>>> Dow Chemical higher by 6% on spin-off/combination of unit with OLN; currentl

Dow Chemical higher by 6% on spin-off/combination of unit with OLN; currently trading around $49.50

Olin: Dow Chemical (DOW) announces spinoff of chlor-alkali and downstream derivatives businesses to combine with Olin Corporation (OLN); transaction is valued at $5 billion

  • Dow announces it will separate a significant portion of its chlor-alkali and downstream derivatives businesses and merge them with Olin (OLN) in a tax-efficient Reverse Morris Trust transaction that creates an industry leader with revenues approaching $7 billion;
  • The transaction is valued at $5 billion, and includes $2.0 billion of cash and cash equivalents to be paid to Dow; an estimated $2.2 billion in Olin common stock using the Olin stock value as of close on March 25, 2015; and approximately $800 million of assumption of pension and other liabilities.
  • Olin expects to achieve annualized cost synergies of a minimum of $200 million, which are anticipated to be fully realized within 36 months.
  • Transaction is highly accretive to Dow and Dow shareholders, with a tax efficient consideration of $5 billion, and a taxable equivalent value of $8 billion.

(BFW) Holcim’s Fourth-Biggest Holder Hasn’t Decided on Voting Yet: FuW

Holcim’s Fourth-Biggest Holder Hasn’t Decided on Voting Yet: FuW
2015-03-27 10:56:50.507 GMT


By Jan-Henrik Förster
(Bloomberg) -- Harris Associates’ David Herro says new
merger terms between Holcim, Lafarge are an “enormous step
forward” though not perfect, according to interview in Finanz
und Wirtschaft.
* As long as CEO succession hasn’t been resolved, Harris
Associates won’t decide on vote
* Says co’s need to solve question as soon as possible
* Says CEO needs operational experience, experience w/
integration of acquisitions
* NOTE: Link to interview (German)
* NOTE: Lafarge-Holcim Merger Logic Questioned by Shareholder
Group
* NOTE: Harris Associates holds 3.19% in Holcim according to
Bloomberg data

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

To contact the reporter on this story:
Jan-Henrik Förster in Zurich at +41-44-224-4116 or
jforster20@bloomberg.net
To contact the editors responsible for this story:
Jan Schwalbe at +41-44-224-4106 or
jschwalbe6@bloomberg.net
Paul Verschuur

>>> Biomarin Pharm trading higher by 7% on renewed M&A speculation

Biomarin Pharm trading higher by 7% on renewed M&A speculation following Betaville blog post, UBS tgt raise

  • BMRN is trading higher by 7% this morning on renewed M&A speculation after Betaville blog, written by Ben Harrington (formerly of the UK's Telegraph), suggested Shire (SHPG) could be considering a merger with BMRN. 
  • {http://betaville123.blogspot.com/} Link to blog
  • Subsequently, UBS has raised their price target on BMRN to $136 from $112

(CS) Italian luxury : Pausing for breath : Ferragamo cut to Neutral

Pausing for breath
■ Cutting our rating on Ferragamo to Neutral (from Outperform). The
shares are up 40% YTD and have reached our target price. We still like
Ferragamo for its margin expansion story, successful diversification strategy
into handbags, outperformance in China, rising RNOA and best-in-class
TSR at +16% in the next three years. We still believe Ferragamo is amongst
the few stocks in luxury for which we see earnings upgrades in 2015.
However, we feel more meaningful revisions are required to drive the shares
higher at the current valuation level.
■ Preference for Ferragamo over Tod's. We continue to see downside risk
to margin expectations for Tod's as strongly negative LFL poses some risk
of further cost deleverage. We feel management has not yet given enough
confidence that the negative momentum for Tod's brand is about to turn and
diversification into handbags has not worked in the past two years. We are
cutting our earnings estimates by 10% placing us 5% below consensus.
■ Still negative on Cucinelli. Management has started guiding the market
hence producing the first sizeable downgrade since IPO due to pressure on
margin from escalating rental costs. We still struggle to justify a valuation
similar to Hermes given a sharp contrast in margins, RNOA and cash
generation which we do not expect to change in the next few years. Liquidity
is low marking the stock difficult to short. We hence maintain our
Underperform rating.
■ All Italian stocks screening as relatively expensive. Ferragamo appears
to be fairly valued on traditional metrics trading at a 1.6x PE/TSR broadly in
line with the sector at 1.5x. Tod's and Ferragamo trade at 1.8x an d 4.3x
PE/TSR respectively. Finally, none of the stocks look cheap on our EV/IC
framework which takes into account RNOA momentum.

