August 23, 2018 | Technology | Europe | Ended

Gemalto / Thales: EC Phase II Antitrust, CFIUS and Downside Risks

Thales’ €4.6bn strategic takeover of Gemalto was perceived by many as generally clear of risks until 23-Jul-18, when the European Commission announced it would undertake a Phase II investigation of the transaction, citing antitrust concerns. The provisional Phase II deadline is 8-Jan-19, but the companies still anticipate completing the transaction by the end of the year. Still, the risk arbitrage spread has only slightly widened despite the deal also facing CFIUS and other antitrust and national security approvals needed from ten outstanding jurisdictions. In this report, we explore the companies’ horizontal overlaps in European and global hardware security modules (HSMs), recent CFIUS reforms and its subsequent effect on the US national security review, Gemalto break price analyses, and timing and earnings announcement risks.

Contents 1. The EU Antitrust Process 2. Gemalto / Thales Antitrust Assessment 3. CFIUS Reform and its Impact on Gemalto / Thales 4. Break Price Analysis and Gemalto’s Frequent Disappointments 5. Risk / Reward and Risk Arbitrage Trading Thoughts Appendices A. Atos B. Strategic Rationale C. Deal Structure D. Gemalto/Thales Company Overviews (44 pages)

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