Latest Reports

June 24, 2019 | Health Care | North America | Ended

WellCare Health Plans / Centene Corporation : Antitrust Assessment and Other Deal Considerations

Centene’s ambitions to acquire WellCare in a $17.3bn cash and stock transaction has been approved by both boards and sets of shareholders, so the sole focus is on regulatory clearances at US federal and state insurance levels. Centene’s motivation for the deal is centred on building scale to compete with its larger competitors in managed care and on establishing a bigger Medicare Advantage footprint. Primarily due to Medicaid Managed Care Organisation (MCO) overlap within counties and states, the deal will inevitably catch the eye of US antitrust regulators. As well, risks posed by the Trump administration’s threats to repeal the Patient Protection and Affordable Care Act (ACA) could have considerable implications for US health insurance markets, and on Centene and WellCare’s standalone businesses.


May 31, 2019 | Health Care | North America | Ended

Spark Therapeutics / Roche Holding : Implications of Pull-and-Refiles and a Second Request

Roche’s pending $4.3bn acquisition of Spark has encountered difficulties with the FTC, which has subsequently led Roche to pull and refile its HSR application three times. Due to a specific carve-out in the merger agreement, Roche is not bound to completing the takeover if it is required to divest Spark’s haemophilia A pipeline drugs, or its own market-leading haemophilia A product, Hemlibra. Since the FTC’s concerns most likely surround Spark’s haemophilia A portfolio, a key driver of the acquisition, this has led to questions of Roche’s strategy for the pull and refiles and its overall commitment to pursue the takeover if a haemophilia A divestiture is required. Conversely, the FTC is weighing pursuing this deal further given recent high profile losses and questionable strengths in their arguments against market definitions and divesting pre-Phase III drugs. Our report balances FTC and Roche incentives, key debates and drugs, theories behind pull and refiles, and break prices, incorporating suitors and crowdedness.


April 29, 2019 | Telecom | Europe | Ended

Inmarsat / Apax, Warburg Pincus, CPPIB, OTPP : Ligado Uncertainty and Optionality – Pre- or Post-Vote

The private equity-led bid for Inmarsat was triggered by a share price decline of 70% from highs three years ago, a subsequent cheap valuation, strong cash flow generation and optimistic growth at its aviation business. When the suitors considered upside scenarios from Inmarsat’s links with Ligado, the rationale for a takeover was clear, and a definitive offer for the company was presented on 25-Mar-19 from a financial consortium comprised of Apax, Warburg Pincus, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan Board. In this report, we assess the impact of the Ligado catalyst, the uncertainties and opportunities before and after the 10-May-19 scheme vote, and our views on the feasibilities of a bump, CVR and counterbid. We explore which organisations and individuals can affect the now much-delayed FCC ruling on Ligado’s licence modification and possible scenarios that can make the investment risky or lucrative for the Inmarsat buyers and investors.


March 28, 2019 | Media | Europe | Ended

Scout24 / Hellman & Friedman and Blackstone : The 50%+1, Bestellerprinzip Risk and Optionality

In the wake of news in summer 2018 that German lawmakers were proposing a significant regulatory reform to the domestic real estate market - the Bestellerprinzip - Scout24’s stock price collapsed by nearly 30%. This negative performance helped trigger renewed interest from private equity firms and the company was subsequently shopped to potential buyers. After some suitors dropped out and a bid was rejected, the company finally agreed to be taken private by a financial sponsor consortium consisting of Hellman & Friedman and Blackstone. These same sponsors formerly held 70% of Scout24 for two years before IPO’ing the company in October 2015. In this note, we explore why the sponsors are returning for a second run, the deal and timing implications of a potential Bestellerprinzip implementation on the German home sales market, and the potential outcomes given the 50% minimum acceptance condition. We analyse the strategies, trading and ownership developments of similar precedent deals over the past ten years, both during and after acceptance periods, and calculate Scout24’s break price in formulating our recommendations.


March 26, 2019 | Telecom | Europe | Ended

Inmarsat / Apax, Warburg Pincus, CPPIB, OTPP : Private Equity vs Public Market – Regulatory and Counterbid Thoughts

A private equity consortium led by Apax announced a recommended offer for Inmarsat at $7.21 cash per share. The firm offer follows the consortium’s proposal announced on 19-Mar-19 and is cum dividend, comprising of $7.09 cash plus Inmarsat’s previously announced final dividend of $0.12 (record: 23-Apr-19, ex-date: 18-Apr-19). The offer will be implemented as a UK scheme of arrangement and the consortium has secured irrevocable undertakings from Lansdowne (11.4%), as well as Inmarsat directors (0.5%). Regulatory hurdles include antitrust in Austria, China, Germany, Russia, the UK and US, and foreign investment approvals in Australia, Germany, India, Italy, Russia and the US (under CFIUS). Shareholder votes are expected to take place by 31-May-19 with a targeted effective date during 4Q’19. The tension between public markets and private equity is at the heart of the offer. The financial sponsors see long term value in the satellite operator, and believe that an offer pitched at about the same level as a strategic one from EchoStar last summer (albeit in cash) will see institutional investors rushing for the exit. Inmarsat faces short-term headwinds in its traditional maritime markets and uncertainty in relation to payments from Ligado. However, the company remains an attractive asset for strategic buyers and potential counterbids are likely to be at least examined by EchoStar and Softbank.