(Citi) Global Asset Allocation - Citi house - March 2015

Global Asset Allocation
Citi House Views – March 2015
* Asset Allocation & Macro Overview
– Cautious optimism best characterizes investor sentiment in our view. We see few
signs of irrational exuberance. Our cross asset risk aversion indicators are still
quite elevated, whilst individual US investors seem restrained in their allocations
to stocks. We still think equities can rally and bond yields can fall to end-2015.
– We adopt a barbell approach to our medium term asset allocation: overweight
equities and government bonds (upgraded); underweight credit and cash; neutral
commodities (downgraded).
* Citi House Views by Asset Class Specialists
– Equities: We remain constructive on global equities. We think the bull market is
maturing but it is too early to call its end given where we are in the profits cycle.
– Credit: We see further spread tightening in Europe in particular, with HY to
outperform IG. In the US, it’s far more likely that spreads range trade.
– Rates: We forecast divergent yield paths for the major government bond markets
in 2015. European government bonds outperform, USTs underperform.
– Commodities: We expect further price weakness short term, and a recovery
further out. To end-2015, return forecasts are positive.
– Foreign Exchange: USD cycles are normally persistent and last 5-6 years in the
appreciation phase. We see further medium term USD gains.

>>> BOE's Broadbent: Likelihood for persistent deflation is low

BOE's Broadbent: Likelihood for persistent deflation is low - comments from London 
- Watching for signs that price falls hitting wage growth
- Sees 'good deflation' boosting both demand and output
- Risk that low inflation could last for longer than expected
- Inflation to receive a sizeable kick in coming years
- Natural real rate of interest more likely to rise
- CPI aim is for 2% and not 0%
- UK labor market continues to tighten

(Berenberg) Porsche - Important Legal Victory, compelling Value

Important legal victory, compelling value
● The plaintiffs’ appeal (claims of €1.18bn) against Porsche’s victory on 17
March 2014 was on Thursday rejected by the Higher Regional Court of
Stuttgart. It upheld the original ruling in Porsche’s favour and did not
allow the plaintiffs to appeal the case to the BGH (the German Federal
Court of Justice, effectively Germany’s Supreme Court). We expected the
appeal decision to go in Porsche’s favour (given the court’s comments on
26 February) but, importantly, we believe some investors may now make a
step-change and choose to remove the €1.18bn from the headline
outstanding claims of c€5.4bn. The €1.18bn represents c4.4% of Porsche’s
market capitalisation. The plaintiffs can complain that they are not allowed
to appeal but to do this they would have to go the highest court in Germany
(the BGH). It seems unlikely to us that this court would consider their case.
● On the 20 March 2015 we raised our Porsche one-year target from €100
to €125. We believe that a price of €150, 69% above the current price, is
feasible within two to three years. Our price target increase reflected a
2016 EPS rise of c3% at Porsche and Volkswagen (VW), and the rise in our
VW prefs target from €230 to €300 in our Structural winner plus FX: target
up to EUR300 note (9 March 2014). We believe VW is significantly
underrated (2016E/17E P/E of c7.6x/c6.8x and FCF yield of c10%) and
offers the most attractive risk-reward profile of the German and French
auto OEMs. We believe investors are overly focused on conservative 2015
EBIT guidance (hit by weakness in Brazil and Russia), whereas Chinese JV
earnings (below EBIT) are boosted by FX translation. As FX hedging rolls
off, the strong USD, RMB and GBP theoretically boost EBIT (especially
Porsche and Audi) by c35% from 2016.
● As of 26 March close, the total SOTP/legal discount is c27%, or c€10.1bn.
On top of an assumed 15% SOTP discount, the market implies a c€4.5bn
legal discount – c140% payout on €3.2bn of “live loss claims”. We exclude
“unrealised” gains of nearly €1bn and the €1.18bn appeal Porsche has won.
● Porsche has won all finalised legal cases. The rest are in Germany, where
precedent does not apply and awards tend to be lower. The six-year US
statute of limitations since the October 2008 short squeeze has ended.
● The next legal date is likely to be witness hearings on 7/8 May 2015 at
Hanover (€1.8bn Elliot case) and the criminal case is expected to be heard
this June/July. The Hanover court has approved c21 witnesses, but we only
expect six or seven to testify because Porsche’s former CEO and CFO have
been charged in a criminal case and the Supervisory Board is being
investigated – this means these witnesses can choose not to testify. On 14
October 2014, the Hanover Court Judge said that the plaintiffs’ claim of a
“cartel” between Porsche and its banks was a weak case and that it should
be resolved quickly.
● Our one-year €125 target is largely based on SOTP (VW ords at €300
implying a VW 2016E/17E P/E of 9.7x/8.7x) and assumes a Porsche
2016/17E P/E of 8.1x/7.4x. We assume a combined SOTP/legal discount of
c17%, or €8.6bn – a 15% SOTP discount (€7.1bn) and a further c4% from a
€1.5bn legal discount (unchanged). We raise our SOTP discount from 12.5%
to 15% due to lower dividends and the slow progress of investments. We
note investors’ reluctance to use a lower discount, but this could change.
● Porsche may be on many more investor watch lists within 6-12 months and
if VW shares reach what we view as a feasible price of €350 (10.1x 2017E
P/E) we think Porsche shares could rise c69% to €150 within three years.

