Yum! Brands (NYSE:YUM) printed less-than-desirable operating update last night ahead of its 11 December investor day. 2014 EPS growth is now expected in the positive mid-single digits, versus 9% consensus, and China sales are recovering, but at a slower pace than expected. That news has shares of the Louisville, Kentucky-based fast food operator down around 4.5% pre-market. Not including last night’s fall, YUM’s stock is down roughly 0.5% year-to-date versus a broader market that is up 11.5% over that period. That begs the question whether YUM could find itself on an activist’s menu. Fast food peer McDonald’s (NYSE:MCD) has already been speculated as a possible target following a series of disappointing sales reports in 2014. Shares of the golden arched company have fallen over 5% in the past two days after a disappointing November same-store-sales report before Monday’s open. And one could argue YUM has an even more compelling agenda for a possible agitator than its supersized peer. YUM has been asked numerous times about separating its China business—most recently on its 3Q14 earnings call in October. Weakness in China was behind last night’s lower than expected 2014 EPS growth—with full year same-store sales for the division in the negative mid-single digits. With the company’s once all-powerful growth engine sputtering, the spin question could become even more prevalent. Of course, the flip side may be that YUM’s China operations need to get back on track before a separation becomes truly feasible. YUM’s nomination deadline for the 2015 AGM is 31 January.
A way for Europe {http://bit.ly/1wAYqI3}
The situation in the euro-zone is very bad. Italy exceeds the still valid sixty-percent limit for the debt ratio by more than a trillion euros in France around about 660 billion euros. But the governments of these two most indebted countries in terms of volume refuse to undergo a rigorous austerity, and the citizens are opposed to reforms that could change anything about stagnation. Also in European politics is no solution in sight.
Inflation is also not the debtors to help. Is stably held the position since 2012 by the ECB, which until now gives the impression that she wants to confront doubts about the solvency of individual states and can boldly. But the legal uncertainty about the future of this policy raises doubts.
In this seemingly hopeless situation, one wonders why the risk premia in the euro zone have not been cut to length increases again. The usual answer to this question is not reassuring: Some market participants appear to be relying on a broad quantitative easing (QE) - that would be the proportional purchase of government bonds from all countries of the euro zone - to be quite safe replacement for controversial selective purchases of government bonds (OMT) , QE, it is claimed, is part of the common monetary policy, as well as in Japan or the United States.
Unauthorised public finance?
As a substitute for the OMT program QE would not convince. From a purely technical stieße a bond purchase, was based on the ECB capital share of the member countries, limits if the scarce amount of the investment-grade bonds puts the purchases of bonds with low credit limits.
When a purchase is proportional to the amount of outstanding debt, the limits were sometimes significantly higher. But then countries could unsound fiscal policies continue under the protection of a long-term and large-scale program. In view of the current political resistance to consolidation the suspicion could an unlawful State funding for such a program. The next argument before the Federal Constitutional Court would be programmed - open-ended.
In conjunction with the new supervisory tasks of the ECB, a QE program act problematic. It would be about desirable that the ECB orders in its role as overseer to reduce the concentration of national government bonds from banks. This would reduce the losses of these banks when these plants were losing by government debt cuts in value.
Threatens lawsuit before the Constitutional
Would get the banks to sell too little time, but it would probably mean excess bonds sell at a loss or insure. Would the ECB at the same time as the central bank as part of a QE particularly those government bonds, would be tantamount to prescribed risk-taking of banks by the ECB same. The "firewall" between banking supervision and monetary policy would then act like a rather tight-sized fig leaf.
Also the ABS program of the ECB raises legal questions: How is it - without a political role of the ECB admit - to justify that securitized private loans from Greece and Cyprus are acquired with different terms than those from other countries?
A fairly safe solution to the euro crisis can not be tolerated in a permanent political overstretching of the mandate of the ECB, via the permanent threat hovers as an action before the Federal Constitutional Court.
Time is running out
Are there alternatives? A resolution of the currency area would provide important economic and legal uncertainty on how to deal with conversion losses with them. But uncertainty about the allocation of losses is the breeding ground of crises. That's why the permanent unity of the European currency area is so important.
The best way out would continue in the fact that Europe agrees on national reforms in exchange for financial freedom. If this does not happen, you have to make friends with another idea: A haircut in Italy could relieve the euro zone as a whole. The time for a better solution is running out.
