MKC, PGR, STJ, TXT, PCH, CUBI, EAT, BA, BABY, GD, GNTX, HCBK, KNX, MKTX, SEIC, TUP, ACAT, AEP, CRS, MDP, TROW, UTL, AHGP, ARLP, SPIL, AME, CVLT, RDWR, STM, BAH, BOKF, CFR, EVER, FCAU, FCF, HES, PX, RES, ROL, RYAM, TEL, ANTM, ABC, ABMD, MDC, IP, HTCH, KLIC, ADT, ENR, MTOR, ROK, GIB, GWB
BoI: ECB's bond buying program is expected to significantly increase growth in Italy and the EMU in the upcoming 2 years - Risks to market stability in the EMU come form financial and political tensions-
Germany Chancelleor Merkel: Ball is in Greece's court; waiting for Greece to re-commit to aid program - notes that it is amazing that the discussion and debate about a Greece debt cuts is even happening
Facebook: Expecting Q4 upside despite F/X headwinds; Bullish on FB's position for video ad growth
MKM Partners remains at Buy on FB shares, noting they consider co's results the most important for investor sentiment toward the Internet sector overall following a disappointing 2014 for stock performance and terrible Q3 reporting season for stock performance across the group. Firm expects strong pricing will be a consistent theme in 2015 and beyond as video ads become more common on Facebook and Instagram. Firm believes that expenses are more dollar denominated than rev, creating an even larger EPS impact.
Dallas Fed Jan Texas Service Sector Outlook Survey: -2.8 v +12.1 prior (prior revised from 12.7)
- Texas Service Sector Revenue Index 12.1 v 22.2 prior (prior revised from 20.5)
DMG Mori eyed for domination agreement play or activism (Deal REporter)
The takeover of DMG Mori Seiki AG [ETR:GIL] (DMG AG) is being watched for signs of activism or positioning to play a domination agreement (DA) process after shareholders criticised DMG Mori Seiki Company’s [TYO:6141] (DMG Co) 7.5% offer premium as too low.
DMG Co is offering EUR 27.50 per share to 100% of DMG AG’s share capital. DMG Co is aiming to increase its 24.3% stake through the offer and has set a 50% plus one share minimum acceptance threshold for the bid. Following the announcement on 21 January, DMG AG shares rose through the offer price. They opened on Tuesday at EUR 28.50.
Industry sources are speculating whether the buying could be linked to activist hedge funds acquiring a stake big enough to block the transaction. But a mitigating factor is that DMG Co only requires a quarter of the register to reach 50%, they noted.
This leaves open the possibility that investors are positioning for an expected DA process, industry sources said. Offering such a low premium initially could indicate that DMG Co has an eye on the DA process, one industry source said.
Initial industry reaction was that of surprise that the takeover would be happening now. DMG Company President Masahiko Mori had previously suggested that the two companies would look to a merger of equals by 2020.
A domination agreement allows a party to secure full control of a German company with the approval of 75% of shareholders voting/present at a general meeting. The bidder can simultaneously add a profit and loss pooling agreement into the domination agreement. This means the group can qualify for consolidated tax accounting.
In return for full control, the bidder offers to compensate shareholders for any losses. Shareholders can either tender to an independently valued purchase offer or hold on to their shares and receive a guaranteed dividend. Remaining minorities are able to appeal this valuation through the courts.
DMG Co President Masahiko Mori said at an analyst conference on the deal last Thursday that he has no intention of delisting the German company. Mori said he wants to keep the listing of DMG AG in Frankfurt, noting it would be more convenient if the company remains on the stock exchange. Mori also said at the conference he is confident of clinching 75% ownership, based on talks with large shareholders.
Over the last two years, domination agreements have been back in the headlines, with McKesson’s [NYSE:MCK] takeover offer for Celesio [FRA:CLS1] and Vodafone’s [LON:VOD] takeover of Kabel Deutschland [FRA:KD8]. London-based hedge fund Elliott Advisors has been a key activist in each situation.
“I wouldn’t be surprised if it was a usual suspect [buying up shares],” a second industry source said. “I do think there’s bound to be something here,” said a person following the situation. About 12% of DMG AG’s shares have traded since the announcement, or about 16% of the free-float, according to Thomson Reuters data.
DMG Co announced on Monday it had increased its stake to 26.5%, without disclosing the price paid for the shares. As yet, there have been no disclosures from other shareholders of a change to their holdings following the announcement. Germany requires disclosures at 3, 5, 10, 15, 20, 25, 30, 50 or 75% of the voting rights.
