(Makor) RARe Trading/Special Situations: Smith & Nephew: do not jump - avoid

RARe© Trading/Spesits: Smith & Nephew (SN/ LN)

Do not Jump. Avoid for now

SN/ LN: GBP 11.80

December 24, 2014

Speculation that a takeover of S&N is imminent is resurfacing again.  S&N had been the recurring target of takeover speculations for months, and as before we will argue against such speculations, or at least against a high premium bid. We have been correct for the time being.  Our argument is centered on value.  S&N is simply too expensive, and any acquisition which would involve a premium would be value destructive.  At the current share price, S&N is about as expensive on a relative basis as Covidien in its deal with Medtronic, although S&N’s growth expectations are significantly higher.  A premium for S&N would mean the acquisition to be even more overvalued.  The market is speculating on a 30% premium which we think is totally unrealistic from a value point of view.

FULL REPORT ATTACHED

 

>>> AB Inbev/SABMiller potential merger could trigger Yanjing Brewery SOE reform

AB Inbev/SABMiller potential merger could trigger Yanjing Brewery SOE reform

A merger between AB Inbev [EBR: ABI] and SABMiller [LON: SAB], the world’s two largest brewers, could trigger state-owned enterprise reform within Beijing-based beer company Yanjing Brewery [SHE:000729], according to two bankers and two industry sources.

Talks of consolidation in the beer space has kept the market abuzz, after Heineken [AMS:HEIA] rebuffed an approach from SAB Miller in September, and AB InBev was reported to be speaking to banks about raising USD 122bn to buy SABMiller.

Against this backdrop, it could be time for Yanjing Brewery to revisit approaches from foreign strategics which it has repeatedly received for several years, the bankers and industry sources said. Carlsberg could be interested in a stake in Yanjing, as reported by a local paper in Denmark in 2013.

Beijing SASAC is Yanjing Brewery’s largest shareholder with a more than 50% stake.

Yanjing did not respond to resquests seeking comment.

The potential mega-deal could intensify pressure on Yanjing’s ambition to increase its market share in China, the two industry sources said. Meanwhile, China is pushing forward its state-owned enterprises reform campaign. The confluence of these two could be an incentive for Yanjing to start a strategic review, the four agreed.

Many SOEs like Sinopec, China Communications Facilities Services Corporation and China National Tire & Rubber have embarked on apparent reforms that have often involved the entry of private investors into industries previously dominated by the state.

The top five beer companies in China – China Resources Snow Breweries, Tsingtao Brewery, AB Inbev, Yanjing Brewery and Carlsberg – all have their own strongholds and find it hard to penetrate each others’ territories, the first banker and the first industry source noted. These five dominate the beer industry in China with a combined market share of 80%, according to a local news report citing data from the China Alcoholic Drinks Association (CADA).

Yanjing has a large market share in its home market of Beijing as well as in Guangxi province, according to its annual report. It is also working hard to reinforce its presence in other regions including the provinces of Guangdong, Fujian, Yunnan, Sichuan and Xinjiang Uygur Autonomous Region.

The talked about combination between AB Inbev and SAB Miller could make it even harder for Yanjing to reinforce its presence in these regions, the first banker said.

SABMiller has a 49% stake in China Resources Snow Breweries, and a merger with AB Inbev will give the group 37% market share of China’s brewery sector, according to a previous report by this news service.

It could be hard for Yanjing to sustain sales growth if it only fights on its own, according to the first banker and the two industry sources. Yanjing Brewery reported a 16.16% year-on-year drop in third quarter sales.

The industry sources also noted that China’s beer industry itself is facing a growth crunch. The annual growth of Chinese beer consumption has slowed to single digits, which could worsen even further in the coming years, one of them said.

Yanjing has a market cap of CNY 22.24bn

WSJ : China’s Investigation of Ex-President’s Aide Marks New Phase in War on Cor

China’s Investigation of Ex-President’s Aide Marks New Phase in War on Corruption
Probe Into Ling Jihua Exposes One of Former President Hu Jintao’s Closest Allies

BEIJING—The Chinese Communist Party’s decision to investigate a onetime top aide to former President Hu Jintao has resurfaced old scandals and lifted the cloak that shielded the former leader’s closest allies from scrutiny.

The probe, disclosed late Monday, into whether Ling Jihua committed unspecified violations of party discipline opens a new chapter in President Xi Jinping ’s war on corruption.

As he seeks to uproot graft, Mr. Xi has used the campaign to bolster his own political power. In taking aim at a onetime ally of Mr. Hu, he is making a bet that could spark new discord among party elites, some political scholars said.

“So many people won’t be able to sleep,” said Zhang Lifan, a historian and expert on Chinese politics. “Anticorruption has from start to finish just been a slogan. It is still by nature a struggle for political power.”He added that Messrs. Hu and Xi ultimately were likely in agreement on the decision to put Mr. Ling under investigation.