Asian Update: RBNZ retains tightening bias; Australia unemployment hits 12-year highs; BOK on hold for 2nd month
***Economic Data***
- (AU) AUSTRALIA NOV EMPLOYMENT CHANGE: +42.7K (9-month high) V +15KE; UNEMPLOYMENT RATE: 6.3% (12-year high) V 6.3%E; PARTICIPATION RATE 64.7% (4-month high) V 64.6%E
- (AU) AUSTRALIA DEC CONSUMER INFLATION EXPECTATION: 3.4% V 4.1% PRIOR; matches 4-month low
- (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE UNCHANGED AT 3.50%, AS EXPECTED
- (NZ) NEW ZEALAND NOV FOOD PRICES M/M: -0.5% V 0.0% PRIOR
- (CN) China Ministry of Finance (MoF): China Nov Fiscal Rev CNY995B, +9.7% y/y, Fiscal Spending CNY1.28T, +0.8% y/y
- (JP) JAPAN OCT TERTIARY INDUSTRY INDEX M/M: -0.2% V -0.2%E
- (JP) JAPAN OCT MACHINE ORDERS M/M: -6.4% (first decline in 5 months) V -1.7%E; Y/Y: -4.9% (largest decline in 5 months) V -0.3%E
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE AT 2.00% (AS EXPECTED)
- (UK) UK NOV RICS HOUSE PRICE BALANCE: 13% V 15%E
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -1.1%, S&P/ASX -0.5%, Kospi -0.8%, Shanghai Composite -0.6%, Hang Seng -1.2%, Dec S&P500 +0.2% at 2,029
***Commodities/Fixed Income***
- Feb gold +0.1% at $1,230, Jan crude oil +1.0% at $61.52/brl, Mar copper -0.5% at $2.91/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 3.0 tonnes to 724.8 tonnes; Highest level since Nov 10th
- SLV: iShares Silver Trust ETF daily holdings fall to 10,646 tonnes from 10,737 tonnes prior (lowest since Sept 22nd)
- (US) Yield on the US 10-yr note falls to 2.17% at the close, Lowest close since Oct 16th; Yield on the 30-year at 2.84%; Lowest close since May 2013
- (CN) PBoC won't conduct open market operations (OMO) in today's session (5th consecutive halt); Injects net CNY5B this week v injected CNY30B prior (4th consecutive injection, smallest injection in 4 weeks)
- USD/CNY: (CN) PBoC sets yuan mid point 6.1153 v 6.1195 prior setting (strongest Yuan setting since Feb 20th)
- (JP) Japan investors sold net ¥852.2B in foreign bonds v bought ¥3.4B in prior week; Foreign investors bought net ¥481.9B in Japan stocks v sold ¥53.0B in prior week
***Market Focal Points/Key Themes/FX***
- Asian indices echoed another pummeling in the US markets where year-end profit taking has taken stocks down for the 3rd straight day. Safe-haven US bonds are firmly bid amid political uncertainty in Greece, slowdown in China, and looming FOMC meeting next week, with the yield on the US 10-yr at 2-month lows and 30-yr at 20-month lows. Tracking lower US yields, USD/JPY fell below 117.50 - a 2-week low.
- Reserve Bank of New Zealand was on hold at 3.50% as expected, also lowering its 90-day bill rate from prior forecasts by 10bps at 2014-end, 30bps at 2015-end, and 40bps at 2016-end. RBNZ reiterated the high exchange rate still restrains growth in the traded sectors and yet to adjust materially to the lower commodity prices, but also added that "some further policy tightening will be necessary to keep future average inflation near the 2% target mid-point and ensure that the economic expansion can be sustained." NZD/USD spiked up about 150pips on that statement component, as investors anticipated a decidedly neutral bias from the RBNZ due to recent pressure in dairy prices and lower inflation expectations. Speaking after the policy announcement, Gov Wheeler clarified the RBNZ would be on hold for a long time, expressing surprise the markets interpreted the statement as a tightening signal.
- AUD/USD traded up over 30pips as high as $0.8370 after Australia employment change came in at nearly triple the estimates. Those gains were quickly reversed however, with most of the job creation registered in the part-time space. Moreover, unemployment rate hit a 12-year high of 6.3%, even though participation rate rose to a 4-month high.
- Hong Kong authorities moved to clear out the Occupy Central sites after giving protesters ample warning to vacate the areas. Some 7K police officers were deployed, and initial reports indicate the clearing has far been peaceful. On the mainland, China Securities Regulatory Commission (CSRC) said it plans to inspect margin trading leverage issues for brokers next week due to outsized volatility in the A-shares over the past week. Separately, a press report indicated PBoC has been easing lending conditions, targeting 2014 Yuan loans to hit CNY10T v CNY8.9T reached in 2013.
- KRW hit a 3-week high against USD at KRW1,095 before paring its advance after a dovish Bank of Korea policy statement. BOK kept rates on hold at 2.00% in a unanimous decision as widely expected, but also added inflation would stay low for considerable period, 2015 GDP would struggle meeting a 3.9% target, and recovery of consumption has been inadequate.
