Latest Reports



January 14, 2020 | Real Estate | Europe | Ended


TLG / Aroundtown : Back-Ends in All-Stock, No Minimum Acceptance, Real Estate Deals

Despite some recent deal tender failures in Germany in 2019 - from Scout24 to Osram to Metro - event driven funds still actively seek opportunities in German back-end situations, led by the speculation for future domination agreements. The takeover of TLG by Aroundtown is different from others whereby it is a real estate deal, with all-stock consideration and is not subject to a minimum acceptance requirement. Thus, while there is no risk to the tender outcome or antitrust (German FCO approval has been achieved), notable considerations are whether Aroundtown will pursue a post-deal control measure, such as a domination agreement or squeeze-out, and how a standalone TLG will perform immediately after the transaction closes. In this report, we assess TLG back-end considerations after analysing relevant precedent German takeover offers (real estate, stock component and “no minimum acceptance” deals), specifically dissecting the transactions’ ultimate acceptance levels, in-deal control commentary, timing and control measure actions, and the immediate and medium-term share price performances of untendered target shares.

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November 21, 2019 | Industrials | Europe | Ended


Fiat Chrysler Automobiles / Peugeot : Pre-Deal Hurdles, Rationale and Deal Structure

In what may shortly become the largest public European merger of 2019, by far, the union of Fiat Chrysler Automobiles (“FCA”) and Peugeot (“PSA”) will create the third largest automaker in the world. With the car industry under pressure due to subdued demand and a shift to electric and self-driving cars, joining forces makes sense as the best path to survival. The companies’ advisors and management teams are working to get a definitive deal announced in the coming weeks and will be hoping that their efforts will not be hampered by a recent litigation roadblock erected by General Motors (GM US). Pre-deal hurdles to arriving at a firm deal in the automotive space are vast and most recently caused FCA to withdraw from its negotiations with Renault (RNO FP). For FCA / PSA, expectations are no different and, in this report, we analyse anticipated pre-event risks: unions, politicians, litigation, major shareholders, antitrust and valuation.

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October 31, 2019 | Consumer Discretionary | North America | Ended


The Stars Group / Flutter Entertainment : Global Antitrust and Notable Deal-Related Risks

The TSG / Flutter merger will create the world’s largest online sports betting and gaming operator, and follows a trend of consolidation in the gambling industry, particularly among UK public companies. The cross-border deal was agreed upon due to the companies’ needs to diversify geographies, meaningful accretion, strong synergies and lucrative cross-selling opportunities. To achieve these benefits, the parties must overcome complex antitrust hurdles, in addition to regulatory control and foreign investment approvals. In this report, we focus on the risks to deal completion, which are predominantly competition-related in the UK and Australia - the world’s two largest online gaming markets. We look at how required divestitures weigh against the primary rationale for the deal – cross-selling in the US – and explore the feasibility of additional deal-related risks, such as an unsolicited bid for Flutter and UK-specific regulatory, public interest and political considerations.

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September 27, 2019 | All | Europe | Ended


European LBOs / Axel Springer, Cobham, Inmarsat, Merlin and Osram : Trends, Structures, Candidates

While European private equity activity falls shy of levels seen during the previous M&A boom, deals are increasing, and investors must monitor companies and transactions for opportunities. Within the region, risk arbitrageurs need to look no further than Axel Springer, Cobham, Inmarsat, Merlin and Osram Licht to understand that while a mega leveraged buyouts deal still alludes Europe, public-to-private LBOs are prevalent and announcements are unlikely to slow down. Brexit and economic malaise in Europe deter some investors, but this spells opportunity for private equity firms who have an appetite for undervalued stocks. Led by record levels of dry powder at buyout firms, private equity deal-making has been fuelled by strong historical investment returns, still-cheap borrowing costs and the attractiveness of privately-held companies, whose multiples are exceeding the public average. It is thus logical to anticipate more European buyouts, and in this report, we consider the most likely candidates. We dissect the five major public-to-private European LBOs in the marketplace and construct a list of 20 publicly-traded companies which we believe will be the next public equity takeover targets.

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August 22, 2019 | Health Care | Europe | Ended


Allergan / AbbVie : Antitrust Complications and Considerations

On 25-Jun-19, AbbVie agreed to acquire Allergan for $63bn, a 45% premium to the target’s undisturbed share price. Since the deal was announced, AbbVie shares have fallen 14%, and while understanding AbbVie’s need to diversify from 2023 patent-threatened Humira, its shareholders have questioned the need for the company to control the leading anti-wrinkle injection manufacturer whose stock price has declined 50% since 2017, partly due to the patent loss of its second best-selling product. The risk arbitrage gross spread has widened to low double digits and, although the size of the deal prevents arbs from controlling the spread, many investors have questioned why strong pessimism remains. We have spoken to multiple doctors and specialists, and in this report, we explore key antitrust risks which are causing uncertainty: in-depth scrutiny from a recently inconsistent FTC; later-stage or marketed drugs, such as Skyrizi, being required for divestiture; wider Spark-like product definitions uncovering unexpected overlaps; and AbbVie’s defined outs to walk away from the deal.

