Michelin Buys Flex Composite Group from IDI for $766 Mln
Topic of the day
Michelin (-1%) confirmed that it has acquired Flex Composite Group from French private-equity firm IDI for 700 million euros ($766.1 million), including debt. The French auto supplier said that buying the Paris-based engineer of fabrics and films will increase its high-tech materials business revenue by around 20%. FCG reported EUR202 million in revenue for 2022, Michelin said. The company had an average organic growth rate of 11% with earnings before interest, taxes, depreciation and amortization margin of between 25% and 30% over the 2015-22 period, Michelin said. The deal will enhance Michelin's role in the polymer composite market and allow it to expand in areas beyond mobility, the company indicated. The purchase of the Flex Composite Group by Michelin appears to be reasonable in terms of the company's long-term strategy, according to UBS. The acquisition is unlikely to end concerns about Michelin's spending policy. Even if the financial impact is limited, Michelin is investing its cash to acquire a company that is highly valued and only adds a small amount of profit over time, UBS analysts noted.
On Monday, the SMI lost 0.7 per cent to 11,307 points. Among the 20 SMI stocks, there were 18 price losers and two price winners. 14.12 million shares were traded (previously: 56.2 million). Among the individual stocks, Lonza fell sharply by 3.3 per cent. Market participants pointed to the profit warning issued by the German laboratory and pharmaceutical equipment manufacturer Sartorius for the current year. The reason was the ongoing reduction of inventories by customers. Analysts at Berenberg are of the opinion that the recovery of profits at Lonza could also be delayed until 2024. Geberit (-3.3%) and Sika (-2.8%) also recorded marked decreases. UBS was the day's winner with a gain of 1.4 per cent. Following the takeover of Credit Suisse, the major bank is planning a massive downsizing of its investment banking business. The shares of index heavyweight Nestle slipped 0.1 per cent. Among the pharmaceutical giants, Roche lost 1.3 per cent. The share of competitor Novartis held up considerably better with a plus of 0.1 per cent.
The European stock markets fell on Monday, mainly due to profit-taking, while the US markets were closed due to a bank holiday. The Stoxx Europe 600 index lost 1% to 462 points. In Paris, the CAC 40 and SBF 120 shed 1% and 1.1% respectively. The DAX 40 in Frankfurt dropped 1% and the FTSE 100 in London was down 0.7%. Pharmaceutical supplier Sartorius Stedim Biotech (-12.8%) cut its financial forecasts for the 2023 financial year, anticipating weaker-than-expected demand in the second half of the year. Casino's parent company Rallye (-7.4%), controlled by Jean-Charles Naouri, announced that it had reached an agreement with holders of debt secured by Casino shares as part of its conciliation procedure with creditors. Construction and concessions groups Vinci (-4%) and Eiffage (-5.4%) lost ground as the Conseil d'Etat reportedly issued an opinion paving the way for an increase in the tax burden on motorway companies and other state concessions, according to the French newspaper Les Echos. Morgan Stanley raised its recommendation on Channel Tunnel operator Getlink (up 2.2%) from "neutral weighting" to "overweight", while raising its target price from €18.30 to €19. On the first day of the Paris Air Show, Airbus (+0.2%) announced that it had secured a firm order for 500 A320neo family aircraft from the Indian airline IndiGo. Aircraft engine and equipment manufacturer Safran (+1.7%) meanwhile confirmed that British airline Jet2 had placed a new order for LEAP-1A engines built by CFM International, the joint venture between the French group and the US company General Electric. Call centre operator Teleperformance (-1.6%) has appointed Bhupender Singh as deputy CEO.
U.S. markets were closed on Monday due to a bank holiday.
The mood on the East Asian stock markets remains gloomy on Tuesday. A cut of the key interest rate in China hardly gives the markets a boost, especially as it had been expected by the vast majority. Traders rather speak of greater concerns about the economic development in China after the lifting of the Corona restrictions. Although hopes had been high that the economy would take off, this failed to materialise. The People's Bank of China is now trying to create momentum by lowering its reference rate for bank loans (LPR) to enterprises and households by 10 basis points. It is the first cut in the key rates since August 2022. The yuan continues to slide in the foreign exchange market following the rate cut. The market's disenchantment regarding China's steps to boost its sluggish economy is particularly evident in Hong Kong (-1.5%). By contrast, the Shanghai Composite dropped only 0.2 per cent, as did the Kospi in South Korea. The willingness to take profits is very pronounced, with a view to the previous rally. In addition, the meeting between US Secretary of State Blinken and China's President Xi did not deliver much in the way of tangible results apart from polite statements. In Japan, the Nikkei-225 dropped 0.4 per cent, on the back of the insurance sector.
At the beginning of the week, price fluctuations on the Swiss bond market were limited. According to traders, business was quiet and there was no major turnover. This was probably also due to the fact that no new bonds had been " issued" yet and that the stock exchanges in the USA remained closed due to a bank holiday. Meanwhile, the September Conf future was trading 90bp lower at 147.37% with 5 contracts dealt at 1pm. On Friday, the conf was trading unchanged at 148.27%. The market's benchmark Swiss Bond Index (SBI) is down 11 bp at 125.16%. The 4 Confederates so far traded have all been declining. The yield of two-year Confederates was last quoted at 1.222% and that of ten-year Confederates at 0.997%.
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