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– USG People (USG NA): As customary with an announced intended offer in Netherlands, companies provided a joint status update, stating that: ‘ Companies are making timely progress on the preparations for the Offer, with Recruit expected to submit a request for AFFM approval by Mar 15, and that Recruit will publicly announce the availability of the offer memorandum and commencement of the offer period which is currently expected to commence in April 2016.’ With an expected 8 weeks offer period, this vanilla offer is very much on track for early Jun-16 closing. With no regulatory issues (companies perfectly geographical complementary) and unlikely chance for a counter (at the deal conference call, USG’s CEO was quoted that Recruit deal came “After a market consultation and following discussions with other/relevent players”), base case still very much receipt of EUR 17.50 cash in first part of Jun-16. Trades about 5% pa – remains solid deal, with limited downside.
– Bang & Olufsen A/S (BO DC): After Bang & Olufsen, the Danish high-end stereo and TV maker, confirmed end-November 2015 that it had received certain initial approaches in respect of a potential launch of a takeover offer, various schools of thought have appeared on the process after Bang & Olufsen decided to release its 2Q15 one month earlier than expected on 17 December 2015: some speculate that that earlier release is positive and is putting pressure on potential bidders to up their price, while others argue that such a release indicates that the sales process is slowing down. Although we would more lean towards the former, positive interpretation, we also acknowledge that a) Bang & Olufsen’s share price has already outperformed the local Danish (although oil geared) OMX index by 30% (coming down from 50%), b) last 1-2 weeks have seen increased local institutional selling sceptical of full sale (as witnessed by 15% share price drop since 09 January); c) Bang & Olufsen’s standalone fundamentals are less than ideal with high chance for further profit warnings as it suffers from worsening product mixes with the higher-margin Bang & Olufsen- branded business deteriorating (in a rapidly evolving and uncertain world of digital media), and company hasn’t generated positive FCF since 2010. Dangerous situation with ugly downside should deal not materialise.
– Ocado Group plc (OCDO LN): Lower quality UK press Daily Mail writing in a more general market report that there are ‘rumours in the City’ that Amazon has advisers ‘beavering away’ on a potential approach to Ocado as part of its ambitions to launch a fully-fledged grocery delivery service in the UK. Very surprised to see Ocado up so significantly on Daily Mail article: We would be aggressive sellers here of Ocado up more than 19% given a) perennial rumoured take over target status whose interest by Amazon looks a slightly lazy editorial effort piece by Daily Mail (in line with their recent unfounded ‘scoops’ of PostNL and Vodafone), b) most likely we would have seen a statement already by companies imposed by UK Takeover Panel should there be any substance to the rumour (FT commented that no statement is thought to be imminent), and c) some of this move is most likely being accentuated by relatively large short interest. We are awaiting call back from UK Takeover Panel.
– SABMiller plc (SAB LN): With i) absence of new European deals being announced and few other large scale European merger arbitrage opportunities, and ii) SAB deal pretty straightforward, we believe that SAB will benefit the most from reallocation of BG Group’s arbs money getting reinvested on a successful Shell vote.