Investigators in the coal-producing province of Shanxi, where Mr. Ling began his political rise, earlier detained a number of senior local officials including Ling Zhengce, who was later placed under investigation. Chinese media have described the Lings as brothers in a politically powerful familyrooted in Shanxi’s coal country.

In investigating Ling Jihua, the Communist Party is reopening old controversies. Those include the death in 2012 of Mr. Ling’s son in a late-night Ferrari accident on the snowy streets of Beijing. The accident and death of 23-year-old Ling Gu was reported in Chinese media and through social networks before being hushed by government censors. Some media reports from that time began reappearing online in China on Tuesday.

In his first two years as president, Mr. Xi has presented himself as a unifying figure for the Communist Party and the country, in the mold of former leader and reform architect Deng Xiaoping.

He has also used the campaign against corruption to purge potential rivals. This month, the party ousted Zhou Yongkang, China’s former security czar and once a member of the Politburo Standing Committee, the party’s most powerful body. That followed the conviction last year of Bo Xilai, the former leader in the city of Chongqing, once seen as a potential candidate for top party leadership.

Mr. Xi has also tackled elites in the military, bureaucracy and leading state-owned enterprises. On Tuesday, the party ousted Sun Zhaoxue, the former leader of metals giant Aluminum Corp. of China, after accusing him of taking bribes, abusing his post and adultery. The company had no comment, as Mr. Sun is no longer there, a company spokesman said.

The process will likely continue through the next several months and could set the stage for a major conclave of party leaders, the 19th Party Congress, in 2017. At that time, five of the Politburo Standing Committee’s seven members—all except Mr. Xi and Premier Li Keqiang —are due to retire, providing Mr. Xi a chance to populate China’s top leadership body with his allies.

The decision to investigate Mr. Ling underscores the relative political weakness of former President Hu, said Joseph Fewsmith, an expert on Chinese politics at Boston University. Mr. Hu led China from 2002 to 2012, a period of soaring economic growth marked by rising corruption in government and business. The party had also been split by leaders’ decision to purge Mr. Bo, a popular and rising official, from their ranks.

At the height of his influence, Mr. Ling was in charge of the General Office of the party’s Central Committee. In that position, he was perhaps Mr. Hu’s closest aide, responsible for managing day-to-day affairs of top leaders. Mr. Ling was widely viewed as a strong candidate for promotion to the party’s Politburo, its roughly 25 top leaders, ahead of a once-a-decade party leadership transition in 2012.

The death of Mr. Ling’s son while driving a Ferrari—a trenchant symbol of official excess—emboldened opponents of Mr. Hu and complicated discussions of Mr. Bo’s fate.

Though questions over Mr. Ling’s future have long swirled in Chinese political circles, his fate remained unclear as recently as last week. Writing in a prominent party-theory magazine, Seeking Truth, Mr. Ling praised Mr. Xi’s leadership in an essay on ethnic unity in China. His essay has since been deleted from the magazine’s website.

>>> Walgreens expects to complete acquisition of Alliance Boots ahead of schedul

Walgreens expects to complete acquisition of Alliance Boots ahead of schedule on 31 December

Walgreens, a listed Deerfield, Illinois-based pharmacy chain, has said it expects to complete its acquisition of the European chemist chain Alliance Boots on 31 December. Walgreens announced on 6 August that it would acquire the remaining shares it did not own in Alliance Boots and that it expected the deal to be completed in 1Q15.

The relevant extract from Walgreens 1Q15 financial results, published on 23 December, follows:

Special Shareholder Meeting

Walgreens will hold a special meeting of shareholders on Dec. 29 in New York City. This follows the announcement made on Aug. 6 when the company exercised its option to complete the second step of its strategic transaction with Alliance Boots.

At the special meeting, Walgreens shareholders will be asked to consider and vote upon the following items, among others:

A holding company reorganization to establish Walgreens Boots Alliance, Inc. as the new publicly-traded holding company of the new combined enterprise; and the issuance of Walgreens Boots Alliance shares necessary to complete Step 2 of the strategic transaction.

Subject to shareholder approval, the company expects to close the second step of the Alliance Boots transaction on Dec. 31.

