TheChek News Flow

With shale breakevens falling US$20/bl in a year, and deflation taking hold of the industry, we lower our Brent oil price estimate to c.US$65/bl in the near term, falling to US$55/bl by 2020. This change is likely to put severe pressure on the integrated oils, leaving them too high on the cost curve.

Lower oil prices leave dividends at risk, and on our new estimates none of the companies under active coverage can sustainably maintain their existing dividend to 2020 while maintaining cash flow neutrality. On our estimates, ENI and Total should be able to maintain the highest yields, with BP, Statoil and OMV likely to see the largest cuts.

'Matthew Scales'

ENI remains our top pick in the sector, with ongoing restructuring in the downstream, near-term production growth from Top 420 projects including Marine XII, Goliat and Angola LNG, and strong FCF generation. We raise our 12-month target price to €19, implying 10% upside.

We reduce our sector view to Cautious (from Neutral) given our negative view on the oil price and downgrade BP (12m TP 364p, 20% downside) and Statoil (12m TP Nkr147, 7% downside) to Sell. For BP, we see limited upstream growth, fewer options left for disposals and an ongoing overhang of the Macondo liability. For Statoil we see the high gearing ratio and relatively limited growth profile leaving the dividend at risk in a lower oil price world. We also downgrade both Galp and OMV to Neutral (from Buy) following strong recent performance.

- ECB’s Mersch Says Greece Must Stick to Its Promises

- BOE’s Bailey Says Asset Buffers an Option for Systemic Funds

- Greek Euro Exit Poses Political Not Economic Danger: Gabriel

- SNB’s Zurbruegg: Doesn’t Now See Rise in Capital Buffer: TDG, Swiss real Estate has slowed, CHF should weaken over time

- Fed’s Evans Repeats ‘No Compelling Reason’ to Tighten in 2015

- AERL LN : Irish Govt Report to Recommend Sale of Aer Lingus to IAG: Times

- AF FP : Air France to Shut Marseille, Toulouse, Nice Bases: Figaro

- AVV LN : Aveva attracts interest from European and US bidders, Schneider, GE & Emerson are interested, value ~ GBP1b - Sunday Times

- BAMNB NA : BAM 1Q Pretax Loss EU21.1m vs Profit of EU4.6m; Confirms Outlook

- BPTY LN : 888 Holdings Said in Running for Bwin.Party, Times Says (sunday)

- BPTY LN : *888 HOLDINGS CONFIRMS MAKING BID FOR BWIN.PARTY (just now )

- EDEN FP : Edenred Chairman and CEO Stern to Leave Co. on July 31

- EXO GY : PartnerRe Holder Exor Reports 9.9% Stake

- FYR NA : Fugro Said to Have Received Indicative Bids for Subsea Unit: FD

- GOOGL US : Plans to put "Buy" button next to some search ads, starting in the next few weeks

- ILD FP : France Won’t Promise Free 4G 700 MHz License, Echos Says

- ITV LN : ITV rumoured to be in sights of Comcast - FT

- LNZ AV : Lenzing 1Q Rev. EU474.6m vs EU451.7m Y/y

- MKS LN : Marks & Spencer May Return Cash to Shareholders: Sunday Times

- MNOD LI : Norilsk Nickel to Borrow $1b From VTB for Copper Mine: Vedomosti

- OMV AV : OMV 1Q Clean CCS Net Income EU237M; Est. EU188.8M

- OSR GY : Osram May Spin Off Traditional Lighting Within 12 Mths, SZ Says

- PC IM : ChemChina Finalizes Accord with Banks for EU6.8b Loan: Corriere

- UG FP : PSA Peugeot Citroen Plant Plans to Invest EU48m, Expresso Says

- RNO FP : Nissan-Renault Capital Structure Is Very Stable, Ghosn Says

- RWE GY : RWE to Pay Back-Taxes for 2004-2008, Boersen-Zeitung Reports

- S32 LN : South32 CEO Says Sees Growth Options in Coal, Manganese, Silver

- SIX3 GY : Sixt 1Q Sales Up 21%, Pretax Rises 5.5%; Confirms Expectations

- SU FP : Schneider Electric in Talks About Possible Aveva Bid - Sunday Times

- GLE FP : *SOCGEN'S MANAGERS KNEW OF KERVIEL TRADES, MEDIAPART SAYS, *MEDIAPART CITES POLICE INVESTIGATOR LE ROY ON SOCIETE GENERALE

