TheChek News Flow

- Reiterates view that inflation to hit the 2% target during FY15/16 period

Dividend ratios are currently the best predictor of returns for European bank shares. This suggests that forthcoming regulatory changes will be critical to determine which banks can and can’t surprise on dividends. Regulators are

currently considering changes to how RWAs are calculated and to purify CET1 definitions. Whilst in general higher yielding shares (eg, DNB, UBS, Lloyds) should be able to absorb these changes, we highlight Credit Agricole, BNP and SocGen as challenged, at the very least in terms of payout ratios increasing.

SoftBank Downsizes Presence in Silicon Valley --> -ve for TMUS, +ve for Europe, more spec. about a deal coming in Europe ???

No jobs have been eliminated, company says.

A SoftBank spokesman said Wednesday that the company had subleased both of the four-story office buildings it had leased in San Carlos, California in 2013, where around 100 employees had been stationed until last year.

Some employees will remain on the site, while the rest will return to Japan or move to Sprint’s headquarters in Kansas, the spokesman said. He declined to give numbers but said no jobs were eliminated. The Silicon Valley office was home to teams of Japanese engineers working on handsets, networks and accessories, as well as some members of the mergers-and-acquisitions team.

Sprint’s bid to acquire T-Mobile encountered opposition from U.S. regulators last year. SoftBank holds an 80% stake in Sprint, the No. 3 U.S. wireless carrier, as well as a major wireless network in Japan and has made a range of Internet investments.

SoftBank has tried to make Sprint more competitive since acquiring it in 2013. Last year it appointed a new chief executive, mobile-phone entrepreneur Marcelo Claure . But T-Mobile has been gaining ground on Sprint in subscriber numbers.

SoftBank Chief Executive Masayoshi Son said during a news conference in February that he planned to downsize the number of staff and cut costs associated with its Silicon Valley outpost.

The SoftBank spokesman declined to comment on whether the move was connected to the failed T-Mobile bid.

S&P 500 1Q bottom-up EPS has come down 8% over the last three months to $27.05 – a bigger cut than any other recent quarter (Chart 2). This quarter marks the first since 2009 in which analysts expect earnings to decline YoY: including the impact from buybacks, EPS is slated to fall 4% YoY. Is this a reason to sell US stocks? While revision trends suggest muted near-term returns, during nonrecessionary quarters in which EPS growth was negative – and this has happened 31 times since 1960 - the S&P was up 60% of the time during earnings season with an average return of 2%. We expect the EPS recession to be transitory, with positive EPS growth resuming in the 2H.

The sizable cut has been chiefly due to Energy, where estimates have fallen ~50% YTD. Ex Energy, EPS has come down 5%, slightly worse than the typical pre-EPS season cut of 3-4%. Expectations suggest 1Q earnings will decline 6% YoY (but grow 1% ex. Energy) and that sales will fall 2% YoY (but grow 3% ex. Energy).

The impact to EPS from lower oil and a stronger USD will be greater this quarter than in 4Q14, with the average levels of WTI and the DXY index -51% and +18% YoY, respectively – double the impact of 4Q14 (-24% and +9%). As the oil impact is evident in sector revisions, the impact from FX is also evident in that stocks with high (>30%)

foreign sales have seen 1Q earnings expectations slashed by 13% YTD, while pure domestics have seen earnings revised up slightly over this period.

Given USD strength, we took down our 1Q EPS to $27.50 from $28.25. This suggests a modest (~2%) beat vs. consensus, which is likely given how dramatically estimates have been cut. The average beat has been 3-4% over the last three years. 1Q estimate cuts have slowed since mid-March (when the USD peaked), and early reporters have generally held up - nearly 70% have beaten on EPS. And as we recently noted, other factors besides FX drive multinationals’ EPS, like global growth. The GLOBALcycle indicator suggests that growth is tracking at a healthy

3.5% pace, and last quarter 60% of multinationals surprised to the upside on EPS.

According to measures that have historically been most predictive of strong or weak results (including revisions, guidance and the prior quarter’s results) Health Care screens as most attractive while Energy screens worst – this was also the case in 4Q14, and results were generally in line with our expectations. On pg 3 we include screens for stocks most likely to positively and negatively surprises based on fundamental and quantitative inputs. We also include screens for crowded stocks which could see downside risk based on active managers’ positioning, a particularly important read heading into earnings season as crowded stocks tend to fall much harder on disappointing results and/or guidance.

The Boards of Shell and BG are pleased to announce that they have reached agreement on the terms of a recommended cash and share offer to be made by Shell for the entire issued and to be issued share capital of BG.

