Latest Reports

March 10, 2017 | Health Care | Europe | Ended

Actelion / Johnson & Johnson : Uptravi Assessment and the R&D NewCo Spin-off

The Actelion / J&J deal has multiple moving parts that should together determine whether the transaction will successfully complete, on time, and will offer a meaningful return to shareholders. This research report assesses and answers two investment questions: 1) can the Pharmacovigilance Risk Assessment Committee (PRAC) swiftly conclude that Actelion’s Uptravi drug be withdrawn in Europe, and could this persuade the US Food and Drug Administration (FDA) to follow suit, thus provoking J&J to invoke the Material Adverse Effect (MAE) clause, all within two months?; and, 2) is there substantial value in the R&D NewCo “sweetener”, and will the market realise this value ahead of the deal closing?


January 24, 2017 | Media | Europe | Ended

Sky / Twenty-First Century Fox : Opportunities and Risks For M&A Activism

Sky’s Independent Committee recommends that minority shareholders accept a 1,075p bid from Fox, while its financial advisers’ own research analysts had forecasted that Sky will trade at 1,000-1,050p in 12 months, as a standalone company. Has the Independent Committee truly negotiated the best premium for minority shareholders, and has in no way been influenced by Sky’s Chairman, James Murdoch, the current CEO of Fox? Fox’s pending takeover of Sky has been accepted by an Independent Committee that is questionably independent. While the control premium offered is higher than precedent minority buyouts, Sky was pursued at its most vulnerable point, when investors shunned the company due to concerns over slowing organic growth, increasing operating costs, threatening competition from over-the-top, broadband and TV rivals, and underwhelming contribution from the company’s recent investments in Sky Italia and Sky Deutschland. Add to these issues a depressed British Pound resulting from the June 2016 UK Referendum on EU membership and we have what media experts refer to as a “bargain of a lifetime”. At its current terms, the offer is both very accretive for Fox shareholders and, for Fox management, it “helps complete the jigsaw of capabilities”. We believe that investors have sound arguments to complain, that Fox has a strong desire to secure full control, and that only a handful of large investors can call the shareholder vote into question. As such, M&A activism is possible on the notion that Sky minority shareholders deserve a higher offer. In this report, we assess why European antitrust and media plurality aspects can be dealt with comfortably. We believe that the deal will lead to media plurality being maintained since Fox's 2013 spin-off from News Corp separated itself from any newspaper business, thus ensuring a sufficient voice to the UK public. Furthermore, Sky's 2014 acquisitions of Sky Deutschland and Sky Italia have cleaned up the companies and antitrust issues for these acquisitions have already been reviewed and approved by the EC. More importantly, this report evaluates the opportunities and risks for M&A activism and Fox's potential response to this.


December 21, 2016 | Industrials | North America | Ended

Monsanto / Bayer : International Antitrust Scrutiny

This 62-page risk arbitrage research report focuses almost exclusively on the international (ex-US) antitrust aspects of the deal, less covered, yet potentially deal-breaking risks. The analysis considers the deal’s effects on competition in China and Latin America, and pays particular attention to scrutiny from the European Competition Commission (EC). The findings suggest that there is potential for the EC to block the deal, stemming from issues with: 1) BASF, which could be unwilling to help and/or may instead purchase divested assets from Dow/DuPont, and, 2) the EC, potentially defining the “bundling” of seeds and crop protection products as a distinct product market, which could lead to monopolistic dominance and foreclose competitors on conglomerate grounds. Until we receive more clarity on the Dow/DuPont EC decision and corresponding divestiture buyers, we would not be long Monsanto.


November 01, 2016 | Financials | Europe | Ended

Delta Lloyd / NN Group : Pre-Event Risks, the Stichting and Shareholder Reactions

Soft catalyst special situations, which include pre-event M&A, is a popular strategy among event driven funds and can be lucrative. While it is not a deal that we would usually cover, the Delta Lloyd / NN Group pre-event situation is of particular interest as it illustrates the difficulty in: 1) assessing the outcome of a proposed offer; and, 2) concluding whether or not companies will eventually agree to an M&A transaction. Through statistical analysis and a thorough investigation of precedent takeover proposals, we highlight the risks involved in buying potential targets at elevated prices in hopes of an agreed deal, an increased proposal or a counterbid. Funds only need to have experienced or read our case studies on failed European pre-event M&A, such as K+S (SDF GY) / Potash (POT CN), Syngenta (SYNN VX) / Monsanto (MON US) and AstraZeneca (AZN LN) / Pfizer (PFE US), among others, to understand how swift and significant losses can be in undertaking this strategy.


October 26, 2016 | Industrials | Europe | Ended

Kuka / Midea : Implications of the BMWi Certificate Withdrawal of Aixtron / Grand Chip

Our thoughts on the likelihood that the German Federal Ministry of Economic Affairs and Energy (BMWi) revisits and revokes the Certificate of Non-Objection that was issued for Midea’s acquisition of Kuka. This is on the back of the recent confirmation that Grand Chip Investment received a letter from BMWi announcing the withdrawal of the BMWi Certificate of Non-Objection, that previously approved the Aixtron / Grand Chip transaction on 8-Sep-16.


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.



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