(BFW) HeidelbergCement to Sell Hanson Building Products Unit for $1.4b

DBF 12/24 08:13 DGAP-Adhoc: HeidelbergCement to sell its North American and UK Building Products Business
BN 12/24 08:20 *HEIDELBERGCEMENT WILL USE PROCEEDS TO CUT FINANCIAL DEBTS
BN 12/24 08:19 *HEIDELBERGCEMENT SELLS HANSON BUILDING PRODUCTS UNIT FOR $1.4B
BN 12/24 08:17 *HEIDELBERGCEMENT: UP TO $100M WILL BE PAYABLE IN '16
BN 12/24 08:17 *HEIDELBERGCEMENT: AGREEMENT W/ LONE STAR FUNDS AFFILIATE
BFW 12/24 08:16 *HEIDELBERGCEMENT TO SELL N.A., UK BUILDING PRODUCTS FOR $1.4B
BN 12/24 08:16 *HEIDELBERGCEMENT TO SELL OPS FOR AGGREGATE PRICE OF $1.4B
BN 12/24 08:15 *HEIDELBERGCEMENT: AGGREGATE PURCHASE PRICE OF $1.4B
BN 12/24 08:15 *HEIDELBERGCEMENT TO SELL NORTH AMERICAN AND UK BUILDING OPS
BN 12/24 08:13 * HEIDELBERGCEMENT TO SELL NORTH AMERICAN, UK BUILDING PRODUCTS
HeidelbergCement to Sell Hanson Building Products Unit for $1.4b
2014-12-24 08:23:06.636 GMT


By James Ludden
(Bloomberg) -- HeidelbergCement selling North American,
U.K. building products unit to Lone Star Funds.
* Up to $100m payable in 2016
* Expects completion in 1Q
* NOTE: Reuters reported sale talks yesterday; easier to
dispose of sell unit than carry out IPO; Lone Star was
competing against other PE firms

Link to Statement:Link

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

To contact the reporter on this story:
James Ludden in London at +44-20-7673-2645 or
jludden@bloomberg.net
To contact the editors responsible for this story:
Andrew Rummer at +44-20-7073-3722 or
arummer@bloomberg.net
James Ludden

>>> What to look at today - 24th of December 2014

US Market closed higher with Dow crossing above the 18,000 mark...US GDP was a good catalyst for the mkt, energy ended in the lead with Crude trading higher, materials was also not far tfrom the lead (+0.8%), Consumer discretionary (+0.6%) and financials (+0.6%) enjoyed broad support while the technology sector (+0.3%) (GOOGL, INTC & MSFT Higher but AAPL Lower)..KO +1.5% after WSJ news on job cut...volume were below average @ 700mil shares...VIX @14.80 -2.95%...US After Hours CALM -7.6% CAMP -4.2% on earnings...China is still in Profit taking mode, breaking the 3,000 psychological mark, Financials are again under pressure following CBRC report that November-end non-performing loan ratio rose another 15bps to 1.31%. Brokers were also heavily sold on press reports indicating that some firms have raised margin thresholds on concerns over rising volatility...Nikkei225 returned from holiday break with a catch-up rally, Fin Min Aso reiterated the govt will proceed with Abenomics policies, but also added the upcoming budget needs to be mindful of Japan's fiscal target. Automakers Nissan, Mitsubishi, and Honda reported double-digit y/y declines in domestic output, reflecting the high base-effect of strong demand last year going into the April sales tax hike. Separately, local press also reported that Honda's domestic production would fall short of the company's target by about 15%...Nikkei +1.24% Hang Seng +0.07% Shanghai -1.86%

RUB $54.47 RUB €66.22 WTI $56.77 Brent $61.30

Eur$ 1.2175 S&P +0.06% EuroStoxx / Dax Closed SMI Closed

Macro :
- Moody’s May Cut 45 Russian Corps; Sees 2015 GDP Contracting 5.5%
- Russia May Be Cut to Junk by S&P

Keep an eye on :
- AERL ID : IAG rumoured to be discussing revised offer for Aer Lingus - FT
- BMPS IM : Monte Paschi Settles Tax Dispute With Authority for EU126M
- BP/ LN : BP Agrees to Buy Stake in Rosneft’s Siberian Project: Kommersant
- HEI GY : HeidelbergCement Said in Talks to Sell Unit: Reuters
- LG FP : Lafarge, Holcim Select Executive Committee for Enlarged Company
- MVC SM : Bankia Sells 19.07% Stake in Metrovacesa to Banco Santander
- NOVOB DC : Novo Nordisk Wins FDA Approval for Saxenda to Treat Obesity
- PTC PL : Portugal Telecom suitor Isabel dos Santos withdraws EUR 1.21bn offer
- REC BB : Recticel Sees 2014 Combined Rebitda Down About 12% From 2013
- SAN SM : Santander Presented Expression of Interest for Novo Banco
- SIK VX : Ethos rallied 11 pension funds to oppose the acquisition of Sika - Le Temps {http://bit.ly/13DpQj7}
- SN/ LN : Stryker Said to Plan Smith & Nephew Takeover Bid Within Weeks
- SYNN VX : China Allows Syngenta GMO Corn Imports From Argentina: Reuters
- MF FP : Wendel Agreeds to Buy Majority Stake in Constantia Flexibles