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from Breakingviews:

JPMorgan commodities sale shows trading’s opacity

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By Kevin Allison and Antony Currie

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

JPMorgan’s $3.5 billion sale of its physical commodities business is a perfect example of just how opaque trading is. The bank is selling what is probably a low-return business with regulatory headaches to Mercuria, a privately held firm that does not have to make its financials public. The dearth of details does make it hard to judge, but applying some statistics from both the industry and some rivals suggests Mercuria may be paying top whack.

Investment bank consultants Coalition recently reported commodity revenue at the top 10 investment banks of $4.5 billion in 2013, down from $5.5 billion in 2012. Assume JPMorgan’s share of that revenue pool is around $1.2 billion and that its net margin runs at around 20 percent, which may be generous. That means the bank run by Jamie Dimon could have made around $240 million of net income on the business last year.

Trading physical commodities accounts for the lion’s share of the business, but is also less profitable than trading derivatives, for example. So assume the unit for sale brought in $140 million. That would mean Mercuria is paying a hefty 25 times last year’s earnings for JPMorgan’s unwanted traders.

from Breakingviews:

Vivendi’s SFR is top target for French cable king

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By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

France’s cable king promised investors a slew of deals when he floated Altice, his investment vehicle. The biggest and best would be Vivendi’s mobile operator SFR.

from Breakingviews:

Turning suit deal inside out reveals silver lining

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By Jeffrey Goldfarb
Thea author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Turning a suit deal inside out has revealed a silver lining. After fending off a hostile bid from Jos. A. Bank, Men’s Wearhouse is now proposing to buy its smaller rival for $1.2 billion. The estimated cost savings could cover nearly the entire purchase price and the combined company would be less indebted. Structured this way round, the transaction is financially more fashionable.

from Breakingviews:

Bayer can pay more for cancer blockbuster partner

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Bayer can pay more for Algeta. After a leak, the German pharma and plastics giant has admitted making a 336-crown-a-share, or 1.8 billion euro ($2.4 billion), takeover overture to its Norwegian partner. Shares in the smaller firm promptly rose above Bayer’s proposal. That looks appropriate: this opening gambit is not overly generous. Algeta’s flagship prostate cancer treatment, Xofigo, is promising. And the technology pioneered here could be used to treat other cancers.

from Breakingviews:

Blackstone’s $6 bln oil deal signals another peak

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By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A $6 billion oil deal signals yet another Blackstone apex. The sale of private equity-backed GeoSouthern Energy to Devon Energy comes at a toppy price by one important measure. Blackstone also has an uncanny knack for timing. The glut of undeveloped land owned by oil companies suggests finding buyers will get tougher.

from Breakingviews:

DSM’s pill deal oddly blends carve-out and LBO

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By Neil Unmack
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

DSM has come up with an odd formulation to solve its drug-production headache. The world’s biggest vitamin maker is merging its DSM Pharmaceutical Products (DPP) business with a private equity-backed rival. DPP was a subscale distraction. But the precise benefits of the $2.6 billion tie-up are hard to fathom. And DSM cedes control of the unit without reducing its economic exposure.

from Breakingviews:

Shire adds to premium valuation with toppy deal

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By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Markets must like Shire’s boldness. Shares of the UK pharmaceutical firm jumped almost 4 percent on the news it would acquire ViroPharma, even though it agreed to pay an eye-watering nine times this year’s sales for the biotech group.

from Breakingviews:

Private equity titans revel in Great Separation

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By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Great Separation has arrived in private equity. For a long stretch, investors barely distinguished among the publicly traded stocks of Apollo, Blackstone, Carlyle and KKR. There now appears to be a noticeable appreciation for the differences. It should be a welcome change even if it reflects some short-term thinking about a long-term business.

from Breakingviews:

M&A gets greedy in cross-border pharma deal

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By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Greed is seeping into the art of M&A. Endo Health Solutions is the latest buyer to receive a warm welcome for a sensible acquisition with notable synergies. Its market value jumped almost as much as the $1.6 billion purchase price for Paladin Labs. But the deal also involves a huge tax dodge and investors aren’t factoring in enough risk.

from Breakingviews:

M&A could help Nestle tackle sales slowdown

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By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It is easy to see why Nestle might want to do deals. The Swiss food group is finding it hard to deliver on sales growth targets. And it can afford to buy itself out of trouble.

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