– BG Group (BG/ LN): Couple of developments in last 3 days: 1) extremely weak BG share price close on Friday in the closing auction (most likely driven by accelerated Capital Group and other UK institutional selling); 2) Telegraph reporting that BG’s 10th largest shareholder Capital Group (with about 2% stake in BG worth about £600m) has been selling £100m worth of BG shares last week (of importance as Capital Group is Shell’s 2nd largest shareholder with 4% stake); and 3) most importantly that Shell is rushing through with its process and will be publishing the Scheme prospectus tomorrow and organising the crucial Shell and BG shareholder votes on 27 and 28 January 2016 (with deal then expected to close by mid-Feb-16).
Although Shell could have waited till 11 January 2016 to publish the Scheme document, it most likely rushed the process because it wanted to avoid having the votes to close to (the black out period of) Shell’s and BG’s FY15 results (Shell results on 04 Feb, BG on 05 Feb). With today’s strong language of ‘unanimous approval by both Boards’ to move forward with the transaction (despite crude prices collapsing to/below $35/bbl), it looks like Shell remains very much locked in to proceed with this deal, and a withdrawal of recommendation now seems very unlikely – with any deal only to be derailed by accelerating institutional shareholder opposition, and potential negative, aggressive recommendation(s) by the proxy advisors (like ISS). Nevertheless, with a) oil prices further declining; b) higher chance of further negative (rather than positive) shareholder comments; and c) fact that most arb funds are rather full already in the name/situation, there is good chance that spread could further widen out before it starts tightening again. We have so far held off in the name and would only enter situation again on further widening in the spread to GBp 130-150 levels.
– ITV plc (ITV LN): Renewed speculation in lower quality UK press that Comcast, the owner of NBCUniversal, is weighing a bid for for Britain’s largest terrestrial commercial broadcaster, with reports that the two have held talks. ITV said it would not comment on speculation that it had held talks with Comcast. We are sceptical of a bid by Comcast, but still believe ITV will be taken out in medium-term by Liberty Global – as ITV is a page out of Liberty Global’s rulebook to acquire companies, when they start with acquiring a minority stake (precluding competitors and putting their foot in the door) before increasing control and ending up with full take over. Wouldn’t chase ITV here 4% up.
– Ten Cate (KTC NA): Suspense continues with absence of release by bidder Gilde – although legally Gilde has 3 working days (deadline would expire today at 11.59pm – this was confirmed to us by Ten Cate’s IR) to announce market how it wants to move forward with offer (walk away, merely extend or bump and extend), it is slightly bizarre that no release was put forward. Most likely an indication that consortium of parties still very much deliberating what their next move is. We still believe probability of mere extension/bump is higher than parties walking away today, and would own some here going into tonight’s announcement.
– Syngenta (SYNN VX): Bloomberg reporting over the weekend that Chemchina has proposed to purchase Syngenta in a two-stage takeover process where Chemchina offered to purchase 70 percent of Syngenta now, with an option to acquire the remaining 30 percent of the company at a later date. Although the leaks indicate further commitment from Chemchina and puts more pressure on Syngenta to (finally) agree to a deal (with Syngenta understood to hold a board meeting before year-end to vote on the deal), we still believe Chemchina will need to improve on this leaked structure (and most likely need to find more financing) as a partial offer is not in interest of all of Syngenta’s shareholders. Syngenta at current CHF 380 is touch too high here, one to buy in CHF 360-370 range. Updated downside: CHF 290-320, upside: CHF 400-470 (10-15% pa spread on CHF 470-500 cash offer).
– Tessenderlo Chemie (TESB BB): Since we published our cautious note on the Picanol transaction, we have been receiving lots of feedback and comments from equally disgruntled Tessenderlo minority shareholders who are very much wanting to fight this transaction- and willing to vote against at Tessenderlo’s 29 January 2016 EGM. Please contact us at email@example.com to discuss further.