February 25, 2019 | Technology | North America | Ended

Red Hat / IBM : Vertical Limit: The Cloud, Linux and European Antitrust Scrutiny

From an antitrust perspective, the Red Hat / IBM transaction has presented a degree of complexity due to the parties’ long-standing vertical relationships. Red Hat and IBM are partners rather than competitors and work together on the open source Linux software platform. Regulators could probe whether IBM has an incentive to shift or reshape these vertical relationships in a manner which could be considered anti-competitive, for example, by halting the supply to competitors or degrading interoperability with competitors’ products. This potential for vertical effects is more likely to raise eyebrows with the European Competition Commission (EC) than the US Department of Justice (DoJ). In this report, we examine the segments of the cloud market where Red Hat and IBM operate, and where competition issues potentially arise. We then analyse how European and other antitrust regulators could deal with these based on precedent reviews.


January 28, 2019 | Health Care | North America | Ended

Celgene / Bristol-Myers Squibb : Buyers for BMS, Merger Agreement Strength, Antitrust and Activism

We expect Celgene / Bristol-Myers Squibb (BMS) to be a core position for nearly every risk arbitrage fund in 2019. Although the knee-jerk selling in BMS by unconvinced market participants has subsided, the spread remains wide as event funds have somewhat held back, realising that they cannot meaningfully impact and contract the spread of this $61bn target. In this note, we explore the elephant in the room – an unsolicited bid for BMS pitched at a high enough premium to cause the merger to lapse. We also discuss the impact of Celgene’s patent litigations and a failed pipeline drug’s ability to test the permitted settlements and MAC provisions, respectively, antitrust hurdles and potential activist actions. Finally, we analyse precedent tradable CVRs, and the timetables and approval likelihood of each component that makes up the Celgene CVR.


January 17, 2019 | Media | North America | Ended

Tribune Media / Nexstar Media Group : A Different Approach to Sinclair

In acquiring Tribune Media, Nexstar Media Group is implementing a similar strategy to Tribune’s prior suitor, Sinclair Broadcast Group. While the pathway of the now failed Sinclair deal led to an acrimonious dispute with regulators over TV station divestitures, we provide evidence to support the view that Nexstar is undertaking a far less provocative stance with the Federal Communications Commission and Department of Justice. Nexstar has committed to divest at least 13 stations and is armed with a list of potential independent acquirers for these assets. Moreover, Nexstar is viewed as a less partisan acquirer.


December 19, 2018 | Consumer Discretionary | Europe | Ended

Amer Sports Group / Anta Sports-led Consortium : CFIUS’ National Security Considerations and Financing Stability

A definitive offer for Amer Sports came on 7-Dec-18 from a widened and stronger Anta-led consortium after further due diligence and negotiations with lenders. Trusting the legitimacy of the Helsinki Takeover Code and the rationality of the Committee on Foreign Investment in the US (CFIUS), funds may have increased confidence that the firm deal can succeed with few issues. In this report, we explore the stability of the Finnish Securities Markets Act’s Helsinki Takeover Code, and the enforceability of debt financing agreements for a case where, for example, Anta runs into capital raising problems stemming from previously-reported accusations that the Junjuan City-based company has “fraud-like” traits. Separately, we study the impact of CFIUS on this deal – the market is only pricing in minimal CFIUS risk, but this is a hurdle that should not be overlooked.


November 28, 2018 | Media | North America | Ended

Twenty-First Century Fox / Disney : Brazil Antitrust, Collar and Election Strategies, New Fox Value

Disney’s acquisition of Fox is the world’s largest pending public M&A deal, and its high-profile nature, attractive return and convoluted structure has piqued the interest of most risk arbitrage investors. With US, European and Chinese antitrust rulings behind us, and with just eight jurisdictions left, risk arbitrage funds can now prepare for deal consummation. In this note, we explore the approach, criticism and likely rulings by the last major antitrust regulator: Brazil’s CADE. However, we mainly focus on trading dynamics and considerations leading into and after the ruling. We explore the mechanics, valuation and delta hedging strategies of fixed-value M&A collars, including how risk arbitrage funds will typically trade Fox / Disney. In addition, we highlight the investment pitfalls and opportunities presented when targets face elections with collars that are subject to proration. We then suggest how to properly trade around the election averaging period in Fox / Disney to minimise hedging risks in assuming how other investors will elect. Finally, we calculate a fair value for New Fox, appropriate break prices for both Fox and Disney and put the various pieces together in recommending how to most efficiently trade this risk arbitrage opportunity.



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