June 2, 2009
On 29 April 2009, BPP Holdings, the UK professional training company, announced it received a preliminary approach from Apollo Global at a price of 620 pence in cash per share. With an almost 100% freefloat, and Schroders, BPP’s largest shareholder with around 17.4% of the shares, receptive to the approach, we believe that a firm bid for BPP from Apollo is likely: Apollo has no existing operations in Europe, with BPP being a robust business and very well positioned in a resilient market. Apollo Global has confirmed that any offer would not be subject to external financing conditionality. Any regulatory or other issues preventing a combination seem unlikely. With BPP trading at GBP5.50, there is 12.7% or 70 basispoints upside on the materialisation of a firm bid. Further upside could be generated by a competitive bidding situation with other parties as Pearson, who might want to get further presence in the UK/European training market. However in the low probability scenario of Apollo walking away, the downside could be more than the GBP 3.5 it was trading before the approach statement, given that BPP’s liquidity was limited ahead of the approach announcement and would dry up again if Apollo walks
UPDATE 08 JUNE 2008: APOLLO HAS MADE A RECOMMENDED CASH OFFER OF 620P, TO BE EFFECTED BY MEANS OF A SCHEME OF ARRANGEMENT. IRREVOCABLES 0.1%. SCHEME EXPECTED TO BECOME EFFECTIVE ON OR AROUND JULY 31ST. With the short duration of the scheme to be completed, we remain holders of BPP LN, given its low chance of rival offer of the likes of Pearson.
Posted by PG. Posted In : European Event-Driven Situations
June 2, 2009
With a EUR 4.49 per share cash offer ready for implementation, Lufthansa's take over for Austrian Airlines (AUA2:AV) is still subject to Europe's scrutiny on both the state aid it received from Austria and the merger competition from Europe's merger council. Given firstly that state aid was approved by Europe for the likes of Olympic Airways in Greece, and that secondly Lufthansa would be willing to offer concessions on some of the overlapping routes, we believe that with Austrian trading at EUR 4-implying a 12.5% spread - it is attractive to go long Austrian, and receive the EUR 4.49 toward the early part of the third quarter of 2009.
On 26-May 2009, Austria’s Finance Minister Josef Proell and Neelie Kroes, the European Union’s competition commissioner, were emphasizing that both had an interest in finding a quick solution to the EC matters. Regulators have to decide by June 17 if the acquisition can simply be approved or if additional examinations have to be performed.
Posted by PG. Posted In : European Event-Driven Situations
June 2, 2009
Given John Paulson's theorem of protecting the downside while the upside will take care of itself, I wanted to highlight one UK company that displays a resilient growth profile, with a possible bid coming along:
Venture Production plc VPC LN: After Centrica, the UK energy company, bought a 23% stake at 725p a share on 18 March 2009, it indicated it could possibly make a full cash offer for Venture. However, immediately thereafter the Board at Centrica indicated that that this 725p price a share substantially undervalues the Company, its prospects and strategic position particularly with regard to its UK gas resources. We believe that with the stock trading at 800-825p, the downside on this situation is protected by the 725p with 850-1100p a share upside, given that Centrica might need to pay a strategic premium for its assets (North Sea oil and gas assets) to convince Board and shareholders. Given a) Centrica does not achieve much with only 22% of the company; b) a 725p offer approach will not be accepted by the board, and c) Centrica is believed to be securing GBP 1.5bn (EUR 1.6bn) of funding from Lloyds, Barclays Capital, RBS and other banks to acquire London-listed Venture; we feel there is an attractive downside-upside investment proposition around 800p levels.
On 29-May 2009 Standard & Poor's lowered its long and short term credit ratings on Centrica to 'A-/A-2' from 'A/A-1' and noted that Centrica is structurally short of both gas and electricity assets relative to its competitors in the energy supply market, which creates significant volatility in its consolidated cash flows. Standard & Poor's anticipates that a buy out of Venture Proudction would reduce Centrica's business risk by lowering its exposure to wholesale gas and electricity prices. However, the reduced business risk will be offset by higher financial risk, since Centrica's cash flow coverage of net adjusted debt would weaken. We still believe that Venture Production is a strategic asset for Centrica, which already has put its focus on it by acquiring the 22% of the company, and would be expecting a full buy-out with a strategic buyout premium attached in the short/medium term.
Posted by PG. Posted In : European Event-Driven Situations
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