– BG Group plc (BG/ LN): With the deal now coming in its last straight line before the crucial Shell shareholder vote (next Wednesday 27 January), more of Shell’s shareholders are now coming in favour of the deal. With i) the deal now having won support of all 3 proxy advisors (ISS, Glass Lewis, PIRC), ii) public comments by Shell shareholders having been more than not in favour of the deal, with no large/reference shareholders against (see updated list below), iii) Shell having a history of shareholders voting alongside Shell’s board, and iv) BG and Shell’s (production/growth) results earlier this week displaying that Shell is better off with than without BG, Shell’s shareholder approval now almost looks like a given. Shell’s proxy advisor also confirmed to us that momentum for the vote was looking good,: asked what kind of % of approval they were expecting, they were saying at least 70-80%.
Although spread has come in significantly, we would continue to add above Gbp 30 levels, which still represents about 3% spread (or annualized almost 40% on Feb-16 closing). As written before, with Shell’s A shares now trading at parity vs Bs, we would also now consider trading the anticipated renewed widening of the Bs vs A’s of Shell.
Updated public shareholder stance:
In favour: Allianz Global Investors, Old Mutual, Qatar Investment Authority, Henderson, Aberdeen Asset Management, AXA Investment Managers, Artemis Global Energy Fund, Rathbone Investment Management, Brewin Dolphin, Norges Bank Investment Management, Kames Capital
Against: Standard Life Investments (although will vote half of its stake in favour), Jupiter Fund Management, Smith & Williamson
Largely unknown: Capital Group (although mainly known to be voting alongside the board)
– Koninklijke Ten Cate NV (KTC NA): As anticipated by us (where we were expecting tendering in the 80-90% range), Gilde announced that 85.8%of shares have been tendered, and that it will announce by Jan 26 if the bid will be declared unconditional or not. Base case now that Gilde declares the offer unconditional as to acceptances and commence a 2 week post acceptance period and trying to squeeze in as much as further acceptances (index funds,…) while putting pressure on Kempen to tender too.
– Syngenta AG (SYNN VX): In a separate transaction, CFIUS, America’s foreign-investment watchdog, objected to the $3bn sale of a Philips unit to Chinese buyout firm. Although obviously no direct read-across to potential Chemchina’s acquisition of Syngenta, any recommended deal with China could become increasingly politicised and would start attracting largely political and US CFIUS headlines during the process (US represents about 20-25% of Syngenta’s total revenues). Although we acknowledge that Syngenta’s takeover chance by Chemchina could be compromised by the ongoing China macro uncertainties (acquisition of Syngenta would be China’s largest foreign acquisition), Syngenta has come off quite significantly, and at CHF 350 only trades with an estimated 10-15% takeover premium. Would recommend to (continue to) own Syngenta around CHF 350-360. Updated downside: CHF 290-320, upside: CHF 400-470 (10-15% pa spread on CHF 470-500 cash offer).
– Home Retail Group plc (HOME LN): After Home Retail’s less than impressive results last week, Sainsbury’s has been remarkably quiet this week, mostly expected to be in process of analysing Argos’ last reported set of numbers and Home Retail’s disposal of Homebase to Wesfarmers . With Sainsbury’s 02-Feb-16 PUSU approaching rapidly, we expect there to be high chance of some update early next week (most likely an unsolicited or recommended cash and shares GBp 140-160 offer being put forward by Sainsbury’s), and would expect some kind of Friday effect on the shares today (accelerated buying ahead of expected positive UK weekend press).