- TEF SM : Telefonica Loses Court Case Brought by Treasury: Confidencial

- VED LN : Vedanta CEO Sees Investments Slowing Amid Oversupply: Telegraph

- VOS GY : Vossloh Starts Sale of Transportation Business: Boersen-Zeitung

- Zanetti IPO : Zanetti IPO Range Set at EU11.6-EU15.75;

--> UBS Morning attached, GS on Oil attached

*DNO RAISED TO BUY VS NEUTRAL AT GOLDMAN

Nouvelles fréquences 4G : pas de cadeau pour Free

L’autorité de régulation
des télécoms considère
que réserver des fréquences à Free est trop risqué juridiquement.

Mauvaise nouvelle pour Free. Le trublion des télécoms voulait qu’on lui garantisse un lot de fréquences 700 MHz destinées à la 4G, pour lesquelles l’Arcep doit lancer un appel à candidatures en juillet, mais c’est plutôt mal parti. D’après nos informations, le régulateur des télécoms, qui vient de fina- liser une analyse sur le sujet, conclut à l’impossibilité d’un tel scénario, trop risqué sur le plan juridique. Or Sébastien Soriano, le président de l’Arcep, l’a encore dit récem- ment sur BFM Business : la procédure d’attribution de la bande 700 doit être « solide juridiquement ». Faute de quoi, si elle devait être attaquée en justice une fois les fréquences attribuées, toutes les autori- sations délivrées pourraient tomber.
Dans ces conditions, l’hypothèse d’un lot garanti pour Free semble donc difficile à
maintenir. Quand bien même, ce type de « réservation » s’est déjà fait dans trois pays européens (Pays-Bas, Royaume-Uni et Slo- vénie), lors de l’attribution de la bande 800 MHz, ces dernières années. Mais jamais en France. C’est un coup dur pour le groupe de Xavier Niel qui a beaucoup milité pour qu’on lui réserve une partie de fré- quences de la bande 700. Le fait est que Free a aujourd’hui beaucoup moins des fréquen- ces que ses concurrents Orange, Bouygues Telecom et SFR. Il considère ainsi qu’on doit lui en garantir, quitte à payer le prix demandé, pour rééquilibrer le marché. Mais pour l’Arcep, Free était candidat il y a cinq ans lors de l’attribution de la bande 800 MHz et a donc alors eu l’occasion d’obtenir des fréquences comme ses concurrents. A l’époque, il a échoué.
Free va devoir convaincre
Bercy et l’Arcep
Pour les « telcos », l’enjeu est de taille : vu l’explosion du trafic mobile, ces fréquences pour la 4G sont vitales. Dites « en or », elles sont d’autant plus convoitées qu’elles per- mettent une couverture à longue distance et pénètrent à l’intérieur des bâtiments. L’Etat, lui, en attend plus de 2 milliards d’euros de revenus. Faute de lot garanti et si un méca-
nisme d’enchères pures devait être décidé, Free redoute que ses concurrents soient tentés de surpayer les fréquences pour l’exclure du marché.
Cela dit, l’analyse juridique de l’Arcep ne préjuge pas de la décision finale que doivent prendre ensemble l’Etat et le régulateur des télécoms. Dès lors, tout le travail de Free va consister à convaincre Bercy et l’Arcep de lui garantir des fréquences quand même, sans passer par un lot réservé. On peut par exemple imaginer qu’un plafond de fré- quences par opérateur puisse être décrété. Les concurrents de Free ont chacun 20 MHz en bande basse. Free, lui, n’en a que 5. Si demain, on impose un maximum de 25 MHz par opérateur, un seul, Free en l’occurrence, pourrait être candidat pour plus de 5 MHz.
Il existe ainsi un champ des possibles entre un lot garanti et des enchères pures et dures, c’est à ce niveau-là que Free a une carte à jouer. Orange, Bouygues Telecom et SFR ne veulent naturellement pas en enten- dre parler. Pour eux, il est hors de question de réserver des lots à qui que ce soit, sous une forme ou une autre. Après tout, avec un mécanisme d’enchères, tout le monde peut jouer. Et que le meilleur gagne. Ou plutôt, celui qui fera le plus gros chèque.