***Equities***
US markets:
- HBOS: Announces definitive merger agreement with Renasant Corp, values company at approx $27.00/shr; +7.4% afterhours
- RH: Reports Q3 $0.49 v $0.47e, R$485M v $482Me; +6.7% afterhours
- CNX: Intends to Pursue the Initial Public Offerings of a Thermal Coal MLP and Metallurgical Coal Subsidiary; approves $250M buyback program (3% of market cap); +3.0% afterhours
- CASY: Reports Q2 $1.28 v $1.09e, R$2.15B v $2.20Be; +1.9% afterhours
- EBAY: Said to be considering cuts of as many as 3K jobs in 2015 (about 10% of total workforce), mainly in the Marketplace division - financial press; +0.2% afterhours
- MW: Reports Q3 $0.83 v $0.87e, R$890.6M v $909Me; -0.2% afterhours
- LAKE: Reports Q3 -$0.42 v -$0.31 y/y, R$25M v $22.8M y/y; -8.6% afterhours
- LC: Prices IPO at $15/shr vs. $12-14 expected range; to trade on NYSE
- RDN: Said to be close to selling its financial guaranty business to Assured Guaranty Ltd for about $800M - financial press
- SPLS: Starboard Value said to take approx 6% stake valued around $550M - financial press
Notable movers by sector:
- Consumer Discretionary: Belle International Holdings 1880.HK -1.1% (Q3 sales result)
- Financials: Poly Property Group 119.HK -2.3% (Nov sales result); China Merchants Bank 600036.CN +1.1% (Anbang Insurance raises stake)
- Energy: Origin Energy ORG.AU -1.9%, Santos STO.AU -5.6%, Sundance Energy SEA.AU -7.2% (WTI crude lower); Caltex Australia CTX.AU +3.1% (FY14 guidance); China Oilfield Services 2883.HK -5.7% (FY15 guidance)
- Industrials: China State Construction 3311.HK +1.6% (Nov new contracts result)
- Utilities: CGN Power 1816.HK +7.3% (momentum on IPO debut)
Starboard Value Takes Roughly 6% Stake in Staples
Investor Also Boosts Stake in Office Depot, Moves That Could Increase Pressure for Combination
Starboard Value has built a roughly 6% stake in Staples and increased its position in Office Depot. ENLARGE
Starboard Value has built a roughly 6% stake in Staples and increased its position in Office Depot. GETTY IMAGES
Starboard Value LP has built a roughly 6% stake in Staples Inc. and boosted its position in Office Depot Inc. to about 10%, said people familiar with the matter, moves that could raise pressure for a combination of the office-supply retailers.
Staples has a market capitalization of $9.2 billion, valuing the activist investor’s stake in the Framingham, Mass., company at about $550 million. Starboard had an about 8.6% stake in Office Depot, which is based in Boca Raton, Fla., and has a market value of about $3.5 billion.
In its filings disclosing the stakes, Starboard isn’t expected to spell out any changes it might seek. But the industry has long been under pressure to consolidate to better compete with rivals such as Amazon.com Inc., Wal-Mart Stores Inc. and Target Corp. that offer broad selections of products including office supplies at discounted prices.
Starboard led a fight last year to get on the board of Office Depot, where its co-founder and chief executive, Jeffrey Smith, shown at a conference in Las Vegas in May, sat until he resigned in September. ENLARGE
Starboard led a fight last year to get on the board of Office Depot, where its co-founder and chief executive, Jeffrey Smith, shown at a conference in Las Vegas in May, sat until he resigned in September. REUTERS
To be sure, any combination could draw scrutiny from antitrust regulators because Office Depot and Staples are the last remaining major retailers specializing in office supplies.
In 1997, the Federal Trade Commission won a court ruling blocking an attempt by Staples to combine with Office Depot. But in November 2013, in a sign of how new competitors had altered the industry’s landscape, the FTC let Office Depot merge with OfficeMax Inc. without forcing them to shed any stores.
Amid the fierce competition, Staples’ sales have fallen this year, and the company has been closing stores as it looks to cut costs. It has also moved to expand its offerings and push aggressively into online retailing.
Office Depot’s results in the third quarter, disclosed last month, topped Wall Street expectations and it increased its forecast for the year. The company also has been shutting stores and reducing costs as it integrates OfficeMax.
A report from Credit Suisse analysts in September said the chains still have a combined 3,000 locations, twice as many as the analysts considered warranted. The report, which suggested a deal between Staples and Office Depot could lead to more than $1.4 billion in annual cost savings by 2017— equal to the bank’s estimate for the combined company’s profits that year—sent both stocks climbing sharply, in a signal that investors believe in and applaud the possibility. Staples shares gained 8% the day of the report, and Office Depot rose 6%.
Staples shares are down about 7% on the year, while Office Depot’s are up 27%.
The Credit Suisse analysts said they believe regulators would consider a broader set of competitors than just the office-supply stores in reviewing such a proposed merger, pointing to the FTC’s approval of the Office Depot-OfficeMax deal.
