Latest Reports

October 13, 2016 | Industrials | Europe | Ended

Syngenta / ChemChina : Loan Refinancing Considerations

Nervousness has resurfaced in Syngenta. This is due to recent Chinese press reports which suggest that state-backed equity investors might not participate in the deal, thus threatening the proposed financing structure. Syngenta has since sent emailed statements to press outlets on 10-Oct-16, confirming that the bridge financing provided by HSBC and China CITIC Bank Int’l is “committed and irrevocable”. Similarly, on 11-Oct-16, dealReporter disclosed that ChemChina has sought to assure its lenders that the equity arrangements and overall financing package are progressing well. Still, the risk arbitrage spread remains wide and investors have doubts over the success of the transaction.


September 29, 2016 | Industrials | Europe | Ended

Kuka / Midea : Update on CFIUS and ITAR Reviews

Our thoughts on Kuka / Midea deal considerations related to CFIUS and ITAR, US government contract litigation (including M&A) and national and homeland security.


September 26, 2016 | Energy | Europe | Ended

Technip / FMC Technologies : Mergers-of-Equals and Negative Arb Spreads

The Technip / FMC Technologies merger-ofequals (MOE) has strong strategic rationale and is considered a ‘merger-of-necessity’ in an era of lower oil prices and a struggling oilfield services industry. While the deal has not been embraced by equity research analysts, the merger continues to have support from both companies’ Boards, customers and, most likely, shareholders, who will participate in the €400m pa of cost synergies after the deal completes. The main question for funds is why the current risk arbitrage spread is negative which in an ordinary merger would imply that the target will most likely be the recipient of a competing bid or a bump from the acquirer.


September 01, 2016 | Industrials | Europe | Ended

Syngenta / ChemChina : Sources of Funds

Details on the Syngenta / ChemChina loan syndications and the funding sources for the transaction.


September 01, 2016 | Consumer Discretionary | Europe | Ended

SABMiller / AB InBev : Proxy Adviser Risks

The only remaining and realistic risks to the SABMiller / AB InBev transaction are the upcoming voting recommendations by proxy advisers, namely Institutional Shareholder Services (ISS) and Glass Lewis (collectively, “PAs”). Investors who impulsively assume that PAs will side with the companies’ Boards and key shareholders are making a risky bet, as there are precedent ISS decisions and protocols that suggest ISS has legitimate reasons to recommend against the deal. There are concerns that institutional investors ‘blindly follow’ PAs’ voting recommendations and multiple studies have shown that ISS alone can influence 6-40% of a mid- to large-cap company’s share capital. SABMiller vote risks include the lower voting quorum due to the decision to hold a split vote, dissident shareholders and risk arbitrage funds holding positions in derivatives, thus unable to vote. Adding an ISS recommendation to vote against the deal will potentially put the vote outcome and deal in jeopardy.


August 04, 2016 | Consumer Discretionary | Europe | Ended

SABMiller / AB InBev : Scheme Vote Considerations

AB InBev’s 26-Jul-16 revised and final offer, combined with SABMiller’s recommendation, has essentially eliminated any possibility of a higher bid. So the question is, what can break this deal? Funds received their bump (albeit light) and now hope the deal closes at 4,500p. With all pre-conditions and major antitrust approvals cleared, and with the AB InBev vote outcome unlikely in question, there are two deal-breaking hurdles: 1) the emergence of additional dissenting shareholders, upset about the takeover premium and treatment of minorities; and, 2) the voting strategies and actions of the event driven and risk arbitrage funds (collectively, “arbs”). In this research report, we assess these risks.


July 26, 2016 | Technology | Europe | Ended

ARM Holdings / SoftBank Group : Committed Buyer, Swift Timeline to Completion

SoftBank’s founder and CEO, Masayoshi Son, last week announced his latest largescale, long-term gamble - to acquire ARM Holdings for £24bn. Unless another suitor quickly rounds up lawyers and bankers and presents an acceptable competing offer, his takeover will likely close as planned in 3Q’16. Few synergies exist between ARM and SoftBank’s businesses, and Son’s latest “crazy idea” can be seen as “visionary, risky, or both”. SoftBank shares have declined 10.6% since the 18-Jul-16 announcement, as investors question SoftBank’s ability to realise synergies. They also believe SoftBank is overpaying, are impatient that merger benefits may take years - or decades - to accomplish, and worry about pro forma leverage. Many SoftBank investors hope that Son walks away from this bet and instead uses the cash to pay down debt or to fund its Sprint (S US) investment. However, with a Cooperation Agreement executed and a firm Scheme of Arrangement signed under UK rules, SoftBank cannot walk away and is committed to closing the deal by 17-Nov-16.


June 02, 2016 | Industrials | Europe | Ended

Kuka / Midea : German Protectionism and CFIUS Scrutiny

Midea’s strategic rationale for acquiring Kuka is questionable. As a household appliance manufacturer, Midea has little experience in robots, let alone in many of the other seven industry sectors in which Kuka operates. Arguably, it makes even less sense for Midea to pursue an unsolicited takeover proposal for Kuka with a 59.6% share premium, at 17x EBITDA, for what may only be a minority stake in Kuka. If Kuka’s Management and Supervisory Boards (collectively, “Board”) do not recommend the offer, the transaction will likely fail to attain US regulatory approvals. If the transaction is recommended, Kuka shareholders may argue against any actions by management to unnecessarily divest assets or contracts to appease regulators - for the sole benefit of a non controlling shareholder - and Kuka itself risks ending up in a shareholder stalemate situation (as was the case in late 2011 with SGL Carbon (SGL GY)), given the company’s shareholder structure and Voith’s (private) 25.1% blocking stake. Increasing its stake to above 30% will likely give Midea a seat on Kuka’s Supervisory Board but, if it holds less than 50%, Midea will not be allowed to make any strategic decisions for the German company. Midea’s business profile suggests that synergies between the two companies are limited and there is little need for Midea to increase its stake. Instead, similar and much cheaper collaboration could be achieved by signing new joint ventures and partnership agreements. Regulators in the US will heavily scrutinise the deal as it presents perceived threats to US national security. Most notably, CFIUS will likely have issues with a Chinese company having an influence on Kuka’s contracts with Northrup Grumman (NOC US) to manufacture and maintain fighter jets for the US Air Force. Although Kuka’s ...


April 28, 2016 | Health Care | Europe | Ended

Meda / Mylan : VEB, the Dutch Enterprise Chamber, and Deal Collars

With its focus on over-the-counter (OTC) products and a strong presence in emerging markets and Europe, Meda is an ideal strategic partner for Mylan. Although the deal was initially met with scepticism from Mylan shareholders, most have recognised that the 92% premium is less relevant than the actual multiples that Mylan is paying, which are in-line with or lower than precedent specialty pharmaceutical deals. The price is simply what was needed to get Meda’s largest shareholder, the Olssen family (20.7%), to agree to a deal and, even at this level, cash flows are so robust that leverage at the combined company will not be constrained and Mylan can fulfil its aim of returning capital to its shareholders. In this research report, we analyse the key risks to the deal and potential outcomes.


March 30, 2016 | Financials | Europe | Ended

London Stock Exchange / Deutsche Boerse : Other Suitors, the UK Referendum and Antitrust Risks

Investors seem fixated on understanding when, and to what extent, Intercontinental Exchange (ICE US) will disrupt the agreed LSE/Deutsche Borse ‘merger of equals’ by counterbidding for LSE. While hoping for upside through a competitive situation, event driven funds and LSE investors should not forget the multiple significant risks that any acquirer will face in a sector that is notorious for failed transactions.



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