Media and tech companies hiring bankers left and right

Nelson Peltz loses proxy battle with DuPont

'Lip Sync Battle' brings in big numbers for Spike

Gift shop fights to keep its Brooklyn bonafides

Buyer finally found for Say Media's xoJane, xoVain

According to a hedge-fund manager last week, one of the most controversial — and complicated — financial engineering practices related to the bankruptcies of companies like RadioShack isn’t in danger of being outlawed, despite complaints from traders, Kevin Dugan reports.

Traders have complained that shadow bankers like Standard General lent RadioShack money only to force its bankruptcy at a later date — when separate derivatives bets would come due and lead to a major payday.

“It’s the greatest lawsuit that will never be heard,” Michael Lipsky, a partner at hedge fund MatlinPatterson Global Advisors, said during an industry conference on Wednesday.

“I find it very hard [to believe] a judge [would] say, ‘Wait a minute, that’s an unfair practice. You’re actually giving the company more liquidity, more lifeline,’ ” he said.

How a drink for babies became the adult hangover cure of choice

Pedialyte, that perennially popular oral electrolyte for ailing kids, has a new target consumer in mind.

Adult usage of the brand, owned by Similac formula parent Abbott Laboratories, has grown by almost 60% since 2012. Adults now make up more than one-third of Pedialyte’s sales, up from a historical average of 10% to 15%, Heather Mason, an executive vice president at Abbott, said in an interview. The Pedialyte brand doesn’t disclose its actual sales, but Nielsen tracking shows retail sales growing 22% between 2012 and last year to $102 million.

The company, citing Nielsen, said that it has a 58.2% share of the $167 million U.S. oral-electrolyte market and that most of its rivals are retailers’ private-label brands.

While Pedialyte has been used in the past by serious athletes and some college students with hangovers, Mason said the dramatic growth in recent years has been spurred by social media.

“There’s an underground movement in social media to drive word of mouth,” including from celebrities Pharrell Williams, Mason told MarketWatch. “We saw increased use by adults. We have high electrolyte and lower sugar content than common [hydration] beverages. That combination caused us to say, ‘We need to be part of this.’ ”

Williams told US Magazine that he drinks Pedialyte almost every day. And Miley Cyrus was reportedly spotted posing with a bottle of Pedialyte.

The trend is expected to translate to higher sales. While Pedialyte sales have typically grown by percentages “in the mid single digits” annually, Abbott Labs expects sales to jump by a double-digit percentage this year, driven by adult usage.

It’s an opportunity “any time you can both expand your market and get beyond seasonal products,” Mason said, noting that the Pedialyte brand is traditionally tied to the flu and cold season.

The move also will put Pedialyte in direct competition against more traditional adult hydration choices such as PepsiCo Inc.’s Gatorade.

Mason said the company doesn’t plan to change the product makeup of Pedialyte and has no plans to change its name to target adult consumers. The company, however, is introducing larger powdered-stick packs for adults, and adding adult-friendly flavors including strawberry lemonade and orange. In March, it unveiled a “See the Lyte” campaign to promote the brand to adults as part of a plan to double marketing spending this year, mostly on social media and via other online venues.

This year it also will appear in 144 music festivals and sport events in cities from New York to Atlanta to give away free samples.

Mason said Abbott doesn’t plan to sell the brand beyond its traditional food, drugstore and mass-merchant retail customers but said there could be opportunities to feature the brand in different parts of a given store.

Charles Minnick, a 28-year-old financial analyst from St. Louis, said that he and his twenty-something friends swear by Pedialyte to treat their hangovers and keep it on hand for that purpose. “Nothing is better,” he said.

At a bachelor party years ago in Dallas, he said, a friend of the groom “turned us all on to it, and we exported the knowledge back to our respective hometowns.”

Branding experts said that while it makes sense for Pedialyte to expand the definition of its target market, Abbott will have to think seriously about either changing the brand name or formally indicating that the product is intended for adult use.

“Any strategy that you develop to be able to expand the user base is a good one,” Robert Passikoff, founder and president of consulting firm Brand Keys, told MarketWatch. “The question is, ‘Can they do it?’ Pedialyte is known for electrolyte absorption for children. Now you have to try to sell to adults. It’s like going out and having a headache and someone asks, ‘Would you like children’s Tylenol?’ Abbott isn’t going to be the only one doing this. Adults are going to feel they need a product of their own. The name becomes a barrier.”