· Under the terms of the Combination, BG Shareholders will be entitled to receive:

For each BG Share: 383 pence in cash; and

0.4454 Shell B Shares[1]

· Based on the 90 trading day volume weighted average price of 2,170.3 pence per Shell B Share on 7 April 2015 (being the last Business Day before the date of this Announcement), the terms of the Combination represent:

- a value of approximately 1,350 pence per BG Share; and

- a premium of approximately 52% to the 90 trading day volume weighted average price of 890.4 pence per BG Share on 7 April 2015.

· Based on the Closing Price of 2,208.5 pence per Shell B Share on 7 April 2015 (being the last Business Day before the date of this Announcement), the terms of the Combination represent:

- a value of approximately 1,367 pence per BG Share;

- a premium of approximately 50% to the Closing Price of 910.4 pence per BG Share on 7 April 2015; and

- a value of approximately GBP 47.0 billion for BG's entire issued and to be issued share capital.

· The Combination will result in BG Shareholders owning approximately 19% of the Combined Group.

· Shell expects the Combination to accelerate its growth strategy in global LNG and deep water.

· The Combination will add some 25% to Shell's proved oil and gas reserves[2] and 20% to production, each on a 2014 basis, and provide Shell with enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.

· The Combination has the potential to unlock further value for both sets of shareholders from the combined portfolio. An enhanced set of upstream positions will be a springboard to high-grade the Combined Group's longer term portfolio, increase asset sales and reduce capital investment, thereby enhancing the Combined Group's capacity to pay dividends and undertake share buybacks.

· Shell expects the Combination to generate pre‑tax synergies of approximately USD 2.5 billion per annum (which have been reported on) and has also identified further significant opportunities.

· In the near term, BG Shareholders will benefit from the dividends enjoyed by Shell Shareholders.[3] Shell today confirms its intention to pay dividends of USD 1.88 per ordinary share in 2015 and at least that amount in 2016.

· In the medium term, all shareholders will benefit from the potential for enhanced cash flow and a continued drive to grow returns and enhance capital efficiency from the combined portfolio.

· Shell expects to commence a share buyback programme in 2017 of at least USD 25 billion for the period 2017 to 2020.[4] Shell expects this programme to offset the shares issued under the Shell scrip dividend programme and to significantly reduce the equity issued in connection with the Combination.

Commenting on today's announcement, Jorma Ollila, Chairman of Shell said:

"This is an important transaction for Shell, accelerating the delivery of our strategy for shareholders. The result will be a more competitive, stronger company for both sets of shareholders in today's volatile oil price world.

BG shareholders will receive significant value through the premium being offered for their shares. They will become shareholders in Shell, accessing an attractive dividend policy, a share in the significant synergies and the compelling upside and enhanced operating capability of the combined group.

We believe that the combination is in the interests of both our companies and their shareholders."

Commenting on the Combination, Ben van Beurden, CEO of Shell said:

"Bold, strategic moves shape our industry. BG and Shell are a great fit. This transaction fits with our strategy and our read on the industry landscape around us.

At the start of 2014, Shell embarked on an improvement programme, including divestments and the restructuring of underperforming businesses, whilst at the same time delivering profitable new projects for shareholders. This programme is delivering, at the bottom line.

BG will accelerate Shell's financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell's growth priorities and areas where the company is already one of the industry leaders. Furthermore, the addition of BG's competitive natural gas positions makes strategic sense, ahead of the long-term growth in demand we see for this cleaner-burning fuel.

This transaction will be a springboard for a faster rate of portfolio change, particularly in exploration and other long term plays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios.

Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace."

Commenting on the Combination, Andrew Gould, Chairman of BG said:

"This offer represents an attractive return for BG shareholders. BG has a strong portfolio of operations including growth assets in Australia and Brazil and a highly competitive LNG business, as well as an enviable track record of exploration success. The BG Board remains confident in BG's long-term prospects under the leadership of Helge Lund. Shell's offer, however, allows us to accelerate and de-risk the delivery of this value. The structure of the offer will provide BG shareholders with an attractive premium and a substantial cash return as well as enabling them, if they wish, to participate in the benefits of the combination through the share component. For these reasons, the BG Board recommends the offer."

Commenting on the Combination, Helge Lund, CEO of BG said:

"The offer from Shell delivers attractive returns to shareholders and has strong strategic logic. BG's deep water positions and strengths in exploration, liquefaction and LNG shipping and marketing will combine well with Shell's scale, development expertise and financial strength. The consolidated business will be strongly placed to develop the growth projects in BG's portfolio. The transaction will take time to complete, during which my team and I will remain committed to BG and our shareholders, and to safely delivering our 2015 business plan."

