– Syngenta AG (SYNN VX): Chemchina has published its Syngenta offer prospectus one week ahead of the 16-Mar-16 deadline (6 weeks after 03-Feb-16 offer announcement). The recommended offer is to run from 23-Mar-16 till 23-May-16, subject to one or multiple 40 trading days offer extensions to obtain all regulatory approvals. Chemchina intends to align Swiss and US offers timelines. Deal is expected to conclude by end of year. Termination fee of $1.5bn by Syngenta to ChemChina & reverse termination fee by ChemChina to Syngenta of $3bn. Conditional on minimum 67% Syngenta shareholder tendering, antitrust approvals (with Regulatory Material Adverse Effect limit set at $2.68bn (or 20% of Syngenta’s total revenues)), CFIUS approval (with Regulatory Material Adverse Effect limit set at $1.54bn (or about 45% of Syngenta’s US revenues)). Full financing secured, however possible that all or parts of the existing credit Facilities may be replaced by equity funds from itself and one or several third parties. Although no real surprises, this is incrementally positive offer document (with higher than expected reverse termination fee and relatively high regulatory divestiture caps). Continue to like/own the spread at current levels.
– Burberry Group plc (BRBY LN): The FT reports that a mystery investor has built up a stake of close to 5% in Burberry. Company has attempted unsuccessfully to ask HSBC, which is listed as the custodian for the position, to reveal its client. The buyer’s stake first went over the 5% disclosure threshold one month ago on 11-Feb-16, with HSBC reporting a total holding of 5.4% to the market four days later. The article also comments that analysts are suggesting that rival luxury goods groups such as LVMH, or private equity investors, could be behind the transaction with a view to launching a takeover. Although at GBP 14, trading at at 2016e P/E of 19x and EV/EBITDA of 10x, Burberry currently trades slightly 5-10% higher than its historic average trading multiple, and at (small) premium to European luxury sector, Burberry could represent an attractive, digestible EUR 8-10bn target for the likes of EUR 85bn LVMH (which has a history of undisclosed stake accumulation before launching its overtures): with its share price having come down more than 25% since March 2015, Burberry still represents an attractive one-brand addition to larger luxury conglomerates given its strong brand positioning (especially with the Chinese consumer). With Burberry having been rumoured multiple times in last years to be target for likes of PE, Coach, PPR and LVMV, we believe it is just a matter of time before real M&A interest materialises for Burberry – which in fact could accelerate once (unknown strategic/competitor) parties start their stake building (as today’s news). Although would not necessarily chase on this news, would initiate small around GBp 1420-1430 for outside case that stake builder turns out to be LVMH or other strategic party, and add Burberry to list (similar as last week’s BBA Aviation) of very credible near-and medium European M&A targets.