Latest Reports

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.


August 07, 2018 | Industrials | Europe | Ended

Linde / Praxair : US and China Antitrust Analysis; Breaching the Divestiture Cap

The Linde / Praxair risk arbitrage spread dramatically widened on 6-Aug-18 after the US Federal Trade Commission (FTC) indicated increased divestiture expectations from the companies, beyond the recently-announced €2.8bn sale of Linde’s Americas business to Messer Group and CVC Capital Partners. The companies confirmed that there is a higher probability that the agreed divestiture cap will be breached and with a non-waivable longstop date of 24-Oct-18, the companies will be pressed to immediately offer additional commitments or watch the merger lapse. In this research report, we summarise our conversations with Linde and re-visit our antitrust assessment of the merger in two particular regions, the US and China. Based on our findings, we place our antitrust work in the context of the divesture cap and precedent transactions that faced similar scrutiny. Finally, we provide our views on the companies’ ability to come up with a sound revised remedies package to appease regulators ahead of the longstop date.


July 31, 2018 | Consumer Discretionary | Europe | Ended

Luxottica Group / Essilor International : MOFCOM Secured, Squeeze-Out and Sell-Out Optionality

Over 18 months after it was first announced, Luxottica / Essilor cleared its last major regulatory hurdle with clearance by Chinese competition authorities (MOFCOM) on 26-Jul-18. This completes investors’ focus on antitrust since US and EU regulators have also approved the deal, albeit taking longer than forecast. Our estimated settlement date is now end-September 2018 and, moving forward, the market will most likely focus on opportunities derived from the transaction structure. In this report, we examine Italian laws and regulations related to squeeze-outs and sell-out rights. We also highlight recent squeeze-out precedents and compare the Luxottica deal structure to more common Italian ones that were designed to mitigate the risks to the acquirer.


July 13, 2018 | Media | Europe | Ended

Sky / Twenty-First Century Fox : Effects of the DoJ’s Appeal Against AT&T and Comcast’s Intentions

The Department of Justice’s surprising appeal against Judge Richard Leon’s 12-Jun-18 ruling to approve Time Warner / AT&T will have some profound impacts on the Sky and Fox takeovers. The appeal is unwarranted and is unlikely to be successful, but it will nevertheless change Comcast’s thinking towards a renewed counterbid for the Fox assets. Convincing the Murdochs and Fox’s independent board to accept a new offer is now more challenging for Comcast, which needs to provide a knock-out bid, combined with a substantial reverse termination fee, for its offer to just be on equal grounds versus Disney’s agreed offer.


July 11, 2018 | Media | North America | Ended

Twenty-First Century Fox / Disney : Counterbids and Leverage, Governance and Antitrust Issues

With its latest bid for the Fox assets at $71.3bn and a deal structure that has appeased Fox’s Board, Disney is currently in pole position with its superior offer. Moreover, shareholder votes scheduled for 27-Jul-18 and recent antitrust clearance by the Department of Justice have additionally put Disney ahead in the regulatory and timing race. Despite these attributes, investors should not count out Comcast CEO Brian Roberts, who still has everything to play for. Should Comcast pursue a counterbid, it will need to put enough clear space between its offer and Disney’s such that the Comcast bid surmounts reasonableness criteria applicable to Fox’s board when discharging their fiduciary duties under Delaware law. In this report we compare the pending offers, explore conflicts of interest and assess, based on precedents, Fox’s ability to ignore a future, financially superior offer from Comcast. We also explore Comcast’s pro forma leverage and whether it can counterbid without a partner while remaining investment grade-rated. Finally, we dissect the regulatory risks identified by Cleary Gottlieb and provide trading recommendations based on the expected risk / reward.


June 25, 2018 | Health Care | Europe | Ended

Shire / Takeda : Heading into the Takeda AGM on 28 June 2018

The AGM is increasingly important for Shire / Takeda because a specific proposal put forth by dissident Takeda shareholders has expedited and invigorated the deal’s key risk: the Takeda vote. We provide an update on the transaction ahead of Takeda’s AGM on 28-Jun-18 in Osaka, Japan (10am local time).


