TheChek News Flow

TUI, IHG, Accor Among Top Leisure Picks at Morgan Stanley
2015-01-06 07:16:37.606 GMT


By Cormac Mullen
(Bloomberg) -- TUI, IHG, Accor, Playtech, Mitchells &
Butlers, RCL named top picks in European leisure and hotels
sector at Morgan Stanley; also likes Thomas Cook, Merlin, 888,
Betfair, according to note.
* Upgrades Mitchells & Butlers to overweight from equalweight,
OPAP to equalweight from underweight
* Sees Edenred, Paddy Power, JD Wetherspoon, Sodexo lagging
relatively, downgrades to underweight from equalweight
* Cuts SSP, Enterprise Inns to equalweight from overweight
* NOTE: Stoxx 600 Travel & Leisure index rose 18.3% in 2014 vs
4.4% rise in Stoxx 600
* NOTE today: Paddy Power Downgraded at Goldman, Nomura,
Morgan Stanley


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Cormac Mullen in Dublin at +353-1-523-9526 or
cmullen9@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

Ferrari Spinoff Sets Up Fiat Chrysler for Another Deal: Real M&A
2015-01-06 00:00:01.3 GMT


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

By Tommaso Ebhardt
(Bloomberg) -- Sergio Marchionne, the architect of the auto
industry’s biggest deal in more than a decade, may not be
finished yet.
Even as he completed the merger of Fiat SpA and its U.S.
Chrysler unit last year to create Fiat Chrysler Automobiles NV,
Marchionne said the industry is still fragmented and ripe for
further consolidation. His planned spinoff of Ferrari this year
puts the $14 billion automaker into position for another
combination that could form a group to vie with No. 1 Toyota
Motor Corp. or help address shortcomings in Asia.
Manufacturers are under pressure to join forces amid
slowing growth and rising costs to develop cleaner cars and add
automated driving functions and smartphone-like technology. By
lowering debt with the cash raised from cutting loose Ferrari,
Fiat Chrysler becomes a more attractive partner. The spinoff
also gives Marchionne more leeway to set up a transaction by
ensuring the Agnelli family, Fiat Chrysler’s biggest
shareholder, retains control over supercar-maker Ferrari.
While the Agnellis want to keep Ferrari, they would
probably be “open to strategic combinations that will reduce,
or eliminate, their stake” in Fiat Chrysler, said Max
Warburton, an analyst with Sanford C. Bernstein & Co.

Suitable Partners

Volkswagen AG, Ford Motor Co. and General Motors Co. all
fit criteria that Marchionne outlined last year for a suitable
partner, while Mazda Motor Corp. and Suzuki Motor Corp. could be
viable Asian merger candidates, analysts and investors said.
“There’s room for megadeals in the car industry in the
medium term as carmakers will be forced to share development
costs,” said Stefano Aversa, managing director of strategy
consultancy AlixPartners. “No carmaker can sustain the
investment needed alone, not even the biggest ones.”
By announcing the Ferrari spinoff just days after
completing the Fiat-Chrysler merger in October, Marchionne, a
self-proclaimed corporate “fixer,” signaled he may be open to
another deal down the road. With the 62-year-old chief executive
officer planning to stay at the helm to complete a strategic
plan that runs to 2018, he’s still got time to consider a
transaction.
“I’ve always had the view that this industry over the
middle to long term needs to look at other consolidation
opportunities,” Marchionne said in November after speaking at
an event at Fiat’s test track in Balocco, Italy, where the CEO
is known to take his own Ferraris on high-speed jaunts.
“Eventually it must happen.”
The spinoff of Ferrari is part of Fiat Chrysler’s efforts
to raise about $5 billion to cut debt. The company also issued
shares and convertible bonds last month.

Agnelli Stake

The Agnellis invested $886 million in Fiat Chrysler’s
convertible bond offering to maintain their stake and have no
plans to sell. Still, the family would consider a dilution to
facilitate the creation of a bigger group, John Elkann, chairman
of the automaker and descendant of Fiat founder Giovanni
Agnelli, said in a Sept. 30 interview with Marchionne in Balocco
outside of Turin.
A representative for Exor, the Agnelli family’s holding
company, yesterday said there was no change in its position. A
representative for London-based Fiat also declined to comment
further.

