– Rexam plc (REX LN): Drinks can makers Ball Corp and Rexam Plc are said to have begun the process of selling assets, potentially worth more than $3 billion, to meet antitrust regulations ahead of their planned merger, several people familiar with the matter said. These reports follow earlier Feb-16 reports 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, for a rumoured purchase price of GBP 1bn. A $3bn global sale number would indeed be (slightly) better disposal price, indicating purchase price of 7-8x EBITDA (rather than the GBP 1bn for European assets which amounted to only 6-6.5x EBITDA). Looks like (global) sale process is progressing, and deal still very much on track for 2Q16 closing. Core spread.
– Syngenta AG (SYNN VX): According to a report published on MOFCOM website, MOFCOM states that ‘they believe that a deal between Syngenta and Chemchina is beneficial for both companies, as it combines complementary strengths and helps both companies advance. It also adds that Chemchina supports ChemChina’s acquisition and expects them to abide by common international business practices. Furthermore MOFCOM states that they hope that relevant countries also view this deal in an objective and rational way.’ Very powerful message from China, highlighting that deal has support from higher echelons in Chinese politics (indicating that any required Chinese approvals from Chinese NDRC, SAFE and ASAC should be relatively straightforward), while acknowledging that the deal could attract other regulatory headlines (i.e. CFIUS). Although we appreciate long dated timetable and high potential for scares and spread has slightly come in to around 19%, we still believe spread remains too wide at current levels.
– Terex (TEX US) / Konecranes (KCR1V FH): Almost concurrent with slightly underwhelming 4Q16 results (4Q EPS of $0.50 vs $0.52 consensus and 4Q sales of $1.58bn vs $1.47 bn consensus and lowering 2016 EPS to $1.30-$1.60 vs $1.87 consensus and net sales to $5.9bn vs $6.19bn consensus), Chinese bidder Zoomlion announced it will continue to advance its proposed acquisition of Terex at US$30.00/share in cash. They state that deal would be financed 40% of the transaction with its own cash on hand and 60% with bank debt financing, and that they are confident it will receive the necessary regulatory approvals. They also state they have made all necessary preparation and have engaged professional financial advisors and legal counsels to ensure the smooth progress of the proposed transaction, but wishes to emphasize that no binding agreement has been entered into as at the date of last night’s announcement. Although any gatecrashing deal like this should be looked at very sceptically, given excess and almost impossible pro-forma net leverage (Zoomlion’s net leverage is expected to jump to almost 50x), we should take this offer very seriously, as China Inc seems to be in an urge to get overseas deals done (FT article was quoting analysts stating that the Chinese government has urged Zoomlion to make outbound acquisitions and that the state would come to its aid if it had difficulty repaying the debt). Would consider Terex position in low $20s, playing higher than 50% probability of successful Zoomlion offer, and limited downside on a potential accretive Konecranes merger downside scenario.
– TNT Express (TNTE NA): (Too) much news flow on Brazilian CADE process of Fedex acquisition of TNT, where new reports are indicating that UPS could file an appeal to CADE Tribunal. However too much fluff around this news, as even a UPS appeal doesn’t look to derail the TNT closing timeframe. Any appeal outcome would most likely just come within MOFCOM Phase 3 timetable. Deal still very much very solid and on track for 2Q16 closing. Too tight though around EUR 7.90, wouldn’t bother.