>>> AB InBev could look at partial share alternative for SABMiller bid

AB InBev could look at partial share alternative for SABMiller bid

* Initial cash default offer more likely to result in fewer share elections - independent lawyers
* Provides scope for major SAB shareholders to be paid exclusively in shares
* Bidder could attempt to make cash offer appear at premium to stock alternative

AB InBev [EBR:ABI] could be considering a partial share alternative as a way to help major SABMiller [LON:SAB] shareholders avoid hefty capital gains tax bills, it was said.

ABI is thought to be working toward a deal structure that would give SABMiller investors Altria (27%) and the Santo Domingo family (14%) the greatest ability to roll over their stakes into the combined entity to avoid large capital gains tax bills on cash profits.

A spokesperson for ABI declined to comment.

UK takeover law stipulates all target shareholders must be offered the same consideration. This means a bidder cannot offer an all share consideration to one set of target investors while offering a cash element to others.

A partial share alternative involves the bidder making an initial cash offer to all target shareholders. However, it includes a secondary option stating it will pay up to a certain amount of the overall offer by way of shares, if target shareholders elect for this alternative.

Analysts have estimated that around 40% of InBev’s offer may be in stock. Bankers previously predicted that this may be to accommodate SAB’s largest shareholders. ABI typically favours offering as much cash as possible in offer considerations, as reported. However in this case it needs to tailor the bid for Altria and the Santo Domingos.

Lawyers that have worked on these type of deal structures said a partial share alternative allows for the possibility of a small amount of target shareholders being paid exclusively in shares, if others do not opt for the share consideration. If the maximum limit for the share alternative is exceeded, then shareholders who opted for this consideration are scaled back evenly.

It is similar to the mix-and-match facility that has become more popular than the partial share alternative in recent years. However, mix-and-match deals only allow shareholders desiring an all share consideration the option if others opt the opposite way. A partial share alternative requires shareholders to positively opt for the share component, two independent lawyers noted.

The risk is that other investors may also desire a share component. The chairman of SABMiller investor Allan Gray is reported to want shares of the new entity to be listed in South Africa.

This could leave ABI in the position of trying to structure the deal so that shareholders other than Altria and the Santo Domingos are attracted enough by the cash consideration to not opt for shares.

Offering a partial share alternative is a more logical way than a mix-and-match for a bidder to attempt convincing certain investors to accept the full cash consideration, one independent lawyer said. A number of investors, particularly less sophisticated ones, tend to follow the default all cash initial offer, he said.

The bidder can attempt to have the cash offer appear at a premium to the share alternative, he said.

One recent example of a partial cash consideration being used is Carlyle’s 2014 private bid for Dealogic. In this deal, target shareholders could only opt for the alternative if they accepted all shares rather than cash.

One minority SABMiller shareholder previously told this news service he favoured an all cash offer due to his expected undesirability of the AB InBev stock post-deal. A second desired a cash-and-stock offer, but was set to sell out of the new entity once the combined entity had reached its full synergy potential. Neither indicated an appetite to receive all shares.

This differs from Platform’s [NYSE:PAH] 2015 bid for Alent [LON:ALNT]. The partial share alternative offered in this deal allows Alent shareholders to elect to receive new Platform shares in lieu of part or all of the cash consideration.

The target board could also consider only making a recommendation on the initial all-cash offer, and not on the partial share alternative, the first independent lawyer said. In this scenario it could suggest target shareholders seek their own advice on the alternative.

Part of ABI’s work would be assessing where SABMiller investors are registered due to different tax regimes, one of the independent lawyers said. This could highlight how many investors would likely stick with the full cash offer, and which might desire partial or full stock consideration.

Ferrovial’s 2006 bid for BAA highlights another structure to a partial share alternative. In lieu of an all-cash offer, target investors could opt for a stake in a newly created company in addition to a partial payment in cash. The new company would have listed on London’s AIM, holding 5% to 10% of the parent. This did not go ahead due to minimum requirements not being met.

Reports have suggested ABI could offer between 4000p to 4500p for SAB. It has been reported that ABI made an informal offer at about 4200p/share this week. ABI has a put up-or-shut up deadline of 14 October.