Ford Affinities

Marchionne and Elkann said in the Sept. 30 interview that
Fiat Chrysler is now strong enough on its own and didn’t need
another deal. Still, they outlined an ideal partner for the
company. That would be an automaker that’s global and not too
exposed to the European market, while being culturally
compatible with the Italian-American company. That could put
Ford at the top of the wish list.
“Ford has been the North Star for Fiat ever since Fiat’s
founder Giovanni Agnelli visited Detroit in the 1910s,” said
Giuseppe Berta, a professor at Bocconi University and the former
head of Fiat’s archives. “There are distinct affinities between
Fiat and Ford.”
Susan Krusel, a spokeswoman for Dearborn, Michigan-based
Ford, said the $57 billion automaker has “no plan or interest”
other than focusing on its current business plans. Ford isn’t
interested in owning Fiat Chrysler, said a person familiar with
the company’s thinking.

Volkswagen Fit

Other analysts see Volkswagen, with its European roots and
large operations in China, as an easier fit. Even if there has
been public sparring between Marchionne and VW Chairman
Ferdinand Piech, the $99 billion German automaker’s portfolio
ranging from mass-market Skoda compacts to upscale Audi sedans
and Porsche sports cars serves as a model for Fiat Chrysler’s
multibrand strategy. With VW struggling to gain market share in
the U.S., the Chrysler, Dodge and Jeep nameplates could be
appealing, and Piech has long expressed interest in Alfa Romeo.
“VW would be the most likely hypothesis, given VW is
relatively underexposed in North America,” said George
Galliers, an analyst with Evercore ISI in London. “I don’t see
either Ford or GM as buyers.”
In July, Fiat was linked in media reports to mergers or
deals with Volkswagen and France’s PSA Peugeot Citroen. The
Italian carmaker denied at the time that any discussions were
going on. A representative for Wolfsburg, Germany-based
Volkswagen said yesterday that takeovers aren’t on its agenda as
the automaker focuses on improving efficiency internally,
reiterating a company statement from July.
While Fiat Chrysler has emerged as the world’s seventh-
largest automaker after the merger, its appeal to competitors
may be limited. The company lacks sizable operations in growth
markets such as China and India, with its main strength in the
mature and competitive U.S. and European markets.
“Fiat Chrysler is neither attractive nor rich enough to
attract anyone better than a desperate castoff,” said Erik
Gordon, a business professor at the University of Michigan.
“The next conquest won’t be so easy.”

Big Ambitions

Still, Marchionne, who has long professed that only a
handful of big carmakers will survive long term, is pushing for
expansion. He’s set the goal of boosting Fiat Chrysler’s
deliveries by 60 percent to 7 million cars by 2018. The plan is
underpinned by 48 billion euros ($57 billion) of investment to
add more Jeep, Alfa Romeo and Maserati models that could be sold
worldwide. Making progress on that effort would strengthen his
hand in any negotiations.
Fiat Chrysler yesterday said U.S. vehicle sales climbed 20
percent in December, the 57th consecutive month of rising sales
with Marchionne at the helm.
Marchionne, who studied philosophy before getting into
business, has a tendency to think big and set ambitious targets.
Aiming low would be “to establish mediocrity as a
benchmark of the house,” he said in the September interview.
“If you dream of peanuts, you get monkeys.”

For Related News and Information:
Marchionne Rebuilds Fiat-Chrysler at 200 MPH
Fiat Chrysler Spins Off Ferrari in Cash Grab as Debt Surges
Ferrari Spinoff’s Real Winners Are Agnelli Industry Clan
Bloomberg Intelligence, automakers: BI AUTMG <GO>
Top transportation stories: TRNT <GO>
Real M&A columns: NI REALMNA <GO>
Top deal news: DTOP <GO>

--With assistance from Dan Liefgreen in Milan, Craig Trudell in
Tokyo and Keith Naughton in Detroit.

To contact the reporter on this story:
Tommaso Ebhardt in Milan at +39-02-8064-4231 or
tebhardt@bloomberg.net
To contact the editors responsible for this story:
Chris Reiter at +49-30-70010-6226 or
creiter2@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Beth Williams