. Not only did the December deficit exceed those expectations but inclusion of the downside November revisions means that the trade deficit will subtract more from GDP growth in the second estimate than it did in the advance release 
  • Nonfarm labor productivity declined 1.8% in the fourth quarter after increasing an upwardly revised 3.7% (from 2.3%) in Q3 2014 while the consensus expected an increase of 0.2% 
    • Unit labor costs increased 2.7% in the fourth quarter after declining in both the second and third quarters. The increase resulted from a 0.9% jump in hourly compensation coupled with lower output gain 
  • The Challenger Job Cuts report for January indicated a 17.6% increase to follow the prior rise of 6.6% 
Tomorrow, the Nonfarm Payrolls report for January will be released at 8:30 ET (consensus 235K) while the Consumer Credit report for December will cross at 15:00 ET (consensus $15.00 billion).
  • Nasdaq Composite +0.6% YTD 
  • Dow Jones Industrial Average +0.4% YTD 
  • Russell 2000 +0.3% YTD 
  • S&P 500 +0.2% YTD

(BN) Pfizer Not Done With Deals Even After Hospira Purchase: Real M&A

Pfizer Not Done With Deals Even After Hospira Purchase: Real M&A
2015-02-05 21:02:35.362 GMT


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

By Brooke Sutherland
(Bloomberg) -- Pfizer Inc.’s deal aspirations are probably
bigger than Hospira Inc.
Buying the injectible drugmaker doesn’t give Pfizer the
innovative products and lower tax rate that the $208 billion
pharmaceutical giant was seeking in its failed bid for
AstraZeneca Plc last year. Pfizer’s $17 billion bill for Hospira
is just a fraction of the almost $120 billion it was willing to
pay for AstraZeneca, so the New York-based company has plenty of
capacity to go after more targets. Chief Executive Officer Ian
Read said Pfizer continues to look at opportunities.
A deal for Actavis Plc, which is wrapping up its $66
billion purchase of Botox-maker Allergan Inc., could fulfill
Pfizer’s remaining needs, according to Kevin Kedra, a Rye, New
York-based analyst at Gabelli & Co. The company could also look
to further bolster its oncology and vaccine offerings, said John
Boris of SunTrust Banks Inc. Big drugmakers such as
GlaxoSmithKline Plc, AbbVie Inc. and Bristol-Myers Squibb Co.
have also been named by analysts as potential Pfizer targets.
“You don’t go from potentially paying $120 billion for a
major deal to something that’s basically an hors d’oeuvre,”
Boris of SunTrust said in a phone interview. “M&A will continue
to be dominant.”

Cash Balance

Pfizer had $33 billion in cash at the end of September, the
most recent date for which information is available. It’s using
some of that to cover a portion of the cost for the Hospira deal
and issuing new debt to pay for the rest. That will still leave
the company with plenty of resources for other acquisitions.
“I’m not going to sneeze at a $17 billion deal -- it’s a
fairly significant move,” David Heupel, a Minneapolis-based
fund manager at Thrivent Financial for Lutherans, which oversees
about $90 billion, said in a phone interview. “But they
certainly, particularly when you think about ex-U.S. cash, have
plenty of money that they could deploy. This doesn’t necessarily
close the door on any acquisition.”
The Hospira deal will add scale and growth to Pfizer’s
established products business, putting the company in a better
position to eventually spin it off as it has discussed doing.
What Hospira doesn’t offer is a pipeline of innovative products
that could replace Pfizer’s own blockbusters that are losing
patent protections and help reverse four years of revenue
declines.

Actavis Appeal

That could drive Pfizer to a deal with Actavis, Kedra of
Gabelli said. Actavis is in the process of buying Allergan to
add fast-growing drugs including the anti-wrinkle treatment
Botox and Restasis eye-drops. Once it completes the deal, the
Dublin-based company may also be big enough for Pfizer to
overcome the U.S. Treasury’s stricter rules on inversions and
strike a deal to lower its tax rate, Kedra said.
Buying Hospira “checks off some of the boxes they would
have gotten from AstraZeneca but certainly not all of them,”
Kedra said in a phone interview. With an Actavis takeover, “you
would certainly pick up some innovative growth assets,
especially through the Allergan portfolio. That would help check
off a lot of the boxes that still seem to be out there.”
Mylan is also a possibility as the companies already have a
relationship on several projects including EpiPen, though Pfizer
would have to work out the tax implications of a takeover, said
Boris of SunTrust. Mylan is seeking to lower its tax bill by
buying Abbott Laboratories’ generic drugs business in developed
markets and moving its legal address to the Netherlands.
The Hospira acquisition may tip Pfizer’s hand on where it’s
looking for its next deal, Thrivent’s Heupel said.
“There are plenty of assets out there that they could buy
that would provide some revenue and feasible growth to the
existing infrastructure the company has -- I think that’s part
of what this tells us,” he said. “You could run the gamut in
the generic specialty space. I think anything would be feasibly
viewed as on the table.”

