There’s a debate breaking out over how much Merck’s new cholesterol drug will help the stock

Merck said Tuesday its cholesterol drug Anacetrapib met its primary goal in a study, significantly reducing coronary heart disease.

Shares of the pharmaceutical company struggled for gains morning trade, after spiking more than 3 percent in premarket trade.

Results of the study on 30,000 individuals will be presented on Aug. 29 at a European Society of Cardiology meeting.

Merck 2-day performance

Source: FactSet

Merck said in a press release that it plans to review the trial results with outside experts and will consider whether to file a new drug application with the U.S. Food and Drug Administration, among other regulatory agencies.

The study’s positive result generally surprised stock analysts, but they had mixed forecasts on how much it would help Merck shares.

“The cautious language in the release indicates an unclear risk:benefit in our view, which investors should pay attention to. We believe that only a 2% move in mid term EPS and valuation is warranted at this time and remind investors of the bigger risks around [lung cancer drug] Keytruda expectations, which remain too high in our view,” Jefferies analyst Jeffrey Holford said in a note. He has an underperform european vix etf rating on Merck.

BMO Capital Markets’ Alex Arfaei also said the release’s wording suggests the study results “may not be very clinically meaningful” and “may not justify the safety issues.” However, Arfaei noted that expectations for the drug are “very low” and maintained his outperform rating on the stock. “We believe the franchise could reach global sales of $1.5-2Bn,” he said.

Merck shares are up nearly 12 percent year-to-date. Analysts said earlier this month the results of this study would be the next major catalyst for the Dow Jones Industrial average member.

CNBC’s Meg Tirrell contributed to this report.

http://www.cnbc.com/2017/06/27/merck-shares-rise-after-saying-cholesterol-drug-met-primary-goal-in-study.html

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Whole Foods’ CEO described his deal with Amazon as a ‘dream come true,’ but investors want more (AMZN, WFM)

Whole Foods employee storeAmazon offered $13.7 billion for Whole Foods. Investors think it’s worth a whole lot more.Mario Anzuoni/Reuters

When Amazon on Friday announced a $13.7 billion deal to buy Whole Foods, John Mackey, the CEO of Whole Foods, could barely contain his enthusiasm.

In a town hall with employees, he gushed about the impending “marriage” a metaphor he revisited repeatedly that was announced six weeks after a “blind date” with Amazon that he characterized as “love at first sight.”

Some Whole Foods investors are decidedly dourer, however, and it appears they have a case that the deal was consummated hastily and was in the best interests of Mackey rather than of shareholders.

Not long after it was announced that Amazon had offered $42 a share to buy the high-end grocer, the stock price began creeping above the deal price, signaling that investors believed a bidding war could emerge and drive up the final price for Whole Foods.

Walmart, Target, Costco, and Kroger whose shares all plummeted after the deal was announced have been named as potential rival suitors. But none has entered the fray yet, and it’s uncertain whether any would have the firepower to outbid Amazon. Still, there’s little evidence any of these retailers were even given a shot.

While Amazon’s offer represented a 27% premium over Whole Foods’ stock price, analysts and investors soon began questioning whether it was too cheap. After all, a little over two years ago the company was trading at $57 a share, which would value it at over $18 billion.

Charles Kantor, a managing director at Neuberger Berman Investment Advisers, which owns nearly 3% of Whole Foods, called the offer “thrifty” and said it undervalued Whole Foods’ brand.

“I think there’s the argument that Amazon acquired Whole Foods for free,” he told Reuters, noting that Amazon’s market cap increased by almost the same amount it was paying for the acquisition. “The reaction of shareholders suggests that Amazon has left themselves lots of room to pay more for this strategic asset.”

‘We just fell in love’

Mackey, who called the deal a “dream come true,” appears to have had a singular focus on Amazon since his first trip to Seattle six weeks ago, possibly to the detriment of shareholders.

The initial meeting lasted all of 2.5 hours, according to Mackey, but he and three other Whole Foods execs came away smitten.

“We just fell in love,” Mackey said at the town hall. “It was truly love at first sight.”

Mackey had every reason to fall in love, given that he and his executive team would keep their jobs under the Amazon deal.

Activist investors, specifically the hedge fund Jana Partners, had become a thorn in his side and a threat to his power in recent months, pushing for a management shake-up.

Shortly after Jana disclosed its holding in Whole Foods in April, Mackey and his team hired a top defense banker from Evercore with more than a decade of experience battling activist and hostile investors.

Evercore helped facilitate the deal with Amazon, which would secure Mackey’s future as CEO and provide some relief from the beating he’d taken in the public markets in recent years.

In the town hall, Mackey described Whole Foods as “trapped” by the short-term demands of the quarterly earnings cycle its profits and stock price have steadily declined in recent years and effusively endorsed Amazon’s big-picture approach.

“One thing I absolutely love, love so much about Amazon is they think long term,” he said. “They have had the courage that almost no other public company has had: the courage to, basically, resist the drumbeat of short-term, quarterly earnings that have had us trapped here for a couple of years, as our same-store sales came down.”

When an Amazon executive told the crowd that Mackey would stay on as CEO, Mackey interrupted him to chime in with: “Until death do us part.”

Walter Robb, who was co-CEO with Mackey from 2010 until the beginning of this year and remains a member of the board, embraced the deal as well. But he acknowledged at the town hall that he hadn’t even met the Amazon team until the night before the deal was announced.

So did Mackey prioritize his interests at the expense of shareholders?

Walmart shoppersCould Walmart swoop in and steal Whole Foods out from under Amazon?Joe Raedle/Getty

A bidding war

An Amazon takeover of Whole Foods would almost assuredly make life easier for Mackey, but it isn’t clear whether it’s a good deal for shareholders.

