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24-Feb-15: London Stock Exchange plc (LSE LN) / Deutsche Boerse AG (DB1 GY): Third time lucky? standard

London Stock Exchange plc (LSE LN) / Deutsche Boerse AG (DB1 GY): Companies confirmed that they are in detailed discussions about a potential merger of equals. The transaction would be structured as an all-share merger of equals under a new holding company. Under the terms of the transaction, LSE shareholders would be entitled to receive 0.4421 new shares in exchange for each LSE share and DB1 shareholders would receive one new share in exchange for each DB1 share. Based on this exchange ratio, DB1 shareholders would hold 54.4%, and LSE shareholders would hold 45.6% of the enlarged share capital of the combined group. The combined group would have a board composed of equal numbers of LSE and DB1 directors. PUSU deadline set for 5pm on ...

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Darty plc / Groupe Fnac SA: Wide and overlooked solid deal standard

– Darty plc (DRTY LN) / Groupe Fnac SA (FNAC FP): Although Darty/FNAC represents a smaller deal with lower liquidity (trades average around $0.5m), we believe this situation has been slightly overlooked, and warrants work done, especially considering net spread is almost 15%. Given main risk relates to timing risk on French competition approval, we would look to set up the spread above Gbp 17 (terms: 1 DRTY = 0.027 FNAC) or about  15% annualised on worse case end of 2016 closing, as this is a stringent UK governed Scheme without any issues with shareholder approvals or substantial regulatory blocking risk, while there is presence of timing upside should France clear the deal in Phase 1.  On 20 November 2016, FNAC announced a recommended ...

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Royal Dutch Shell Share Class Trade: Long RDSB LN – Short RDSA LN standard

Currently Royal Dutch Shell A shares trade almost at par to Class B shares (RDSA LN at GBp 1496 vs RDSB LN at GBp 1501). In the absence of share buybacks till at least 2017 and once the BG deal situation is off the table (completed or lapsed), we would expect the discount of As to Bs to widen again to 4-6% levels. Hence we would suggest to go long RDSB LN and short RDSA LN in 1 to 1 ratio. Although lower pay out profile (4-6% upside, 1-2% downside), this represents much lower risk and  better upside/downside profile than playing the BG/Shell deal spread (with 10% upside and 35%+ downside) going into last 1-2 months of the BG/Shell deal. –          Difference between Shell Class A and Class B shares: o   Main ...

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Smurfit Kappa Group plc (SKG ID): Sitting duck for International Paper standard

We would consider a (market hedged) long position in Smurfit Kappa Group (SKG ID) in the EUR 17-18  range.  We believe it is only a matter of time before rumours re-surface that International Paper (IP US) is looking at Smurfit. Downside: EUR 15. Upside: EUR 30-36. We have stayed away from such position in last months as price and valuations had been running ahead of itself since Sky News reported last year in April 2015 that IP had hired Deutsche Bank to advise on a potential take over offer for Irish rival Smurfit Kappa for EUR 36 a share. However, with Smurfit’s price having come down from EUR 30 levels since (and largely trading in line with historic average NTM P/E and EV/EBITDA multiples of 12x and 6.5x), we ...

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