For Related News and Information:
Pfizer Flexes Muscle With Priciest Purchase of Decade: Real M&A
Drug Buying Spree Still Bustling as Pfizer Leads Hunt: Real M&A
Real M&A’s 2015 Guide for Deal Watchers: Pfizer to MegaBrew
Pfizer $33 Billion Question Remains After Teva, Actavis Feelers
Top Deal Stories: DTOP <GO>
Real M&A Columns: NI REALMNA <GO>

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

>>>BHI/HAL spoke to HAL IR - HSR refiled early Jan - exp 2/7-2/9



From: LAURA ANREDER (OSCAR GRUSS & SON IN) At: Feb 5 2015 21:54:34
To: LAURENT CHEKROUN (MAKOR SECURITIES LLP)
Subject: Fwd:BHI/HAL spoke to HAL IR - HSR refiled early Jan - exp 2/7-2/9
Didn't have an exact date on HSR refiling, but said was coming up on expiration date. Received comments back on S-4 filing (filed 12/22) waiting on DOJ before refiling. Draft filing made with EC. Other regulatory will fall in line after hearing from DOJ.

>>> US Gapping Down

Gapping down

Gapping down In reaction to disappointing earnings/guidance: QUIK -31.7%, ADEP -25.5%, IRBT -10.4%, GMCR -9.8%, RSTI -9.2%, LFVN -7.5%, IMMU -7%, AXTI -6.5%, FBHS -6.3%, PMT -6.2%, PRU -4.9%, ATML -4.8%, (announces initial quarterly dividend of $0.04/share), FOXA -4.8%, GEOS -4.8%, KORS -4.4%, NUS -4.2%, GIL -4%, (also announces agreement to acquire Comfort Colors for $100 Million), APO -3.4%, CMI -3.3%, EL -2.8%, ALL -2.7%, (also Increases quarterly dividend ), FMC -2.3%, TDC -2.3%, AZN -2%, PRLB -1.6%, UA -1.5%, (announces the acquisition of Endomondo for $85 mln and MyFitnessPal for $475 mln), BCO -1.5%, CHTR -1.3%, ZUMZ -0.9%, (Zumiez reports Jan same store sales +12.3% vs +6.0% Retail Metrics consensus ), CNW -0.9%

Other news: BIND -5.4% (Announces Proposed Public Offering of Common Stock and Warrants to Purchase Common Stock; details not disclosed, ICPT -3.3% (prices 1 mln shares of its common stock at $176.00 per share), ANTM -3.3% (was victim of cyber attack, according to reports), SABR -3.2% (prices 23.8 mln shares of common stock by existing stockholders affiliated with TPG Global and Silver Lake Management and certain members of Company management at a price of $20.75 per share), MBII -2.9% (Marrone Bio Innovations announces completion of Audit Committee Investigation; update on financial statement review and status of NASDAQ Continued Listing), CASM -2.5% ( intends to offer $8.0 million worth of its common stock in an underwritten public offering), RARE -2.2% (prices 3 mln shares of its common stock at $54.00 per share), NBG -2.1% (Athens stocks down 5% in European trade), XOMA -1.8% (filed for $300 mln mixed securities shelf offering; co also also filed for offering of ~12.1 mln shares of common stock issuable upon the exercise of warrants) PBR -1.2% (confirmed that Fitch Ratings reviewed Petrobras' debt ratings from BBB to BBB-), TKMR -1% ( announces filing of Definitive Proxy Statement and voluntary delisting from the TSX following the agreement and plan of merger and reorganization with OnCore Biopharma)

Analyst comments: NAV -4% (downgraded to Underweight from Overweight at JP Morgan), COST -3% (downgraded to Hold from Buy at Deutsche Bank), RL -1.2% (downgraded to Neutral from Buy at Goldman; downgraded to Neutral from Buy at UBS), M -1% ( downgraded to Equal-Weight from Overweight at Morgan Stanley), ADP -0.7% (downgraded to Market Perform from Outperform at BMO Capital)