In its November 2013 report on the Office Depot-OfficeMax merger, the FTC said the “current competitive dynamics are very different” from those in place when it blocked Staples and Office Depot from combining 16 years earlier. The regulator said consumers are less likely to turn to an office-supply store than another retailer selling a wider variety of wares. It specifically pointed to the impact of Amazon’s emergence on the industry.
Starboard isn’t a stranger to the office-supply world and those dynamics. Last year the New York hedge fund fought for board representation at Office Depot.
Starboard disclosed its position in Office Depot in September 2012 and began pushing for cost cuts and the sale of the company’s stake in a Mexican joint-venture.
In early 2013, Office Depot struck a deal with OfficeMax, billed as a merger of equals that would help the combined company compete better with Staples.
In a rare move for an activist, Starboard continued its proxy fight for board seats even as it supported the deal. The fund said its arguments would still be relevant at the combined company, whose leadership was still an open question.
The sides eventually settled the proxy fight, with Starboard getting three of 11 board seats. One of them was taken by the fund’s founder and chief executive, Jeffrey Smith, who also served on the combined company’s board until he resigned in September.
Starboard has been busy lately. It is currently pushing for a deal between tech-industry veterans Yahoo Inc. and AOL Inc., another set of competitors it owns shares in and that it believes could compete better together.
This year it also won attention for its campaign against Darden Restaurants Inc., the owner of Olive Garden and otherchains, in which it spent months fighting with the company over issues including its pasta-making decisions. In September, shareholders voted out all 12 Darden directors, replacing them with a board led by Mr. Smith.
Talisman Sale May Be Holders’ Best Exit After Oil Rout: Real M&A
2014-12-11 02:07:54.961 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Brooke Sutherland and Rebecca Penty
Dec. 11 (Bloomberg) -- For Talisman Energy Inc. investors,
a sale at depressed prices may be more worthwhile than waiting
out the rout in oil.
Repsol SA, which took a look at Talisman earlier this year,
is sniffing around again after the plunge in crude prices drove
the Canadian explorer’s stock below C$5 for the first time in 14
years. Talisman said it has also had talks with other parties.
Suitors could offer C$8 a share, based on the average premium in
recent oil deals.
A deal in that price range would leave many shareholders,
including billionaire Carl Icahn who disclosed a stake last
October, with a loss on their investment. A quick exit and a
chance to recoup whatever money they can might be preferable to
continuing to own a stock that analysts predict may not reach in
a year’s time what shareholders could get today in a sale.
“Talisman shareholders are ready for anything -- it’s been
a torturous process,” Chris Feltin, a Calgary-based analyst at
Macquarie Group Ltd., said in a phone interview. “Any movement
on any deal in terms of bringing cash into the company to try to
stop the bleeding would be viewed positively.”
Brent Anderson, a spokesman for Calgary-based Talisman,
declined to comment. Representatives for Madrid-based Repsol
didn’t respond to requests for comment.
Bad Year
Talisman’s stock has plunged 65 percent this year as oil
slumped and the company failed to find the buyers needed to make
inroads in an asset-divestiture plan designed to shore up its
balance sheet. It’s now valued at about C$4.5 billion ($3.9
billion), compared with more than C$20 billion as recently as
2011.
“The equity is a quarter of what it was,” Chris Cox, a
Calgary-based analyst at Raymond James Financial Inc., said in a
phone interview. “This period of low oil prices kind of forces
the decision of the board and management a little more because
now your debt overhang becomes all that much more significant.
It necessitates a quicker action.”
Buyers are aware of that, and the drop in Talisman’s share
price may facilitate a deal. After abandoning a plan to acquire
Talisman earlier this year, Repsol has now revived talks about a
deal for some or all of the explorer’s assets, people familiar
with the matter said this week.
Better Prospects
Part of Repsol’s hangup had been its struggle to line up
buyers for the Talisman assets it wasn’t interested in owning,
people have said, asking not to be identified discussing private
information. Talisman’s plunging valuation and the prospect of a
cheaper deal may make the Spanish company more willing to take
on those less desirable projects itself.
“We’re getting to a level where a transaction makes more
sense from a valuation perspective, from a buyer’s standpoint,”
Feltin of Macquarie said.
Similar-sized targets in oil exploration have commanded an
average premium of about 38 percent in the last three years,
according to data compiled by Bloomberg. For Talisman, that
would be the equivalent of about C$8 a share, based on the
stock’s price during the past 20 days.
A sale lets investors take their gains now and avoid
whatever volatile ride the crude market has in store for them.
Analysts on average expect the stock to trade at C$8.43 a year
from now, according to data compiled by Bloomberg. Those who
refreshed their estimates this month are projecting the stock
won’t top C$8, the data show.
“Shareholders, if they’ve been in the stock for any length
of time, they’ve suffered a lot of pain,” said Lanny Pendill, a
St. Louis-based analyst at Edward Jones & Co. It seems like
Talisman has “been looking to sell the company for over a year
now.”
