– Home Retail Group plc (HOME LN): Companies announce that they have reached terms of possible £1.1bn cash and offer for Home Retail Group comprising 55p in cash and 0.321 shares per HRG. In addition, HRG will receive 25p from the Homebase capital return and 2.8p in lieu of final dividend. HRG board says it is willing to recommend possible offer subject to reciprocal due diligence and reaching agreement on other terms. Sainsbury expects deal to be accretive to earnings in first year and synergies of at least £120m/ year after year 3 of deal completion. PUSU deadline being extended by 3 weeks till 23 February. Firm deal most likely to be structured as UK Scheme conditional on 75% Home Retail shareholder approval (we are still trying to understand whether deal will require Sainsbury’s shareholder approval as deal could be considered Class 1 transaction under UK Listing Rules, as Home Retail’s offer price market cap represents more than 25% of 2 Sainsbury’s market cap), UK Competition Commission approval, and closing of Homebase sale. £120m synergies number very much in line with sell-side expectations. Extremely high chance that companies firm up the deal in a 2.7 announcement in next 1-3 weeks, with deal closing (no regulatory or shareholder approval risk) in 2Q16 – would now aggressively start setting up spread above 10% annualised (with targeted deal closing June-16) or on about gross 4.2% spread – with offer price = 0.321 * SBRY LN + Gbp 82.8 cash – Gbp 2.25 (0.321 * GBp 7) Sainsbury’s May-16 dividend leakage. 

– Kuoni Reisen Holding AG: Following a comprehensive review and assessment of all strategic options to create value for shareholders, company announces  recommended all cash CHF 370 a share offer by EQT: tender offer is subject to min acceptance threshold of 2/3 of Kuoni’s voting rights and 50% of total share capital. The offer is expected to commence on 8 March 2016 and end on 6 April 2016. Although we were always cautious that any recommended cash offer could have come in low CHF300s, this is very good outcome for Kuoni shareholders. Should trade as solid, tight deal with 2Q16 deal closing, driven by regulatory approvals in US, EU and China. Although solid Swiss deal, one has to be compensated for huge 30-35%+ break downside – and would own some 8%pa on Jul-16 closing, implying CHF 355.

– TNT Expess (TNTE NA): Brazilian regulatory CADE unconditionally clears Fedex deal. The offer has now obtained clearances in EU, Brazil and the United States of America, with only China MOFCOM outstanding. FedEx and TNT Express are making timely progress and continue to anticipate that the Offer will close in the first half of calendar year 2016. Main and only gating item now relates to MOFCOM approval, which is understood to be going through full Phase 3 review. Just timing risk now. Deal expected to close somewhere 2Q16. Nothing to get too excited about.