– Deutsche Wohnen (DWNI GY) / Vonovia (VNI GY):  Vonovia announced it was lowering the minimum acceptance level to 50% from 57% on an undiluted basis (44% on a fully diluted basis) for Deutsche Wohnen’s tender offer. Customary under German take over law, when a condition/price gets adjusted, the (initial) acceptance period will be prolonged by law by two weeks (to 9 February). This extension of offer period is not the same as the mandatory subsequent offer period, which will start immediately after the end of the (initial) acceptance period closing (however this mandatory subsequent offer period, will only happen in Vonovia secures 50% by 9 February). Vonovia also announced that i) it was ruling out the alleged possibility of accepting a minority position in Deutsche Wohnen, and that ii) it is now legally not possible (anymore) to make any further changes to any of the offer terms (price, conditions). Vonovia stated that the main reason for the change was to increase the likelihood of the deal going through, as number of index/convertible investors can only tender shares for technical reasons after the successful conclusion of the initial tender period: as of 25 January, Vonovia held/controlled only 22.5% of shares of Deutsche Wohnen shares on undiluted basis. Vonovia IR told us they had good insight from their proxy advisors that a significant additional number of shareholders would now be willing to tender in this new offer period, and were confident they might get to 50% threshold. 

Situation has now increasingly become binary, although with limited up- and downside (approximate EUR 1-1.5 up and down from current levels), but most likely that Vonovia will not manage to get the additional 27.5% shares tendering in next 2 weeks. Would consider MDAX hedged long DWNI around EUR 23-23.5. 

Downside: Hard to see too much downside below EUR 22-23 (which would represent about 0-10% discount to Deutsche Wohnen’s 2016 NAV) (Also worth noting Deutsche Wohnen would be a market seller of its Deutsche Wohnen stake should they not be successful in their offer)

Upside: at EUR 23.95 Deutsche Wohnen trades about 3.5% spread to Vonovia’s (0.6364 shares + EUR 7.5582 cash) offer (without any further bump possibility)

– BG Group plc (BG/ LN): Dutch newspaper NRC indicates that an (unsourced) poll shows that about 75%% of Shell shareholders will vote in favour of the deal vs 79% in BG. Less than 24 hours to go before Shell’s AGM starts tomorrow at 10am European time: expect spread to tighten to Gbp 4-8 spread levels on the widely assumed successful vote tomorrow. 

– Darty plc (DRTY LN): After we published our highlight piece on the Darty/FNAC transaction yesterday, we had a follow up call with FNAC to discuss trade off for FNAC to either give up more stores and get an early Phase 1 clearance in France (so deal can close before summer 2016) or hold on too maximum number of stores and be pushed in extended Phase 2  (so deal could only close Oct/Nov-16). Interesting, overlooked situation. Please contact us at research@pantacapital.com to discuss.