Holding Out
Not all shareholders are going to support a sale with oil
at a five-year low. Icahn in particular may argue for holding
out for a better price -- especially a higher one than where he
bought the shares, said Laura Lau, a fund manager who oversees
more than C$1 billion at Brompton Group in Toronto.
Talisman shares traded at about C$13 when Icahn disclosed a
stake and said he may talk with management about strategic
alternatives. The stock closed yesterday at C$4.37 and earlier
this week touched its lowest level since 2000.
“I wouldn’t be surprised if he protested even a 100
percent premium today,” Lau said. “Do you really want to sell
at the bottom of the market?”
Shareholders would probably be willing to accept a price
closer to C$10 a share, said David Neuhauser, a fund manager at
Talisman shareholder Livermore Partners.
Struggling Assets
Repsol may also still be wary of taking on Talisman’s
struggling North Sea assets, said David Meats, a Chicago-based
analyst at Morningstar Inc.
If it can’t find a buyer for the whole company at a
reasonable price, Talisman may turn to larger asset sales. It
also has the option of reducing spending or lowering its
dividend, said Pendill of Edward Jones.
Doing nothing may not sit well with its suffering
shareholders, and just provides more openings for buyers.
“Today’s stock price is discounting tremendously not only
the assets but also the future cash flow generation of the
assets that aren’t producing today,” Neuhauser of Livermore
said. Buyers will look at that “very opportunistically.”
For Related News and Information:
Repsol Said to Revive Talks With Talisman Over Possible Deal
Oil Price Collapse Enables Buyers to Grab Top Targets: Real M&A
Talisman Deal News: TLM CN <EQUITY> TCNI MNA <GO>
Bloomberg Intelligence -- Crude Oil and Gas E&P: BI EXPR <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Rebecca Penty in Calgary at +1-587-702-3025 or
rpenty@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2014-12-11 02:07:54.961 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Brooke Sutherland and Rebecca Penty
Dec. 11 (Bloomberg) -- For Talisman Energy Inc. investors,
a sale at depressed prices may be more worthwhile than waiting
out the rout in oil.
Repsol SA, which took a look at Talisman earlier this year,
is sniffing around again after the plunge in crude prices drove
the Canadian explorer’s stock below C$5 for the first time in 14
years. Talisman said it has also had talks with other parties.
Suitors could offer C$8 a share, based on the average premium in
recent oil deals.
A deal in that price range would leave many shareholders,
including billionaire Carl Icahn who disclosed a stake last
October, with a loss on their investment. A quick exit and a
chance to recoup whatever money they can might be preferable to
continuing to own a stock that analysts predict may not reach in
a year’s time what shareholders could get today in a sale.
“Talisman shareholders are ready for anything -- it’s been
a torturous process,” Chris Feltin, a Calgary-based analyst at
Macquarie Group Ltd., said in a phone interview. “Any movement
on any deal in terms of bringing cash into the company to try to
stop the bleeding would be viewed positively.”
Brent Anderson, a spokesman for Calgary-based Talisman,
declined to comment. Representatives for Madrid-based Repsol
didn’t respond to requests for comment.
Bad Year
Talisman’s stock has plunged 65 percent this year as oil
slumped and the company failed to find the buyers needed to make
inroads in an asset-divestiture plan designed to shore up its
balance sheet. It’s now valued at about C$4.5 billion ($3.9
billion), compared with more than C$20 billion as recently as
2011.
“The equity is a quarter of what it was,” Chris Cox, a
Calgary-based analyst at Raymond James Financial Inc., said in a
phone interview. “This period of low oil prices kind of forces
the decision of the board and management a little more because
now your debt overhang becomes all that much more significant.
It necessitates a quicker action.”
Buyers are aware of that, and the drop in Talisman’s share
price may facilitate a deal. After abandoning a plan to acquire
Talisman earlier this year, Repsol has now revived talks about a
deal for some or all of the explorer’s assets, people familiar
with the matter said this week.
Better Prospects
Part of Repsol’s hangup had been its struggle to line up
buyers for the Talisman assets it wasn’t interested in owning,
people have said, asking not to be identified discussing private
information. Talisman’s plunging valuation and the prospect of a
cheaper deal may make the Spanish company more willing to take
on those less desirable projects itself.
“We’re getting to a level where a transaction makes more
sense from a valuation perspective, from a buyer’s standpoint,”
Feltin of Macquarie said.
Similar-sized targets in oil exploration have commanded an
average premium of about 38 percent in the last three years,
according to data compiled by Bloomberg. For Talisman, that
would be the equivalent of about C$8 a share, based on the
stock’s price during the past 20 days.
A sale lets investors take their gains now and avoid
whatever volatile ride the crude market has in store for them.
Analysts on average expect the stock to trade at C$8.43 a year
from now, according to data compiled by Bloomberg. Those who
refreshed their estimates this month are projecting the stock
won’t top C$8, the data show.
