– Rexam plc (REX LN): Sunday Times reported that three private equity firms (Apollo, CVC, and Blackstone) and Ardagh have emerged as the leading bidders for the Ball/Rexam asset divestitures in Europe. This article follows earlier reports that Apollo, Madison Dearborn, CanPack, and Crown were expressing an interest for the assets in Brazil. So currently, it appears that only Apollo is looking for a global deal. With respect to European assets, article cites a £1 billion purchase price for the assets in Europe: assuming the required European assets generate about $1.5-1.7bn in revenues (assuming about 15% EBITDA margin), a £1bn price would imply an EV/EBITDA of 6-6.5x, which appears at the low end of (7-10x) price expectations. Nevertheless, we believe deal is progressing very much (and disposal prices could start increasing with further competitive interest), with deal very much looking to be on track for closing in 2Q16. We still like the spread at GBp 30 (incl FY15 Rex dividend) current levels.
– Syngenta AG (SYNN VX): Since deal was announced last week, there has been no substantial new negative headlines which would point to significantly wider spreads: although Monsanto is understood (as they should be, so no surprises there) to be (and will continue to be) lobbying behind the scenes against sale to Chemchina, Chemchina seems to be making all the right noises on how it will approach Syngenta after closing the deal (a grace period of 5 years for Syngenta, with the divisional headquarters and main production sites not going to be touched; & ChemChina will deal much more constructively with Syngenta, as it would have done with Monsanto, with the antitrust assessment to be much less problematic). Trading at more than 22% spread, we continue to believe that any CFIUS and China Inc’s financing risk is exaggerated in Syngenta’s stock, and would continue to own (or initiate) at current levels – but leave enough room to add on scares.
– Home Retail Group plc (HOME LN): Sunday Times reported that Christo Wiese, the billionaire owner of Iceland and New Look considered a bid for Argos before J Sainsbury sealed its £1.3bn takeover of the catalogue retailer last week. A well-placed source said the pair had stalked Home Retail Group, Argos’s parent company, but decided to focus on other deals. Although most likely some substance to this rumour, we wouldn’t pay for it. However given that firm 2.7 announcement will be forthcoming very shortly, we would own/set up the spread at current levels, as believe spread will then contract to 5-6% pa on Jun-16 closing.
– Xchanging plc (XCH LN): Computer Sciences Corporation has now effectively won the bidding war for Xchanging after the deadline for Ebix to submit a formal bid lapsed: Ebix had until this Saturday 6 February to table a formal offer, or 53 days after CSC submitted its firm proposal of 190p a share on 9 December. However, Ebix didn’t even bother to put out any statement, implying CSC’s GBp 190 cash offer is now all ready to be declared wholly unconditional in the next 5-10 weeks (still conditional on EC, FCA and German Banking Act approval after offer has already been declared unconditional as to acceptances).