· It is intended that the Combination will be implemented by way of a court‑sanctioned scheme of arrangement under Part 26 of the Companies Act 2006, further details of which are contained in the full text of this Announcement. However, Shell reserves the right to implement the Combination by way of a takeover offer (as defined in Part 28 of the Companies Act 2006), subject to the Panel's consent and the terms of the Co‑operation Agreement.

· The Boards of Shell and BG have agreed that BG Shareholders will continue to be entitled to receive their final dividend for 2014 of 14.37 cents (9.52 pence) per BG Share which has already been announced by BG, as well as an interim dividend in respect of the six month period up to 30 June 2015 of not more than the interim dividend in respect of the six month period up to 30 June 2014 of 14.38 cents per BG Share. In addition, should completion of the Combination occur after the record date for Shell's 2015 fourth quarter interim dividend, BG Shareholders would be entitled to receive a further BG dividend in respect of 2015 of not more than the final dividend for 2014 of 14.37 cents per BG Share. If, however, completion of the Combination occurs prior to the record date for Shell's 2015 fourth quarter interim dividend, BG Shareholders would receive that Shell dividend and would not receive a further BG dividend for 2015.

· BG Shareholders will be entitled to elect to receive the share component of the Consideration in the form of Shell A Shares, as opposed to Shell B Shares, at the same exchange ratio.

· Shell will also provide a Mix and Match Facility, which will allow BG Shareholders to elect, subject to off-setting elections, to vary the proportions in which they receive New Shell Shares and cash. The Mix and Match Facility will not change the total number of New Shell Shares to be issued or the maximum amount of cash that will be paid under the terms of the Combination.

· The BG Directors, who have been so advised by Goldman Sachs International and Robey Warshaw LLP, consider the financial terms of the Combination to be fair and reasonable. In providing advice to the BG Directors, Goldman Sachs International and Robey Warshaw LLP have taken into account the commercial assessments of the BG Directors.

· Accordingly, the BG Directors intend unanimously to recommend that BG Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Combination at the BG General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial holdings of 217,564 BG Shares representing, in aggregate, approximately 0.006% of BG's issued share capital on 7 April 2015, being the last Business Day before the date of this Announcement. Further details of these irrevocable undertakings are set out in Appendix 4 to this Announcement.

· The Combination will be put to the vote of Shell Shareholders as a Class 1 transaction for Shell for the purposes of the Listing Rules. The Shell Directors consider the Combination to be in the best interests of Shell and the Shell Shareholders as a whole and intend unanimously to recommend that Shell Shareholders vote in favour of the Shell Resolutions to be proposed at the Shell General Meeting which will be convened in connection with the Combination.

· The Shell Directors have received financial advice from Bank of America Merrill Lynch in relation to the Combination. In providing their advice to the Shell Directors, Bank of America Merrill Lynch has relied upon the Shell Directors' commercial assessment of the Combination.

· The Combination will be subject to the Pre-Conditions set out in Appendix 1, the Conditions and certain further terms set out in Appendix 2 and to the full terms and conditions which will be set out in the Scheme Document including the sanction of the Scheme by the Court and the approval of Shell Shareholders. The Pre-Conditions and Conditions include the receipt of various antitrust and foreign investment approvals, other regulatory consents and waivers of any termination rights, pre-emption rights, rights of first refusal or similar rights in a number of jurisdictions, as further described in paragraph 8 of this Announcement.

· The Scheme Document will include full details of the Scheme, together with notices of the Court Meeting and the BG General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders. It is expected that the Scheme Document will be despatched to BG Shareholders towards the end of 2015 or in early 2016, and no later than 28 days after the date on which the Pre-Conditions are satisfied and/or waived, as applicable, save as the Panel may otherwise permit.

· It is expected that the Prospectus, containing information about the New Shell Shares, will be published at the same time as the Scheme Document is posted to BG Shareholders. It is also expected that the Circular, containing details of the Combination and notice of the Shell General Meeting, will be posted to Shell Shareholders at the same time as the Scheme Document is posted to BG Shareholders, with the Shell General Meeting being held at or around the same time as the BG Meetings.

· The Scheme is expected to become effective in early 2016, subject to the satisfaction or waiver of the Pre-Conditions set out in Appendix 1 and the Conditions and certain further terms set out in Appendix 2 to this Announcement.

Summary of strategic fit and financial returns

· BG is highly complementary with Shell's strategic priorities of deep water and LNG.