Morgan Stanley analyst pushes back its view on 1st Fed rate hike until March 2016
Gapping down
In reaction to disappointing earnings/guidance: MSTR -10.3%, PKG -8.7%, MSFT -7.8%, CAT -7.7%, SANM -6.7%, BTU -6.3%, PHG -5.6%, FCX -5%, PLT -4.1%, UTX -2.9%, AUDC -2.8%, PG -2.4%, AAL -2.3%, ZION -2.1%, (light volume), RMBS -2%, (also approved a new share repurchase program ), ERIC -1.9%, BMY -1.9%, PFE -1.8%, TDG -1.8%, MMM -1.8%, TXN -1.7%,LMT -1.7%, DD -1.5%, PII -1%
Select EU financial related names showing weakness: NBG -14.8% (cont vol following Greek elections over the weekend), DB -3.9%, SAN -2%, ING -2%), RBS -1.7%
Select oil/gas related names showing early weakness: SDRL -2.6%, RIG -2.1%, TOT -1.7%, RDS.A -1.5%, BP -1.4%
Other news: FXCM -4.9% (cont vol pre-mkt), JOE -4.1% (discloses that it received a written 'Wells Notice' on Jan 20 2015), HPQ -3.4% (in symp with MSFT), DE -2.4% (in sympathy with CAT), MTW -2.4% (in sympathy with CAT), INTC -2.2% (still checking), INTC -2.2% (in symp with MSFT), MU -2% (in symp with MSFT), JOY -2% (in sympathy with CAT), CNHI -1.8% (in sympathy with CAT), EPRS -1.1% ( commenced an underwritten public offering of shares of its common stock; size not disclosed), TASR -1% (Charlotte approves use of body cameras, according to local news reports), PBR -1% (may be subject of $20 bln in asset write downs, according to reports)
Analyst comments: CIE -3.1% (downgraded to Neutral from Buy at UBS), STO -3.1% (downgraded to Underperform at Credit Suisse), DDD -2.5% (downgraded to Hold from Buy at Jefferies), WSTC -2.5% (downgraded to Neutral at Robert W. Baird), CS -1.8% (downgraded to Hold from Buy at Jefferies), PKT -1.6% (downgraded to Mkt Perform from Outperform at Raymond James), WCC-1.5% (downgraded to Neutral from Buy at Longbow), AWK -1.3% (downgraded to Neutral from Buy at Ladenburg Thalmann ), KLAC -1.1% (downgraded to Neutral from Outperform at Exane BNP Paribas), HSBC -1.1% (downgraded to Hold at Investec)
In reaction to disappointing earnings/guidance: MSTR -10.3%, PKG -8.7%, MSFT -7.8%, CAT -7.7%, SANM -6.7%, BTU -6.3%, PHG -5.6%, FCX -5%, PLT -4.1%, UTX -2.9%, AUDC -2.8%, PG -2.4%, AAL -2.3%, ZION -2.1%, (light volume), RMBS -2%, (also approved a new share repurchase program ), ERIC -1.9%, BMY -1.9%, PFE -1.8%, TDG -1.8%, MMM -1.8%, TXN -1.7%,LMT -1.7%, DD -1.5%, PII -1%
Select EU financial related names showing weakness: NBG -14.8% (cont vol following Greek elections over the weekend), DB -3.9%, SAN -2%, ING -2%), RBS -1.7%
Select oil/gas related names showing early weakness: SDRL -2.6%, RIG -2.1%, TOT -1.7%, RDS.A -1.5%, BP -1.4%
Other news: FXCM -4.9% (cont vol pre-mkt), JOE -4.1% (discloses that it received a written 'Wells Notice' on Jan 20 2015), HPQ -3.4% (in symp with MSFT), DE -2.4% (in sympathy with CAT), MTW -2.4% (in sympathy with CAT), INTC -2.2% (still checking), INTC -2.2% (in symp with MSFT), MU -2% (in symp with MSFT), JOY -2% (in sympathy with CAT), CNHI -1.8% (in sympathy with CAT), EPRS -1.1% ( commenced an underwritten public offering of shares of its common stock; size not disclosed), TASR -1% (Charlotte approves use of body cameras, according to local news reports), PBR -1% (may be subject of $20 bln in asset write downs, according to reports)
Analyst comments: CIE -3.1% (downgraded to Neutral from Buy at UBS), STO -3.1% (downgraded to Underperform at Credit Suisse), DDD -2.5% (downgraded to Hold from Buy at Jefferies), WSTC -2.5% (downgraded to Neutral at Robert W. Baird), CS -1.8% (downgraded to Hold from Buy at Jefferies), PKT -1.6% (downgraded to Mkt Perform from Outperform at Raymond James), WCC-1.5% (downgraded to Neutral from Buy at Longbow), AWK -1.3% (downgraded to Neutral from Buy at Ladenburg Thalmann ), KLAC -1.1% (downgraded to Neutral from Outperform at Exane BNP Paribas), HSBC -1.1% (downgraded to Hold at Investec)
AK Steel beats by $0.06, beats on revs
Reports Q4 (Dec) earnings of $0.14 per share, excluding non-recurring items, $0.06 better than the Capital IQ Consensus Estimate of $0.08; revenues rose 36.4% year/year to $2.00 bln vs the $1.96 bln consensus.