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July 26, 2019 | Telecom | Europe | Ended


Inmarsat / Apax, Warburg Pincus, CPPIB, OTPP : UK National Security, Ligado and Antitrust Updates

Some dynamics of the Inmarsat takeover have changed since the deal was originally announced on 25-Mar-19, but the general likelihood of outcomes for securityholders remains. On 22-Jul-19, shortly after the Competition and Markets Authority (CMA) launched a merger enquiry on antitrust in the UK, the Secretary of State for Digital, Culture, Media & Sport (SoS) issued a public interest intervention notice (PIIN) on national security grounds. This move is not uncommon yet was unexpected given Apax is a former owner of Inmarsat and, just five days prior to the SoS intervention notice, Apax stated that the UK government had accepted voluntary undertakings following “constructive” discussions with all consortium members. Trading in Inmarsat has been relatively muted since 22-Jul-19, indicating that investors still believe the CMA and the SoS will waive the deal through. In this report, we assess what Apax has offered relative to other national security-scrutinised deals, the public interest process, timing, and the most likely SoS decision. We also revisit key investment considerations involving the Ligado argument, antitrust approvals, the convertible bond and our latest break price estimates.

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June 24, 2019 | Health Care | North America | Ended


WellCare Health Plans / Centene Corporation : Antitrust Assessment and Other Deal Considerations

Centene’s ambitions to acquire WellCare in a $17.3bn cash and stock transaction has been approved by both boards and sets of shareholders, so the sole focus is on regulatory clearances at US federal and state insurance levels. Centene’s motivation for the deal is centred on building scale to compete with its larger competitors in managed care and on establishing a bigger Medicare Advantage footprint. Primarily due to Medicaid Managed Care Organisation (MCO) overlap within counties and states, the deal will inevitably catch the eye of US antitrust regulators. As well, risks posed by the Trump administration’s threats to repeal the Patient Protection and Affordable Care Act (ACA) could have considerable implications for US health insurance markets, and on Centene and WellCare’s standalone businesses.

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May 31, 2019 | Health Care | North America | Ended


Spark Therapeutics / Roche Holding : Implications of Pull-and-Refiles and a Second Request

Roche’s pending $4.3bn acquisition of Spark has encountered difficulties with the FTC, which has subsequently led Roche to pull and refile its HSR application three times. Due to a specific carve-out in the merger agreement, Roche is not bound to completing the takeover if it is required to divest Spark’s haemophilia A pipeline drugs, or its own market-leading haemophilia A product, Hemlibra. Since the FTC’s concerns most likely surround Spark’s haemophilia A portfolio, a key driver of the acquisition, this has led to questions of Roche’s strategy for the pull and refiles and its overall commitment to pursue the takeover if a haemophilia A divestiture is required. Conversely, the FTC is weighing pursuing this deal further given recent high profile losses and questionable strengths in their arguments against market definitions and divesting pre-Phase III drugs. Our report balances FTC and Roche incentives, key debates and drugs, theories behind pull and refiles, and break prices, incorporating suitors and crowdedness.

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April 29, 2019 | Telecom | Europe | Ended


Inmarsat / Apax, Warburg Pincus, CPPIB, OTPP : Ligado Uncertainty and Optionality – Pre- or Post-Vote

The private equity-led bid for Inmarsat was triggered by a share price decline of 70% from highs three years ago, a subsequent cheap valuation, strong cash flow generation and optimistic growth at its aviation business. When the suitors considered upside scenarios from Inmarsat’s links with Ligado, the rationale for a takeover was clear, and a definitive offer for the company was presented on 25-Mar-19 from a financial consortium comprised of Apax, Warburg Pincus, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan Board. In this report, we assess the impact of the Ligado catalyst, the uncertainties and opportunities before and after the 10-May-19 scheme vote, and our views on the feasibilities of a bump, CVR and counterbid. We explore which organisations and individuals can affect the now much-delayed FCC ruling on Ligado’s licence modification and possible scenarios that can make the investment risky or lucrative for the Inmarsat buyers and investors.

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March 28, 2019 | Media | Europe | Ended


Scout24 / Hellman & Friedman and Blackstone : The 50%+1, Bestellerprinzip Risk and Optionality

In the wake of news in summer 2018 that German lawmakers were proposing a significant regulatory reform to the domestic real estate market - the Bestellerprinzip - Scout24’s stock price collapsed by nearly 30%. This negative performance helped trigger renewed interest from private equity firms and the company was subsequently shopped to potential buyers. After some suitors dropped out and a bid was rejected, the company finally agreed to be taken private by a financial sponsor consortium consisting of Hellman & Friedman and Blackstone. These same sponsors formerly held 70% of Scout24 for two years before IPO’ing the company in October 2015. In this note, we explore why the sponsors are returning for a second run, the deal and timing implications of a potential Bestellerprinzip implementation on the German home sales market, and the potential outcomes given the 50% minimum acceptance condition. We analyse the strategies, trading and ownership developments of similar precedent deals over the past ten years, both during and after acceptance periods, and calculate Scout24’s break price in formulating our recommendations.

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