– Rexam plc (REX LN): Ball Corp announced largely in line 4Q15 results yesterday: BLL reported 4Q15 EPS of $0.80, ahead of $0.75 consensus, however the beat was mainly driven by a lower tax rate ($0.08); FY FCF of $558mm ex-Rexam deal costs was roughly in-line with previous guidance (~$550mm) & consensus. Company did not provide much update on Rexam: it just stated that it expects the Rexam transaction to close on time in the 1H16, that discussions with FTC were progressing and that it did not expect much tax leakage from the asset sales and have means of offsetting the headwind. Although these numbers were largely non-event, these numbers confirm again the high FCF generating capacity of can makers (and the attraction of become a larger player with Rexam plants), and Ball’s pro-forma capacity (including Rexam) will allow to bring Ball’s leverage back to 3x already by 2017 and might initiate a buyback stock sooner than expected. All signals continue to point to the Rexam deal closing in next months – spread at Gbp 34 (including Rexam FY15 Gbp 12 dividend) or almost 6% remains attractive to own – also worth considering under hedging the (0.0457 BLL + GBP 4.07) spread (as potential Ball upside to $75-80 a share levels vs $67 now if we would price Ball in line with its average NTM EV/EBITDA multiple of 9.5x for pro-forma company allowing for $300-350 annual deal synergies (slightly above Ball’s own projected synergies of greater than $300m) and divestitures of $2.5bn .
– Kuoni Reisen Holding AG (KUNN SW): After Bloomberg reported the news already yesterday afternoon, Kuoni confirmed late last night that final negotiations with EQT for a potential takeover offer are in progress, but at this stage, no final decisions have been taken and there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made. Although everything continues to rightly point in a near-term all cash sale to EQT, at CHF 325, Kuoni’s share price might have slightly run ahead of itself (almost pricing in 50% premium to unaffected CHF 215-230 trading pricing), and would cut another third of our position above CHF 325.
– Home Retail Group plc (HOME LN): FT article highlights traders commentary that Sainsbury and Home Retail might be far apart on price, with a potential bid-ask difference of about 50p short. Fears of too wide bid-ask are also being accentuated byHome Retail’s 2nd largest shareholder Toscafund having trimmed about a 5th of its position above Gbp 150 (reducing stake from 9.1% to 7.2%). With highly binary PUSU deadline approaching, we obviously appreciate that shareholders will come nervous, although we always believed that Home Retail had been trading too high around GBp 150 levels, and would considering buying on start of increased nervousness going into next week’s PUSU – as we still believe that a deal in the GBp 150-170 range will get struck.
– Gamesa Corporación Tecnológica, S.A (GAM SM): According to the Spanish press El Confidencial, Siemens has hired Deutsche Bank to study the acquisition of Gamesa. Siemens has allegedly already started negotiations with Iberdrola, the main shareholder of Gamesa. The negotiations are analyzing how the operation could be done and one of the possibilities is the launch of a takeover. Highly credible rumour as Gamesa offers an attractive addition to Siemens’ wind energy exposure as Gamesa is the 8th largest wind turbine manufacturer worldwide with about 5% global market share (or almost 10% excluding China). An acquisition of Gamesa would propel Siemens to global market leader with combined 15% market share ahead of Vestas with 12.3% market-share and GE (9.1%). Very likely some kind of agreement between Gamesa and Siemens will be struck given a) need for consolidation in global maturing wind energy market, b) Gamesa a sub scale player who would benefit being acquired, c) presence as large 19.7% reference shareholder Iberdrola who could facilitate in a sale (should the right agreement getting struck), d) M&A heating up in wind energy (e.g. 2015 Acciona Windpower deal). However main uncertainty relates to agreement is full take over or some cooperation agreement (where Iberdrola would equally benefit from).