WSJ : Growing Speculation BOJ Easing May Outlast Kuroda’s Tenure

The stalled growth in Japanese prices hasn’t just made it more difficult for the Bank of Japan to hit its 2% target inflation target, it has also made it harder for the central bank to eventually turn off the spigot to its massive monetary easing program.

While Gov. Haruhiko Kuroda has repeatedly said it’s too soon to debate any specifics of an “exit policy” to the program, former BOJ officials say Mr. Kuroda may not be able to find a way out by the time his tenure ends in April 2018.

“It seems fairly difficult,” says Miyako Suda, a former BOJ board member, given how the next increase in the consumption tax planned for April 2017 will likely interfere with the BOJ’s stated mission of “stably” attaining 2.0% inflation.

Based on the correlation between economic growth and inflation, the BOJ expects growth down the road to reduce slackness in the economy. That could lead to a situation where demand outweighs supply, putting upward pressure on prices. The government estimates demand in the economy is currently short by about annual Y12 trillion, or 2.3%, of the gross domestic product.

Kazumasa Iwata, a former BOJ deputy governor, says “lifting the inflation rate up to 2.0% could require a 5% to 7% change in the output gap, meaning it would take about five years from now on, even if the economy annually keeps growing at a pace of 2%.

He says additional stimulus would be necessary, provided that inflation expectations slide further. Making making matters more difficult, a further economic expansion isn’t as easy as they did were over the past two years.

“The BOJ’s JGB purchases are coming close to their limit, but there are a few other options left,” Mr. Iwata says.

Among the BOJ’s remaining options, buying of bonds issued by government agencies and municipal governments is still a possibility. But it’s uncertain whether the BOJ can secure securities worth as much as Y10 trillion, to match the pace of its annual monetary expansion. Other options include lowering interest rates paid on commercial banks’ excess cash deposited with the central bank and allowing interest rates to fall into negative territory like has been done in Europe. But again, it’s unclear whether it’s feasible because that “policy will mark a major shift in its policy regime,” he adds.

Ms. Suda said she objects to additional easing steps, including negative rates, as the central bank’s experiment to generate inflation by flooding the economy with trillions of yen hasn’t worked as intended.

“The experiment is over,” she says, adding that the BOJ should soon start slowing down its pace of its “excessive” asset purchases. Without such action, she warns that the continuation of the policy could cause various negative effects, including an asset bubble and disruptions in financial markets. Other potential problems: squeezing earnings at financial institutions and causing damage to the BOJ’s balance sheet that will eventually be passed on to taxpayers.