“Shareholders, if they’ve been in the stock for any length
of time, they’ve suffered a lot of pain,” said Lanny Pendill, a
St. Louis-based analyst at Edward Jones & Co. It seems like
Talisman has “been looking to sell the company for over a year
now.”
Holding Out
Not all shareholders are going to support a sale with oil
at a five-year low. Icahn in particular may argue for holding
out for a better price -- especially a higher one than where he
bought the shares, said Laura Lau, a fund manager who oversees
more than C$1 billion at Brompton Group in Toronto.
Talisman shares traded at about C$13 when Icahn disclosed a
stake and said he may talk with management about strategic
alternatives. The stock closed yesterday at C$4.37 and earlier
this week touched its lowest level since 2000.
“I wouldn’t be surprised if he protested even a 100
percent premium today,” Lau said. “Do you really want to sell
at the bottom of the market?”
Shareholders would probably be willing to accept a price
closer to C$10 a share, said David Neuhauser, a fund manager at
Talisman shareholder Livermore Partners.
Struggling Assets
Repsol may also still be wary of taking on Talisman’s
struggling North Sea assets, said David Meats, a Chicago-based
analyst at Morningstar Inc.
If it can’t find a buyer for the whole company at a
reasonable price, Talisman may turn to larger asset sales. It
also has the option of reducing spending or lowering its
dividend, said Pendill of Edward Jones.
Doing nothing may not sit well with its suffering
shareholders, and just provides more openings for buyers.
“Today’s stock price is discounting tremendously not only
the assets but also the future cash flow generation of the
assets that aren’t producing today,” Neuhauser of Livermore
said. Buyers will look at that “very opportunistically.”
For Related News and Information:
Repsol Said to Revive Talks With Talisman Over Possible Deal
Oil Price Collapse Enables Buyers to Grab Top Targets: Real M&A
Talisman Deal News: TLM CN <EQUITY> TCNI MNA <GO>
Bloomberg Intelligence -- Crude Oil and Gas E&P: BI EXPR <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Rebecca Penty in Calgary at +1-587-702-3025 or
rpenty@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
After Hours Summary: RH +6.8%, CTVI +3.9%, URBN +2.9%, WTSL -39.1%, LAKE -8.3%, MW -0.3% following earnings/guidance
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: RH +6.8%, CTVI +3.9%, URBN +2.9%, CASY +1.9%, GEF +1.4%, ATHN +0.6%, CENT +0.3%, PDLI +0.1%
Companies trading higher in after hours in reaction to news: NVEE +8.3% (awarded $2 mln contract by San Diego County Regional Airport Authority to provide as-needed surveying services), SM +2.8% (co and its bank group have agreed to amend its senior secured revolving credit facility), CNX +1.7% (announced it will pursue the formation of an MLP for its thermal coal business with an IPO expected in mid-2015; co also announces it will pursue IPO spin-off for 20% of its met coal properties in 2H15; co also announced a $250 mln share repurchase program), WAG +1.7% (President and CEO Greg Wasson announced he will retire following completion of merger with Alliance Boots; Stefano Pessina to serve as acting CEO, pending board search for successor),
After Hours Losers:
Companies trading lower in after hours in reaction to earnings: WTSL -39.1%, LAKE -8.3%, OXM -4.5%, SURG -2.1%, MW -0.3%
Companies trading lower in after hours in reaction to news: WTSL -39.1% (co announced it will need to rais additional capital; co also reported earnings), GBSN -8.7% (announced it has initiated a clinical trial for its sample-to-result Staph ID/R diagnostic test), HDS -2.9% (announced sale of ~40.66 mln shares of common stock by stockholders, including investment funds associated with The Carlyle Group (CG) and Clayton Dubilier & Rice and THD Holdings), NLSN -1.9% (announced offering of 20 mln shares of common stock by selling stockholders), BURL -1.4% (announced that affiliates of Bain Capital Partners and certain other stockholders intend to offer 8 mln shares of common stock in an underwritten public offering), MFRM -1.1% (announced that it has commenced an underwritten public offering of 2,185,130 shares of its common stock by certain selling stockholders)
US stock volumes match October sell-off
The two month stretch of calm in US stock markets is fraying.
Volatility soared on Wednesday as sliding energy stocks left the S&P 500 nursing its steepest one-day decline in almost two months.
The S&P 500 slid 1.6 per cent to 2,032.23, under the weight of oil and gas drillers. Twelve stocks fell on the index for every one that rose.
The technology-heavy Nasdaq Composite fell 1.7 per cent to 4,683.34 while the Russell 2000, the US small-cap home, slipped 1.8 per cent to 1,166.75.
Energy stocks followed the oil price lower. Crude fell after a report from a US government agency showed comfortable stockpiles of oil in the US. Earlier in the day, the oil cartel Opec lowered its forecast for 2015 demand.