June 20, 2018 | Technology | North America | Ended

NXP Semiconductors / Qualcomm : Not Over Yet. Revisiting Break Prices and Trade Tariffs

This research report was sitting on ice recently in hopes that MOFCOM would suddenly approve the deal and that the NXP rollercoaster would finally grind to a halt. Alas, the deal is not over yet and the recent moves encouraged us to publish further analysis. NXP is clearly not a riskless trade and risk arbitrage funds remain tick- and headline-watching for clues on how MOFCOM may react to US-China trade tariff retaliations and ZTE treatment. In this research report, we revisit our break price work in the event the deal terminates, assessing where NXP may immediately trade due to technical hedge fund selling and where it should eventually settle as a standalone entity. We also evaluate NXP amid receiving the break fee and re-levering itself to a more efficient capital structure and consider trends of precedent crowded deals that lapsed. Finally, we look at where we are now in ZTE and US-China trade frictions and provide a look-through into how this may affect MOFCOM’s thinking on Qualcomm.


May 24, 2018 | Media | North America | Ended

Twenty-First Century Fox / Disney : Impact of AT&T, over Disney, and across Sky

The implications of the Time Warner / AT&T federal court ruling will be scrutinised by M&A practitioners and its result will likely lead to corporate action by Fox, Comcast, Disney and Sky. Comcast has recently made its presence felt in media consolidation – first, with its 25-Apr-18 definitive offer to purchase Sky, at a 16% premium to Fox’s offer; and second, with its 23-May-18 announcement that it is in advanced stages of preparing a superior all-cash counterbid for Fox assets, at a premium to Disney’s all-share offer. The 12-Jun-18 Time Warner / AT&T court decision will lead to forthcoming moves by the two key suitors, Comcast and Disney, which will inevitably present risks and opportunities at the targets, Fox and Sky. In this report, we examine the background of Fox / Comcast, the Murdoch’s ownership dilemma and realistic takeover prices for the Fox RemainCo assets. Assuming a bidding war ensues for Fox, we address the Fox vote, antitrust issues and how Sky fits into the suitors’ ambitions. Finally, we provide our view on the most likely outcome and trading strategies.


May 15, 2018 | Health Care | Europe | Ended

Shire / Takeda : Weighing Upside Versus the Acquirer Vote and Pipeline Risks

Takeda’s initial five-week pursuit for Shire that involved five proposals has led to a definitive, agreed UK takeover, but the deal is marred by an unconventionally wide risk arbitrage spread and a heavily sold, unloved acquirer. Whether this is the best deal for Shire, or Takeda, is not yet clear and we remain in the midst of a particularly precarious environment for risk arbitrage hedge funds. Shire / Takeda has its share of complexities and in this note we assess the key risks and anomalies of this cross-border deal, weighing these versus the upside presented. We provide our views on the best trading strategies in the face of the Takeda shareholder vote, the Shire pipeline, arbs’ inability to control the spread, borrow recall risks, the trading and timing uncertainties and factors surrounding antitrust, strategic rationale and third-party interlopers.


May 01, 2018 | Telecom | North America | Ended

Time Warner / AT&T : From the Court House – Closing Arguments

We were at the E Barrett Prettyman US Court House in Washington, DC, for the closing arguments, ending the seven-week Time Warner / AT&T bench trial. Judge Leon will issue his opinion by 12-Jun-18, ahead of the deadline for the transaction on 21-Jun-18. The court proceedings began with 75 minutes of closing arguments from the DoJ’s Conrath. After a lunch break, Petrocelli presented the defence’s closing arguments with Conrath then given a further 15 minutes for rebuttal. Both attorneys focused their closing arguments on the three primary areas of evidence we highlighted in our previous note (Time Warner / AT&T: Expected Verdict, Unwavering Confidence and Crowdedness). These areas are witness testimony, in particular that of industry executives, ordinary course of business documents and economic models. In their final addresses to Judge Leon, both sides clearly had taken to heart the lessons of both US vs. Oracle (2004) and US vs H&R Block (2011), namely: “that for the most part, judges understand and trust documents, testimony and their own common sense more than they do hypothetical economic exercise based on data proxies.”



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