>>> US Gapping Up

Gapping up In reaction to strong earnings/guidance: GLUU +20.6%, (will partner with Katy Perry on the development of a new mobile game ), DATA +16.5%, KIRK +12.7%, INUV +10.7%, EXAR +10.6%, GRA +6.4%, AFOP +6.1%, PRCP +5.6%, NICE +5.3%, LCI +4.6%, GPRE +4.5%, CONN +4.5%, MPWR +4.2%, BLL +4%, SNN +3.9%, CATM +3.4%, LB +3.3%, FORM +3%, BGC +2.4%, LAZ +2.3%, PSEC +1.8%, SNY +1.8%, CX +1.7%, SIRI +1.4%, SNY +1.4%, DNKN +1.3%, PRGO +1.3%, BOOT +1.2%, VMC +1.2%, RRTS +0.9%, WFT +0.9%, TEVA +0.9%

M&A news: HSP +35.3% (Pfizer (PFE) to acquire hospira for $90 a share), BT +5.8% (agrees definitive terms to acquire EE for GBP12.5 bln to create the UK's leading communications provider), PFE +3.1% (to acquire HSP)

Select financial related names showing strength: HERO +7.4%, CRZO +6.9%, GDP +4.8%, BBEP +4.1%, MPET +3.7%, OAS +3.3%, SDRL +2.4%, BP +1.4%, RDS.A +0.9%

Other news: SMRT +16.4% (announced a $5 per share special dividend) FXCM +9.2% (cont vol pre-mkt), FTR +8.5% (attributed to potential Verizon (VZ) deal to buy its Wireline assets), GENE +7.6% (announced yesterday that its Nasdaq deficiencies had successfully been remediated), RXDX +4.3% (receives orphan drug designation from FDA for Entrectinib for the treatment of molecularly defined subsets of non-small cell lung cancer), NGD +3.9% (reported FY14 gold production of 380,135 ounces; sees FY15 gold production of 390-430k ounces), GALE +3.7% (announces that its partner, Orexo AB, has filed a patent infringement lawsuit in United States District Court against Actavis Laboratories (ACT) and Andrx Corporation), OCN +3.6% (discloses company update, expects to record a loss in the fourth quarter of 2014 and for the total year), TWTR +3% (Bloomberg report Twitter has stuck a deal with Google to make tweets easier to search through the search engine), YNDX +2.1% (released a new app that helps drivers in Moscow find a parking space and pay for the service without leaving their car), SHAK +2.1% (cont vol pre-mkt), SE +2.1% (Spectra Energy and Spectra Energy Partners (SEP) announce 2015 business outlook and financial plan), AST +1.8% (announces public offering of common stock; price and size details not disclosed), GSK +1.7% (following peer SNY earnings), TASR +1.7% (announced the purchase of 700 AXON Flex body cameras as well as 700 five-year Unlimited and RMS Integration licenses to EVIDENCE.com by the Maricopa County Sheriff's Office ), GRPN +1.4% (plans to sell stake in Ticket Monster, according to reports)

Analyst comments: BRCD +3.6% (upgraded to Buy from Sell at Citigroup ), FITB +1% (upgraded to Buy from Neutral at BofA/Merrill )

>>> Apple planning to acquire stake in ARM Holdings to deter Int

Apple planning to acquire stake in ARM Holdings to deter Intel bid for ARM

Apple Inc, a listed Cupertino, California-based computer company, was said to be planning to acquire a strategic shareholding in the listed UK-based microchip designer ARM Holdings, The Daily Mail reported. The newspaper mentioned gossip from the US that Apple plans to buy a stake in ARM to deter a potential bid for ARM from the listed Californian chip manufacturer Intel, but did not cite a source for the speculation.

ARM is one of Apple’s major suppliers, the item noted. Dealers cited by the report thought that Apple would need to offer more than 1500p per share to buy a large stake in ARM.

A Daily Telegraph market report noted revived chatter that Apple was thinking about making an offer for ARM, but did not cite a source for the rumour. The report did not specify whether the speculation was about a full takeover bid by Apple or the acquisition of a stake in ARM.

ARM Holdings’ share price closed 32p up at 1069p in London yesterday, 4 February, giving the company a market capitalisation of GBP 15.01bn (EUR 20.08bn).
Daily Mail, Daily Telegraph

>>> Sika senior executives ask Saint Gobain to reconsider hostile takeover

Sika senior executives ask Saint Gobain to reconsider hostile takeover 

Sika, the Swiss chemicals group, has seen 106 of its senior executives write an open letter to Saint Gobain asking the French group to reconsider its takeover attempt, Tagesanzeiger reported. Without citing a specific source, the Swiss daily said 106 senior executives wrote an open letter to Saint Gobain chief Pierre-André de Chalender on 3 February expressing their concern at the hostile takeover attempt.

Tagesanzeiger