Wall Street analysts say Whole Foods could fetch a significantly higher price for investors and that a bidding war could still erupt.

Rupesh Parikh, an analyst at Oppenheimer, said in a research note that there “could be money left on the table” and raised his target price for Whole Foods to $45.

Barclays analyst Karen Short said she thought the price for Whole Foods could go higher yet. She raised her stock-price target more than 14% over Amazon’s bid, to $48, though she said the company could go for as much as $57 a share.

“Many will do anything to either make this acquisition more costly for Amazon or prevent the asset from landing in Amazon’s lap,” she wrote in a research note.

Short said a competing retailer, such as Walmart, could unlock up to $600 million in cost savings that could make the Whole Foods deal more profitable than it would be for Amazon.

Of course, Walmart would have to absorb the $400 million breakup fee if it outdueled Amazon for Whole Foods. But since its market value has fallen by more than $9 billion since the merger was announced, that may seem a small price to pay.

http://www.businessinsider.com/amazon-whole-foods-takeover-stock-price-gains-2017-6

Chinese bankers flock to Hong Kong as expats retreat

A flood of Chinese bankers is changing the social fabric of Hong Kong, as they rapidly expand their footprint in one of the world’s premier financial centres, even as Beijing struggles to tame the former British colony politically.

Twenty years after Hong Kong’s handover to Chinese rule, scores of mainland professionals are filling the elite financial ranks of Hong Kong, while a series of lay-offs at Western banks has led to an exodus of expatriates.

The largest increase in mainland staff over the past decade has come in investment banks, with 80 percent seeing an increase of at least 20 percent, according to a 2015 Financial Services Development Council survey.

“It has a much better environment than Beijing where I used to work,” said Hong Hao, a managing director at BOCOM International, who has lived in Hong Kong for five years. “The food is good, and the tax rate is also good.”

Tax rates in Hong Kong are around 15-17 percent, while they can be as much as 45 percent in mainland China.

Chinese initial public offerings (IPO) dominate the Hong Kong market, the world’s largest IPO market in 2016 when mainland offerings represented 80 percent of all new listings, according to Thomson Reuters data.

Hong Kong’s financial services industry accounts for 18 percent of the territory’s economy, compared with just 10.4 percent in 1997 when the city returned to Chinese rule.

Expat customers fall

Evan Zhang, a 26-year-old from Guangdong province, is one of those new kids on the block in Hong Kong. For Zhang, one of the younger hires at CITIC Securities International, the increasing outward flow of Chinese capital in recent years is an opportunity.

“With Chinese people more willing now to allocate assets overseas, and overseas investors willing to invest in China, I can play a go-between role to help them,” he said.

As top banks such as Goldman Sachs , UBS, and Bank of America trim their Asia headcount, businesses across Hong Kong have taken a direct hit.

Bo Innovation, a Michelin-star restaurant, said its Western expat customers fell roughly 10 percent in the last 10 years, according to owner and executive chef Alvin Leung. Mainland clients increased by about the same percentage, he added.

Western companies are also increasingly turning to more affordable locations such as Quarry Bay, at a time when Chinese companies are boosting their presence in the prime Central district, according to Tom Gaffney, a managing director at real estate services firm CBRE.

The value of a typical expat package for middle managers in Hong Kong, has fallen by two percent in U.S. dollar terms over the past five years, while the value of their benefits has fallen five percent over the same period, according to consultancy firm ECA International.

“I have seen an enormous change in the expat landscape and packages offered,” said Christine Davis, a manager at international relocation firm The Santa Fe Group who was an expat in Hong Kong in 1999-2001 and again since 2011.

Everything was paid for by hosting companies in the past, she said, but now expat terms had been reduced “drastically”.

Hong Kong dropped two places to 13th in the world in HSBC’s 2016 Expat Explorer Survey, which measures various aspects of expat life.

Easier to recruit

The new expat environment is making its easier to recruit talent. Several Chinese brokerages, asset management firms, and a Big Four Chinese bank told Reuters in recent months they intend to expand and hire more people in Hong Kong.

“When I first joined the company 14 years ago, we could barely recruit the right people as we couldn’t offer a good salary,” said Chen Shuang, chief executive of China Everbright Ltd, the Hong Kong investment arm of state-owned China Everbright Group.

“But now, it’s much easier to recruit top talent, even those from large Wall Street banks, which was unimaginable in the past.”

Some senior Chinese bankers, such as managing directors and department heads, now earn more than their Western counterparts, which offer compensation of about $1 million a year, including base salary and cash bonus, according to executive recruiter Bernard Yeo of Bo Le Associates.

On the flip side, junior Chinese bankers are typically paid 20 to 30 percent less than their foreign counterparts and enjoy a less generous package that excludes housing, school fees, and club memberships enjoyed by many Western expats, Yeo said.

The changing demographics of the financial industry is reflected in the local economy.

Restaurants featuring provincial mainland Chinese cuisine, like Old Beijing restaurant and San Xilou, which offers spicy Sichuanese fare, are doing well, restaurant managers say. So are serviced apartment companies, English learning programs, and Audis, a popular car brand among Chinese.

In contrast, Trattoria Doppio Zero, a popular Italian restaurant in the central business district, has seen over a 10-percent drop in its customers the last three years, said manager Jeffrey Ko.

Follow CNBC International on Twitter and Facebook.

http://www.cnbc.com/2017/06/18/chinese-bankers-flock-to-hong-kong-as-expats-retreat.html

5 Industries You Should Invest In Now!

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