Latest Reports

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.”


April 25, 2018 | Telecom | North America | Ended

Time Warner / AT&T : Expected Verdict, Unwavering Confidence and Crowdedness

The final witness has taken the stand, both the Department of Justice (DoJ) and AT&T have rested their cases, and after next week’s closing arguments, we will await the ruling on a $100bn takeover by the sole presiding judge, Richard Leon. Risk arbitrage funds collectively hold approximately $7bn of Time Warner stock and their unwavering confidence prior to and during the trial has caused Time Warner shares to steadily increase, even in the face of nervousness surrounding other crowded risk arbitrage situations, NXP Semiconductors and Monsanto. In this report we explore the US competition regime, the structure of and vertical relationships within the US entertainment industry, and the trial – assessing the DoJ and AT&T briefs, arguments, evidence and witnesses, and, most importantly, Judge Leon and his likely considerations and verdict.


March 15, 2018 | Industrials | Europe | Ended

GKN / Melrose Industries : Bumping, Waiving and Extending in UK Hostile Deals

This £8.1bn hostile takeover came to the forefront following Melrose’s 8.6% bump, which is now deemed ‘final’. Since this aggressive tactic has failed to secure a recommendation from GKN’s board, the deal outcome now hinges on the timing and decision of CFIUS, and Melrose and GKN’s actions in the weeks leading up to 29-Mar-18 - a critical date for the companies. GKN shareholders will most likely be empowered to decide on the outcome, unless Melrose does not waive CFIUS and GKN refuses to revise and extend Day 60, 29-Mar-18, at which point the deal will lapse if the minimum acceptance has not been met. In this report, we look at the likely timing of a CFIUS review, whether Melrose may waive the CFIUS condition and the likelihood that GKN agrees to extend the offer period to create a ‘Revised Day 60’ under Rule 31.6 of the Code, to accommodate a CFIUS review.


February 26, 2018 | Media | Europe | Ended

Sky / Twenty-First Century Fox : Comcast’s Intentions and Whether Fox or Disney Comes Back

Sky / Fox has been turned on its head after Comcast announced a competing proposal at 1,250p per Sky share, plus permitted dividends that can add an additional 34.9p to the offer price if the transaction completes after mid-October. This is a healthy 16.3% headline premium to the Fox offer and investors have driven up Sky’s share price to trade at a 3.6% premium to Comcast’s offer (including dividends). We provide our high-level thoughts on the developments and views on whether Fox will come back. We also importantly address Comcast’s offer in the context of: 1) the rationale and numbers behind Comcast’s counterbid; 2) Fox’s need to control 100% of Sky, considering Disney’s pending offer for Fox assets; 3) Disney’s need to control Sky, in light of its desire to expand internationally and secure subscribers and content; 4) whether Comcast has further intentions for Fox; and, 5) potential outcomes and strategies.


February 16, 2018 | Telecom | Europe | Ended

Com Hem / Tele2 : Manageable Antitrust and Break Scenarios, Plus Optionality

A Com Hem-Tele2 combination has always made strategic sense due to complementary operations: combining a leading Swedish fixed broadband, telephony and pay TV player (Com Hem) with a leading Swedish mobile player (Tele2). Together the companies can threaten market leader Telia, already itself an example of the benefits of telco convergence in Sweden. In April 2017, after investment firm Kinnevik (KINVB SS) announced it purchased a 18.5% stake in Com Hem, rumours swirled that Tele2 would inevitably acquire Com Hem since Kinnevik held 47.6% of Tele2’s voting rights. A firm deal has now come to fruition, most likely brokered by Kinnevik, whose recently appointed CEO, Georgi Ganev, will become chairman of the new Tele2. In this report, we analyse the deal’s antitrust implications, break scenarios, strategic rationale and opportunities for activists to challenge the terms of this stitched-up ‘merger’.


January 23, 2018 | Media | Europe | Ended

Sky / Twenty-First Century Fox : The CMA’s Findings and the ‘Event-Based’ Sunset Clause

We provide our thoughts on Sky / Fox since the CMA’s recent decision will impact the deal. What we found in the possible remedies document is the addition of Disney as a catalyst to get through UK regulators. CMA statements point to a rather simple solution for Fox to get the deal completed: offer all the structural and/or behavioural commitments requested, then agree with the Secretary of State (SoS) that if Disney / Fox completes, these remedies will fall away (again, since the Disney owning Sky weakens the link between the Murdoch’s and Sky). The CMA spells out this possibility and refers to it as an ‘event-based’ sunset clause.


January 23, 2018 | Industrials | Europe | Ended

Linde / Praxair : Antitrust Implications and Break Prices

The merger between Linde and Praxair offers alternative investment avenues: some funds are fixated on the ‘back-end’ squeeze-out in Linde, while others focus on the Linde untendered versus tendered share class trade. Many are combining these strategies and mix in a little merger arb. At this stage, we believe that deviating from the strict merger arbitrage situation introduces market-related risks and we refrain from looking beyond the deal at hand. In this research report, we offer our view on whether the merger can clear global antitrust scrutiny, and the implications and break scenarios if it does not.



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