Brent, the international oil benchmark, dropped 3 per cent to $64.61 following the report, while West Texas Intermediate, the US oil standard, slid 4 per cent to $61.36.
Those declines added to the pressure on the S&P 500 energy index which slumped 4 per cent to take its decline this year to 15 per cent.
The CBOE's VIX volatility index, which measures the expected change in the S&P 500 over the coming month, hit its highest level since mid-October, when the benchmark index came within a hair of a technical correction of 10 per cent.
Airlines proved a rare point of strength, rallying on the crude price drop. The industry's fuel bill could be cut by $10bn if jet fuel prices remain near current levels, analysts with Barclays note.
More than 7.3bn shares traded hands on the New York Stock Exchange, Nasdaq and NYSE MKT, 13 per cent above the trailing 30-day average.
Wednesday marked the first day volumes had eclipsed 7bn on the three exchanges for three consecutive days since volatility cooled at the end of October.
Dec 10 (Reuters) - A group of telecommunications companies led by Oi SA looking to break up a rival in Brazil are still negotiating with each other and no bid for the target is imminent, a source with knowledge of the situation said on Wednesday.
The source said Brazil's biggest fixed-line company, Oi , Telefonica SA of Spain and Mexico's America Movil SAB are still discussing how to buy and split up TIM Participações SA.
No bid price has been set, although in principle the group agreed in late October to pay at least 32 billion reais ($12.3 billion), said the source, who requested anonymity because the talks are private.
Bloomberg News reported earlier on Wednesday that the consortium is poised to bid $15 billion for TIM, or about 40 billion reais, which would value the country's No.2 wireless carrier after Telefonica Brasil SA at 7.5 times annual operational income.
The report, which cited an unnamed source, said the group would be willing to pay a 40 percent premium over TIM's current market value.
Oi, Telefonica and America Movil declined to comment immediately on the report.
Telecom Italia SpA, which owns 67 percent of TIM, and Grupo BTG Pactual SA, which is acting on Oi's behalf on the deal, also declined to comment.
Oi has asked BTG Pactual to act as "merchant commissioner," creating the kind of special investment vehicle that has been used in the past to break up companies among multiple buyers.
Closing Market Summary: Energy Sector Leads Stocks Lower
The major averages ended the Wednesday session on a broadly lower note. The S&P 500 lost 1.6% with all ten sectors ending in the red while the Russell 2000 (-2.1%) underperformed.
For the second day in a row, the major averages slumped at the start, but unlike yesterday, the key indices could not stage a comeback with a big drop in the energy sector (-3.1%) keeping the market under pressure throughout the session.
The energy sector widened its fourth-quarter loss to 15.9% with crude oil settling lower by 4.5% at $60.92/bbl. Today's slide took place after China reported its lowest year-over-year growth in CPI (1.4%) and OPEC cut its demand forecast. In addition, crude stockpiles showed an unexpected build. Following today's drop, the energy component is down 33.4% since the end of the third quarter.
However, the recent slump among commodities has not been isolated to just oil, but the weakness factored in more prominently today as misgivings about the pace of global economic growth and the potential spillover effect for the U.S. fueled a sense that the market has come too far too fast. Accordingly, today's selling interest hit far and wide with nine sectors losing more than 1.0%.
Similar to energy, the materials sector (-2.1%) spent the day at the bottom of the leaderboard. Growth concerns weighed on steelmakers, which sent Market Vectors Steel ETF (SLX 36.28, -1.29) lower by 3.4%.
Elsewhere, the industrial sector (-1.9%) slumped under the weight of Boeing (BA 124.64, -5.02). The Dow component lost 3.9% and fell below its 50-, 100-, and 200-day averages. The underperformance of the influential sector component masked the relative strength among airlines after International Air Transport Association's projection that the airline industry's collective global net profit after tax will increase to $25.00 billion in 2015 from an estimated $19.00 billion in 2014. Jetblue Airways (JBLU 15.15, +0.11), Southwest Airlines (LUV 41.48, +0.75), and United Continental (UAL 63.69, +1.17) jumped between 0.7% and 1.9%, helping the Dow Jones Transportation Average (-1.4%) finish a little ahead of the market.
Also of note, the consumer discretionary sector (-1.4%) settled ahead of the market, but that was no thanks to Yum! Brands (YUM 70.53, -4.69). The stock tumbled 6.2% after issuing disappointing guidance. In a way, the guidance from Yum! echoed global growth concerns. The company said that sales at its China division have not recovered from bad publicity over the summer as fast as the company had expected.
Growth concerns were also visible in the foreign exchange market with the Dollar Index (88.25, -0.45) recording its third consecutive decline. Notably, the retreat in the dollar gave a big boost to the yen and pressured the dollar/yen pair below yesterday's low (118.00).
Safe haven demand boosted Treasuries with the 10-yr yield falling six basis points to 2.16%.
The sell off invited above-average participation with more than 890 million shares changing hands at the NYSE floor.
