– BG Group plc (BG/ LN): Despite crude prices further collapsing and 2.1% Shell shareholder Standard Life (unsurprisingly) publicly coming out against the deal, the other important proxy advisor Glass Lewis also recommended that Shell shareholders vote in favour of the deal: Glass Lewis, which is more US geared, has some relevance heres as around 30% of Shell’s shareholders are US based. With about 2 more weeks before the crucial vote happens, and still some lingering but very present risk that one of the 2 larger Shell shareholders could make a public negative statement on the deal, we would slightly reduce our BG position below GBp 65 – but still would remain spread as a core position.
– Home Retail Group (HOME LN): Public comments by Home Retail shareholders putting a very aggressive GBp 200 ask level in the public domain, with Home Retail’s 3rd largest shareholder Old Mutual (with 6.4% stake) being quoted that a “bid has got to start with a ‘2’ in front of it”, with another anonymous investor saying “if you do believe it’s got a future then the current price is not the price . . . you can get to a number north of 200p quite easily.” Although we believe that Sainsbury’s will be increasing its offer and most likely will be successful in its pursuit of Home Retail, we are sceptical that any successful bid will have a 2 handle given a) first bid is understood to already have been pitched in GBp 130-140 range (already almost 30% premium to unaffected pricing- hard to see any successful bid requiring 50%+ premia for UK retailer in softening and rate rising environment); and b) already some scepticism by sell-side and investors (witnessed by 5% drop in Sainsbury’s price upon approach announcement) as any premium above 30% would require identification of real (although will remain questionable) synergies. Stock at Gbp 150+ too high here.
– Xchanging plc (XCH LN): Xchanging urges shareholders to accept CSC’s GBp 190 cash offer. Xchanging also states that it has had very limited engagement with Ebix to date and as such doesn’t seem to believe anymore that Ebix will come with a superior offer as before their deadline of 5.00 p.m. on 6 February 2016 (being the 53rd day following publication of CSC’s offer document). Although the chance of Ebix coming back for Xchanging has always been remote (given much smaller size than CSC and doesn’t really fit Ebix’s margin’s profile), we would still own Xchanging at GBp 189-190 (for that remote Ebix counter possibility) – with base case that CSC will extend its offer after Day 21 (15 January) and will declare it unconditional as per acceptances on Day 60 (13 February) if Ebix wouldn’t have come back by 06 February.
– Syngenta AG (SYNN VX): Chemchina, the Chinese giant group which is rumoured to be in process of trying to successfully acquire Syngenta for CHF470-500 cash per share, announced this morning that it was acquiring the KraussMaffei Group, a plastics and rubber processing machinery manufacturer for EUR925 million. Obviously any non-Syngenta deal announcement could be perceived negatively, this deal is much smaller and should have no read-across whether Chemchina is still interested in acquiring Syngenta or not. We take comfort, however, that a Chinese group like Chemchina is still announcing European deals in the current weak China macro environment. After holding off on Syngenta in CHF 380-390 range, we would initiate small here in CHF 360-365 range (while being aware of expected weak results at its FY15 numbers announcement on 03-Feb-16). Updated downside: CHF 290-320, upside: CHF 400-470 (10-15% pa spread on CHF 470-500 cash offer).