Latest Reports

October 25, 2018 | Industrials | Australia | Ended

APA Group / CK Infrastructure Holdings : Australian Politics, National Security and Chinese Influence

Australia is in the midst of a highly politicised debate over China’s influence in its politics and businesses, and Cheung Kong Infrastructure’s (CKI) bid for gas infrastructure company APA has found itself caught in the middle. The debate so far has primarily been carried on by high-profile conservatives who criticise the deal on grounds that CKI is a stalking horse for Chinese influence and interests on Australian soil. Others warn of competition and national security issues. The Australian Competition & Consumer Commission (ACCC) has approved the takeover, leaving national security approval by Treasurer Josh Frydenberg as the only remaining hurdle. While Frydenberg is responsible for ultimate signoff, recommendation will come from the Foreign Investment Review Board (FIRB), the body responsible for assessing national security issues related to foreign acquirers, and the Critical Infrastructure Centre (CIC). The FIRB approved CKI’s $7bn acquisition of utility Duet in 2017 but rejected its bid for electricity distributor Ausgrid in 2016, reinforcing its reputation for being difficult to second-guess. In this report, we explore the deal’s perceived threat to Australian national security and the likely assessments by the FIRB and the CIC, both conditions to deal consummation. We look at precedents that could indicate the FIRB’s decision and place our findings in the context of the current political debate surrounding the deal. Finally, we include an APA break price analysis and offer our thoughts on risk arbitrage trading considerations.


September 25, 2018 | Materials | Europe | Ended

Randgold Resources / Barrick Gold : Regulatory and Political Considerations; Nil-Premium Opportunities

The nil-premium combination of Barrick Gold and Randgold Resources will create the largest gold producer in the world. The parties have disclosed limited regulatory hurdles, with the only antitrust clearance required from South Africa, where the parties use the same refining facilities. Political risks attached to the geographical location of Randgold assets are standard for mining industry investors and the appointment of Mark Bristow as CEO (currently Randgold’s CEO) may mitigate concerns that Barrick shareholders face in relation to its 64% stake in the Tanzania-focused Acacia Mining. In this report, we analyse antitrust issues in South Africa and the sensitivities in other key regions: Mali, Côte d’Ivoire, the Democratic Republic of the Congo and Tanzania. We also explore valuation considerations, including the scope for a bump for Randgold, or a counterbid for Barrick, and assess risk arbitrage trading opportunities.


September 20, 2018 | Financials | Europe | Ended

Jardine Lloyd Thompson / Marsh & McLennan : Regulatory Risks and Entry Points

Marsh & McLennan, the US insurance broker, announced a recommended offer for UK-listed insurance broker Jardine, Lloyd and Thompson at 1,915p cash per share, to be implemented via a Scheme of Arrangement. Limited regulatory clearances have been disclosed (US, EU and FSMA) and the parties forecast closing in spring 2019, with a long stop date of 31-Dec-19.


September 18, 2018 | Financials | Europe | Ended

NEX Group / CME Group : Exploring the Overlooked Antitrust Risks

Risk arb funds are nimble and often successful in selecting which deals to avoid. However, although over 90% of public M&A deals close, it is inevitable that some arbs succumb to failed transactions or trading volatility due to deal nervousness or crowdedness. The expression “picking up pennies in front of a steamroller” is often linked to risk arbitrage investment strategies whereby, although there may exist a high probability of deal completion, this comes with a small return (pennies), and the possibility of a very large loss (steamroller). CME’s £3.9bn acquisition of NEX has been regarded as a relatively safe, non-horizontal merger, and there remains a small risk arbitrage spread left in the deal that is set to close in 2H’18. Facing this backdrop is significant break downside and ten pending regulatory reviews, including US and UK antitrust approvals. In this report, we provide a primer on the dynamics and inefficiencies of the US Treasury market, and analyse the key antitrust risks that NEX and CME will contend with within clearing, execution, compression and national security.


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).



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