- "AK Steel's improved financial performance represented its best quarter of the year and quarter-over-quarter reflects strong market demand for our automotive products, lower steelmaking input costs, and the first full quarter of results associated with the Dearborn Works acquisition."
- Average selling price was $987 per ton, a 4% decrease from the $1,031 per ton reported for 4Q13 and a 9% decrease from Q3.
Gapping up
In reaction to strong earnings/guidance: LXK +5.5%, MNRO +5.3%, GIGA +2.6%, GLW +2.1%, NVS +1.7%, SHBI +1.4%, CIT +1.2%, PH +1%, WAT +0.8%
M&A news: SIMG +23.1% (to be acquired by Lattice Semiconductor (LSCC) in an all-cash tender offer of $7.30 per share), COMM +6.4% (TE Connectivity may be very close to deal to sell network business to Commscope Holding (COMM) for $3 bln, according to reports), TEL +4.5% (may be very close to deal to sell network business to Commscope Holding (COMM) for $3 bln, according to reports), WPZ +1.9% (Williams Partners and Access Midstream Partners (ACMP) announced that merged MLP first quarterly cash distribution will be $0.85/unit), LSCC +1.4% (acquiring SIMG for $7.30 per share; also reaffirms Q4 revs)
Other news: EROC +7.8% (provided update on Regency unit sale and Eagle Rock repurchase program: co has sold ~3.3 mln Regency Energy Partners units and has repurchased ~8.5 mln shares as of January 23, 2015) CANF +7.4% (received positive data regarding its CF602 drug candidate), USAT +7.3% (announced a national rollout of new acceptance points for Apple Pay; will work with iPhone 6, iPhone 6 Plus and Apple Watch), PLOW +6.7% (expected to benefit from snow storm in NE), ARTW +2.3% (names Amber Murra Chief Financial Officer), SDLP +2.3% (declares Q4 distribution of $0.5675, up 3% from previous $0.5525 distribution), AZN +1.2% (in sympathy with peer NVS earnings)
Analyst comments: SCSS +2.5% (upgraded to Buy from Hold at Stifel), EGO +1.8% (upgraded to Hold from Sell at Canaccord Genuity), YELP +1.5% (upgraded to Outperform from Mkt Perform at Raymond James)
In reaction to strong earnings/guidance: LXK +5.5%, MNRO +5.3%, GIGA +2.6%, GLW +2.1%, NVS +1.7%, SHBI +1.4%, CIT +1.2%, PH +1%, WAT +0.8%
M&A news: SIMG +23.1% (to be acquired by Lattice Semiconductor (LSCC) in an all-cash tender offer of $7.30 per share), COMM +6.4% (TE Connectivity may be very close to deal to sell network business to Commscope Holding (COMM) for $3 bln, according to reports), TEL +4.5% (may be very close to deal to sell network business to Commscope Holding (COMM) for $3 bln, according to reports), WPZ +1.9% (Williams Partners and Access Midstream Partners (ACMP) announced that merged MLP first quarterly cash distribution will be $0.85/unit), LSCC +1.4% (acquiring SIMG for $7.30 per share; also reaffirms Q4 revs)
Other news: EROC +7.8% (provided update on Regency unit sale and Eagle Rock repurchase program: co has sold ~3.3 mln Regency Energy Partners units and has repurchased ~8.5 mln shares as of January 23, 2015) CANF +7.4% (received positive data regarding its CF602 drug candidate), USAT +7.3% (announced a national rollout of new acceptance points for Apple Pay; will work with iPhone 6, iPhone 6 Plus and Apple Watch), PLOW +6.7% (expected to benefit from snow storm in NE), ARTW +2.3% (names Amber Murra Chief Financial Officer), SDLP +2.3% (declares Q4 distribution of $0.5675, up 3% from previous $0.5525 distribution), AZN +1.2% (in sympathy with peer NVS earnings)
Analyst comments: SCSS +2.5% (upgraded to Buy from Hold at Stifel), EGO +1.8% (upgraded to Hold from Sell at Canaccord Genuity), YELP +1.5% (upgraded to Outperform from Mkt Perform at Raymond James)