· By applying its capabilities to the BG assets, Shell believes that, by around 2020, the Combined Group will have:[5]

o two strategic growth businesses - deep water and integrated gas - that could potentially each generate USD 15-USD 20 billion of cash flow from operations per annum;

o upstream and downstream engines that could potentially generate a further combined USD 15-USD 20 billion of cash flow from operations per annum in total; and

o long-term positions which could potentially add around a further USD 10 billion of cash flow from operations per annum.

· Shell expects the Combination to be mildly accretive to earnings per share in 2017 and strongly accretive to earnings per share from 2018 onwards, on a current cost of supply basis and excluding identified items.[6]

· Shell expects the Combination to be accretive to cash flow from operations per share from 2016.6

· The Combination would have reduced Shell's return on average capital employed by around 1.5%, on a 2014 pro-forma basis, but Shell expects the effect on return on average capital employed to be neutral from 2018, with potential for growth in returns thereafter, assuming flat oil prices.6

· Shell expects asset sales to increase and to total USD 30 billion for the period 2016 to 2018.

· Shell's appraisal of BG is based on an intrinsic asset value assessment across a range of oil prices and on the strong cash flow growth potential of the Combined Group.

· The Combined Group's priorities for cash will be (1) debt reduction; (2) dividends; and (3) share buybacks and capital investment.

· Shell plans to pay down debt from 2016 in order to maintain a strong balance sheet and credit rating to underpin its business model.

· Balance sheet gearing would have been approximately 20% for the Combined Group on a 2014 pro-forma basis.

Merrill Lynch International, a subsidiary of Bank of America Corporation, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the UK, is acting exclusively for Shell and no one else in connection with the Combination and will not be responsible to anyone other than Shell for providing the protections afforded to its clients or for providing advice in relation to the Combination or any other matters referred to in this Announcement.

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the UK, is acting for BG and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than BG for providing the protections afforded to its clients, or for giving advice in connection with any matter referred to in this Announcement.

Robey Warshaw LLP, which is authorised and regulated by the FCA in the UK, is acting as financial adviser exclusively for BG and no one else in connection with the matters referred to in this Announcement and will not regard any other person as its client in relation to the matters referred to in this Announcement and will not be responsible to anyone other than BG for providing the protections afforded to its clients, nor for providing advice in relation to the matters referred to in this Announcement.

Nikkei +0.62% Hang Seng +2.73% Shanghai +0.54%

RUB $55.0380 WTI $53 (-1.82%) EURCHF 1.0454 CHF $0.9636

Eur$ 1.0849 S&P +0.02% EuroStoxx -0.16% Dax -0.11% SMI +0.01%

Macro :

- Dutch Government Must Be More Active as Shareholder: Audit Court

Keep an eye on :

- AF FP : Air France - KLM: March Passengers Down 0.4%

- BALSN SW : Baloise May Consider Acquisitions in Belgium, Luxembourg: Cash

- BBVA SM : Spanish Banks to Boost Profitability, Roldan Tells Expansion

- BEN IM : Benetton Group may sell stake to Uniqlo - Il Sole 24 Ore

- BMW GY : BMW to Recall 53,317 X3 SUVs in China for Fuel-Pump Fault

- BPM IM : BPM may announce M&A operations at shareholders' meeting on 11 April

- CBK GY : Commerzbank CEO Proposes Rule for Banks’ Govt Debt Holdings: FAZ

- DAI GY : Mercedes Targets More Than 10% Sales Growth This Year in China

- EOAN GY : EON Said to Appoint Morgan Stanley as Second Adviser for Spinoff

- HSBA LN : HSBC Said in Talks to Sell Assets in Brazil, Mexico: Financiero

- NOVOB DC : NVO: Novo Nordisk announces FDA accepts Tresiba, Ryzodeg resubmi

- PSM GY : Prosieben Also Made Offer for Dailymotion, Orange CEO Says

- RKET GY : Rocket Internet’s Global Fashion Group Raises 32 Million Euros

- RNO FP : France to Buy Maximum 4.7% of Renault for as Much as EU1.2b

- ROG VX : Roche’s Avastin Plus Chemo for Cervical Cancer Approved by EU

- SHP LN : Shire ‘Confident’ in Fighting Hayman After Victory Over Actavis

- SIK VX : Saint-Gobain Extends Pact With Sika’s Burkard Family

- SIK VX : Sika shareholder Schenker-Winkler appeals Zug court's voting rights decision, request for ex parte decision denied

- BCVN SW : Vaudoise 2014 Net Rises 21.5% to CHF153.6m

- VIV FP : Vivendi in Exclusive Talks to Buy 80% of Orange’s Dailymotion

- VIV FP : Vivendi Said to Look at Sky as Potential Target: Reuters {http://reut.rs/1JloCc0}

*EXPERIAN RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE