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from Breakingviews:

Nutreco’s $3 bln buyout shows value of food chain

By Quentin Webb

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

A $3.4 billion buyout of Nutreco highlights the value in the food chain. A wealthy Dutch family is planning to gobble up the Amsterdam-listed animal and fish-feed specialist. With no financial overlap, this looks like a long-term bet on the world’s growing hunger for protein.

Through SHV, the Fentener van Vlissingen clan is offering 40 euros a share for Nutreco, or 2.69 billion euros in total. That’s a reasonable 34 percent premium to the average closing price over the last three months. It equates to an enterprise value of about 9.6 times first-half EBITDA, Nutreco says, slightly above the roughly 9.3 times achieved in two other recent deals.

Nutreco’s weakness put it in play. The shares have fallen 20 percent in a year, against a 1 percent rise in the wider Dutch market. Nutreco has tried and failed to sell its Iberian business, whose focus on compound animal feed fits badly with the rest of the group. It has also suffered as Norway’s Marine Harvest, a big customer, started producing its own salmon feed. A quarterly trading update on Oct. 20 showed Nutreco’s fish feed revenue down 8.2 percent year-over-year.

from Morning Bid with David Gaffen:

The cage is full

The equity market stabilized on Tuesday but only just barely - a 0.16 percent gain on the S&P 500 is nothing to write home about - but that the market bounced off support levels around 1,876 was notable enough.

One thing for sure is that the short-sellers are finally having their day in the sun after many years of walking around with a cloud over their heads, a la Joe Btfsplk from the L'il Abner comic (yeah, we're busting out Depression-era references here), as Svea Herbst and Jenn Ablan reported in an overnight story.

from Breakingviews:

Snapchat’s valuation soars on tech-land pixie dust

By Robert Cyran

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

Snapchat’s valuation is soaring on tech-land pixie dust. The disappearing-photo business has turned 100 million users, strong demand for chat services and the $20 million sale of a tiny equity stake into a $10 billion price tag. Trouble is, the company lacks revenue – and none is in sight. It’s a reminder that Silicon Valley dreams often trump real economics.

from Global Investing:

Betting on (expensive and over-owned) Indian equities

How much juice is left in the Indian equity story? Mumbai's share index has raced to successive record highs and has gained 24 percent so far this year in dollar terms as investors have bought into Prime Minister Narendra Modi's reform promises.

Foreign investors have led the charge through this year, pouring billions of dollars into the market. Now locals are also joining the party - Indian retail investors who steered clear of the bourse for three years are trickling back in - they have been net investors for 3 months running and last month they purchased Rs 108 billion worth of shares, Citi analysts note. 

from Counterparties:

MORNING BID – Once Upon a Dream

Disney is expected to report third-quarter results after market close and is likely to beat average analyst estimates, according to StarMine. The media company's results could get a boost from "Maleficent", its revisionist take on "Sleeping Beauty" featuring Angelina Jolie, but the company’s prowess doesn’t end there, not with “Captain America: Winter Soldier” also a box-office champ in 2014 – which was also released during its most recent reporting period.

The studio budget for Maleficent was said to be somewhere around $180 million, so it’s not as if this was a cheap one, but consider that it posted worldwide grosses of $727 million, ranking it third for 2014, with the fourth-place film being Captain America (which cost $170 million), and also came through through Disney’s Buena Vista studios, per BoxOfficeMojo data.

from Counterparties:

MORNING BID – Minute by minutes

The bond market remains pretty much tethered to the 2.50 percent to 2.60 percent range that's prevailed for the 10-year note for quite some time now, with the primary catalyst being today's release of the Federal Reserve's minutes from its most recent meeting. The relevant data that investors are probably paying most attention to - the jobs report last week, the JOLTS jobs survey, shows some more things that is meant to keep the Fed engaged rather than moving toward an imminent increase in rates. The quit rate - the rate at which people leave jobs for others - is still historically a bit on the low side, not at a level that would make the Fed more comfortable that the kind of labor-market dynamism needed for the Fed to shift to raising interest rates. Fact is, the central bank just isn't there yet.

And with that in mind, that means those investors clamoring for higher rates are probably going to continue to see their expectations unmet for a longer period of time, and with sovereign buyers from Europe and Japan wandering outside those halls, there's an ongoing bid in the market that continues to thwart short-sellers who are just waiting for that right moment to bet against the bond market. That's been a lonely trade of late - or rather, a popular trade, just a big loser as trades go.

from Counterparties:

MORNING BID – Microsoft, up from the ashes

Microsoft heads into tonight’s earnings report coming in on a high, having recently breached the $40 threshold for the first time in forever (it’s all Frozen references this week, folks). The company pushed past $40 a share in early April for the first time in nearly 14 years, and spent most of that time ensconced in a tight range between about $22 and $35 a share, depending on what the overall market was doing. It tanked in 2008 with everything else, and then spent the 2010-2012 period putting together a cumulative 13 percent price loss in the midst of a raging bull market, if evidence of its sad-sack status couldn’t be more apparent.

This year, though, the company’s been the beneficiary (along with the other “horsemen,” Cisco, Intel and Oracle) of a shift away from overvalued momentum-driven stocks towards cyclical technology stories. These are the types of companies that produce steady revenues even if they’re not doing anything but collecting on consistent upgrades of stuff that everybody needs and doesn’t really like. And really, the company had a stranglehold over PC operating systems that it defended aggressively, let’s not kid ourselves.

from Counterparties:

MORNING BID: Running on Empty

The most interesting developing trend in the U.S. equity market has been the recent stumble in the biotech and momentum-oriented names, be it Gilead Sciences, Biogen, Netflix or a few others. The biotechs were a group often cited as having entered a "parabolic" stage, which in market parlance refers basically to "going up and up and up in a straight line." The move wasn't anything on the order of the homebuilders during the housing bubble of 2006 to 2007, or the tech giants during the latter stages of the tech run - a 300 percent gain versus 700 to 800 percent gains back in the other cases. That doesn't mean we won't see an ongoing breakdown, though some of the selling abated late in the Monday session.

But the Nasdaq Biotech Index has now dropped sharply through its 50-day moving average. More worryingly, the Nasdaq Composite sits just five points above its 50-day moving average of about 4221, and the Nasdaq 100 barely managed to close above that level as well on Monday. "Three consecutive down days have been a rare occurrences in this tape," said Michael O'Rourke, chief market strategist at JonesTrading. "That makes the intraday lows registered today in both single stocks and the indices important support levels to watch. Violations of those levels should be problematic."

from Breakingviews:

Food deal shows how investors eat up synergies

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

Sysco’s acquisition of US Foods shows how investors are eating up synergies. The $3.5 billion purchase, revealed on Monday, received a rapturous reception, with the buyer’s market valuation surging by as much as a quarter – or $5 billion – before giving up some gains. Hefty cost cuts help the merger math.

from Breakingviews:

Disney magic hasn’t exactly worked on Pixar

By Jeffrey Goldfarb and Grace Dai
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

 

 

Walt Disney boss Bob Iger has another Pixar hit on his hands. “Monsters University” should provide an eighth consecutive animated lift to Disney’s bottom line when it reports quarterly results on Tuesday. The upcoming “Planes,” derived from Pixar’s “Cars,” is bound to be a success, too. But a Breakingviews analysis suggests the studio’s value to the Magic Kingdom falls short of the $7.4 billion purchase price. High-priced deals for Marvel and Lucasfilm may also disappoint investors in the long term.

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