Economic data was limited to the MBA Mortgage Index and the Treasury Budget:Tomorrow, weekly Initial Claims (consensus 295K), November Retail Sales (consensus 0.4%), and November Import/Export prices will be reported at 8:30 ET while the Business Inventories report for October (consensus 0.2%) will be released at 10:00 ET.
- The weekly MBA Mortgage Index spiked 7.3% to follow last week's 7.3% decline
- The Treasury budget showed a deficit of $56.80 billion in November, down from a deficit of $135.2 billion in November 2013. The Treasury data are not seasonally adjusted, and the November data cannot be compared to the $121.7 billion deficit in October
- The Consensus expected a budget deficit of $59.0 billion
- The November deficit was slightly smaller than the CBO's forecast of a $59.0 billion deficit
- Nasdaq Composite +12.2% YTD
- S&P 500 +9.6% YTD
- Dow Jones Industrial Average +5.8% YTD
- Russell 2000 UNCH YTD
+------------------------------------------------------------------------------+
Telefonica, Oi, Claro Said to Plan $15 Billion Offer for Tim 2014-12-10 18:43:51.298 GMT
By Cristiane Lucchesi, Manuel Baigorri and Christiana Sciaudone Dec. 10 (Bloomberg) -- Oi SA, Telefonica SA and Claro SA are planning to make an offer for Tim Participacoes SA that would value Brazil’s second-largest mobile-phone company at about $15 billion, people with knowledge of the matter said. The bid to buy Rio de Janeiro-based Tim, which is 67 percent owned by Telecom Italia SpA, would be made by Grupo BTG Pactual acting as a financial vehicle, the people said, asking not to be identified because the discussions are private. BTG would acquire Tim and then split it into three, the people said. Oi would have about 25 percent of Tim, and Claro -- owned by billionaire Carlos Slim’s America Movil SAB -- and Telefonica would divide the rest between them, the people said. Telefonica will join Oi and Claro later, after the acquisition of Brazilian broadband provider GVT is approved by Brazilian regulators, the people said. The companies are prepared to offer about 7.5 times Tim’s earnings before interest, taxes, depreciation and amortization, the people said. That would work out to be more than 40 billion reais ($15.3 billion), or about 40 percent above Tim’s valuation including debt, according to data compiled by Bloomberg. Representatives for Oi, Telefonica, Tim, America Movil, Claro and BTG declined to comment. Telecom Italia believes Tim should be valued at about 20 billion euros ($25 billion) or more, including debt, according to a person familiar with the matter. A Telecom Italia representative declined to comment. The Italian carrier last month received authorization from its board to explore a combination between Tim and Oi.
Portugal Sale
Mergers could help alleviate competition in Brazil, where price wars and government-mandated investments have eaten away at phone carriers’ margins. Oi said this week it agreed to sell its Portuguese assets to billionaire Patrick Drahi’s Altice SA for 7.4 billion euros, unraveling its merger with Portugal Telecom. The proceeds will enable Oi to pare its debt and take part in mergers and acquisitions. It said in a Dec. 8 statement that Oi would “maintain its objective of leading the consolidation movement in the Brazilian telecommunications market.” Telefonica, owner of the Vivo brand in Brazil, is prepared to take part in further consolidation in the country’s phone market, Chief Financial Officer Angel Vila said last month at a conference in Barcelona. Telefonica agreed in September to buy Brazilian broadband provider GVT from Vivendi SA. “We are in a position to participate, but probably we don’t need to be the ones to initiate,” he said. Banco Santander SA is advising Telefonica on the Tim deal. The bank declined to comment. America Movil Chief Financial Officer Carlos Garcia-Moreno said in a Sept. 9 interview that the carrier was entering talks to make a joint bid with Oi for Tim.
For Related News and Information: Tim Analyzes Oi, Says Deal for Brazil Rival Could Be ‘Accretive’ Billionaire Drahi to Buy Oi’s Portuguese Assets for $9.1 Billion Telecom Italia Gets Board Backing to Explore Oi Deal in Brazil Top Brazil Stories
--With assistance from Jonathan Levin in Sao Paulo, Daniele Lepido in Milan, Patricia Laya in Mexico City and Rodrigo Orihuela in Madrid.
To contact the reporters on this story: Cristiane Lucchesi in Sao Paulo at +55-11-2395-9317 or clucchesi5@bloomberg.net; Manuel Baigorri in London at +44-20-3525-4457 or mbaigorri@bloomberg.net; Christiana Sciaudone in Sao Paulo at +55-11-2395-9268 or csciaudone@bloomberg.net To contact the editors responsible for this story: Kenneth Wong at +49-30-70010-6215 or kwong11@bloomberg.net; Aaron Kirchfeld at +44-20-3525-8830 or akirchfeld@bloomberg.net Elizabeth Wollman, Ville Heiskanen