19/01/2016 Argonaut Morning Note

Overseas Market Report – European Markets End Lower

U.S. markets were closed Monday in commemoration of Martin Luther King Day.

European shares attempted to rebound from their lowest level in more than a year, helped partly by gains at mobile telecoms gear marker Ericsson and luxury goods group LVMH.

The FTSE 100 fell 0.4%, the French CAC 40 fell 0.5% and Germany's DAX fell 0.2%.

At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.03% and the 5-year yield was 1.45%.

Stocks were mostly lower across Asia.

China's Shanghai Composite gained 0.5%. The Nikkei 225 fell 1.1% and the Hang Seng declined 1.5%. India's Sensex fell 1.1%.

Australian Market Report – Local Market Expected To Open Lower

Ahead of the local open, SPI futures were 34 points lower at 4,783.

Monday 18 January – close. The Australian market opened sharply lower this morning, following hefty losses across global equity markets and commodity markets last Friday. After tumbling in initial trade, local stocks reversed some of early losses, but failed to fill the pit left by the big banks and resource stocks, to close below the red line. Most sectors posted negative results, with only consumer staples and telecommunication services ending higher. The Australian dollar appreciated against most major currencies.

The All Ordinaries lost 36.70 points to 4,911.80 while the S&P/ASX 200 fell 34.10 points to 4,858.70.

In This Issue                                         

Wesfarmers (WES)
Wesfarmers announced that it has entered into an agreement to acquire Homebase from Home Retail Group for GBP340m. Due to early transformation activity; the acquisition is expected initially to have an immaterial effect on the Company's EPS and return on equity. The acquisition will be funded by new GBP-denominated debt facilities. The acquisition is subject to approval by Home Retail Group shareholders under the UK Financial Conduct Authority's Listing Rules for Class 1 transactions. The Board of Home Retail Group has unanimously recommended the transaction to shareholders. Subject to the approval of Home Retail Group shareholders and its banking syndicate, transaction completion is expected by the end of the first quarter of calendar year 2016. WES added 80 cents to $40.12.

Woolworths (WOW)
Woolworths announced that it intends to exercise its call option over the 33.3% interest in Hydrox Holdings (Hydrox) held by WDR Delaware Corporation, a subsidiary of Lowe's Companies, Inc., (Lowe's) following Lowe's notice to exercise its put option under the JV agreement. Hydrox operates Masters Home Improvement and Home Timber & Hardware (together, Home Improvement). The Company has made provision in its FY15 accounts relating to the put option derived from the carrying value of the business at the end of FY15. As part of the preparation of its half yearly accounts, it is also currently undertaking a review of the carrying value of its 66.7% interest in Hydrox which will be determined in accordance with applicable accounting standards. WOW gained 99 cents to $23.65.

National Australia Bank (NAB)
National Australia Bank announced the commencement of marketing and the price range of the proposed Initial Public Offering (IPO) to institutional investors of CYBG. CYBG senior management will commence a global marketing roadshow in London on 18 January 2016. The Company is pursuing a demerger of 75% of CYBG to the Company's shareholders and a divestment of the remaining 25% by IPO to institutional investors. In aggregate, up to 219,828,814 CYBG shares may be sold by the Company in the IPO. The demerger is not conditional on the IPO proceeding, but the IPO is conditional on the demerger proceeding. The proposed IPO price range has been set between 175 pence and 235 pence per CYBG share. The Scheme Meeting and the General Meeting to approve the demerger will be held on 27 January 2016. NAB dropped 32 cents to $26.69.

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