– BG Group plc (BG/ LN): In a new UK press article this morning in The Times, an ‘unnamed, leading Royal Dutch Shell shareholder’ has urged it to consider renegotiating the terms of its £43 billion takeover of BG Group, saying that ‘circumstances had “changed so much” since the proposed deal was announced in April that Shell should cut the price. Figures show that investors are betting more heavily on further falls in the oil price than at any time for more than a year.’ Although we appreciate everybody can have an opinion, we believe this article to be a poor allocation of editorial space as a) shareholder is and prefers to be anonymous in making his opinion public (any shareholder with gravitas and conviction wouldn’t be anonymous); b) same arguments by Ian McVeigh, head of governance at Jupiter Fund Management, are being rehashed (see our counterarguments). Non-event article, we obviously appreciate the risk arb nervousness kicking in (some big guys with some huge positions out there) but continue to like BG/RDSB spread above GBp 110, but keeping a firm eye on crude prices.
– Telecity (TCY LN) / Equinix (EQIX US): Parties have published the Scheme document. Main news relates to timetable: Scheme vote on 11 January 2016, and deal to be effective on 15 January 2016. Semi-unconditional deal now with settlement in latter part of January 2016: would set up above GBp 20 ((0.0336 EQIX + GBp 572.5 – TCY, with GBp 4 dividend loss on EQIX’ $1.69 ex 07-Dec-15) for quasi risk-free 1.5% return for 2 months
– Rexam plc (REX LN) / Ball Corporation (BLL US): From our sources, it appears that Ball has offered quite a significant divestiture package to the EC and seems to prefer (as would be expected) one buyer for the whole divestiture package. We haven’t heard any specific names of buyers yet, however we expect news flow to start focusing on identities of potential buyers. The fact that Ball seems to be willing to let go higher than expected number, indicates it is willing to go all the way and go above the $1.58bn divestiture cap (most likely as it has identified much higher pro-forma synergies). More comforting regulatory noise coming out of EC process: would set up spread above Gbp 60 (GBP 4.07 + 0.0457 BLL – REX) and add on negative regulatory headlines around Gbp 75-80p.
– Imperial Tobacco plc (IMT LN): There has been increased and accelerating news flow on Imperial in last couple of days (as being a (break-up) target for British American Tobacco): although we appreciate the news flow is still very much rumour based (fact that no statement was issued last week by Imperial, indicates that no talks are currently taking place, otherwise UK Takeover Panel would most likely have pushed parties to come out with a (PUSU) statement), we like Imperial around GBP 34 because of its valuation support (and limited earnings risk) and hence do not believe current levels reflect too great of an M&A /speculation premium.