>>> Technical Research – S&P 500 Index (1,882 last) – taking 4.5% profit on

Sep 29, 2015 

 

Technical Research – S&P 500 Index (1,882 last) – taking 4.5% profit on short position, re-sell higher (portfolio up 43.25% in 2015)

 

Strategy: Short 1 unit from 1,978 taking profit at 1,889 (future reference 1880)

 

Daily chart:

 

·The Index is nearing the August low at 1,867 and while above it a bounce is likely.

 

·Given the oversold conditions and while above 1,867 one should expect a bounce towards the resistance level at 1,952. A sustain move above it would target 2,020.

 

·If we do get a break lower than 1,820 becomes the ideal target. This level is the Low from Sep14 and should provide good support. 

 

Support: 1,867 & 1,820                     Resistance: 1,952 & 2,020 

 

 

Weekly chart

 

·The Index broke below the trend line connecting all the lows from October 2011, the break down level is
2,015-2,030 and as long as below this level further weakness is likely

 

·The trend line connecting the lows from March 2009 stands at 1,720 which is also were the 200 week moving average stands 

 

Support: 1,867, 1,820 & 1,710-30                       Resistance: 1,929 (this week high) & 2,020 

 

 

Monthly chart

 

·The Index had a first monthly close below the 20 month moving average in August this year. This moving average has been a good indicator in historical terms. Since 1998 there has been only one false break in August 2011, back then the Index did fall 22% from high to low within 2 month but has recovered quickly just after 2 month. In the other occasions this 20 month moving average has been a great indicator and moves above or below it has been a leading guide for month to come. 

 

 

  

  ​     ​     ​

 

Makor Capital

 

11 Menachem Begin St., 26th FL

Ramat Gan 52681
ISRAEL
Tel         +972 3 5453 762

Fax        +972 3 7162 680

 

   

Research Disclaimer

 

This publication has been prepared by Makor Capital Limited (“Makor Capital”) and is intended for professional or qualified investors only. Makor Securities London Ltd (“Makor Securities”)is distributing this material to its clients who are Eligible Counterparties or Professional Clients under FCA Rules. It may also be disseminated to persons who are Investment Professionals within the meaning of the Financial Services and Markets Act 2000 (Financial Promotion Order 2005).  In the United States, Makor Capital only distributes this material to major US institutional investors (as that term is defined in Rule 15a-6 of the Securities and Exchange Act of 1934) and to SEC-registered broker-dealers or  banks acting in a broker–dealer capacity. This material is not intended for distribution to any other persons and should not be redistributed.  If you do not fall into any of these categories you should disregard it.

 

This material is a marketing communication.  It is not investment research and has not been prepared in accordance with legal requirements designed to promote the independence of investment research. It is not subject to any prohibition on dealing ahead of the dissemination of investment research under U.K. law. This material is not a research report and is not intended to be a research report as defined under U.S. securities laws and regulations.  This material is not intended to provide information reasonably sufficient upon which to base any investment decision.   

 

This material does not take into account the particular investment objectives, financial situation or needs of individual clients or other recipients. Before acting on this material, clients and other recipients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. 

 

This material should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. 

 

In the United States, Makor Capital does not offer securities services to U.S. persons except pursuant to SEC Rule 15a-6 only to major US institutional investors and SEC registered broker-dealers or  banks acting in a broker–dealer capacity. Transactions in the United States must be effected through the U.S. broker-dealer, Oscar Gruss & Son Incorporated. Oscar Gruss & Son has not prepared, reviewed or distributed this material.

 

Some of this material is produced by providers which Makor Securities believes to be reliable, but Makor Securities does not warrant or represent (expressly or impliedly) that it is accurate, complete, not misleading or as to its fitness for the purpose intended and it should not be relied upon as such. 

Opinions expressed will be the current opinions of those producing this material as of the date appearing on this material only. We expect those producing the material in  this publication to update it on a timely basis but can give no undertaking that they will do so and regulatory compliance or other reasons may prevent  them from doing so (or us from disseminating updated material).  

 

Members and employees of Makor Securities London Ltd, employees of Makor Capital, Makor Capital Markets may from time to time have long or short positions in securities, warrants, futures, options, derivatives or other financial instruments referred to in this material. For Makor Securities, this information is set out in our Conflicts of Interest Policy which is available on request.  Policies for the production of research from other research providers are available on request.  Unless otherwise stated, share prices provided within this material are as at the close of business on the day prior to the date of the material.

 

Neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without prior consent. This material is issued for general information and discussion purposes only. None of  Makor Securities, Makor Capital, Makor Capital Markets accepts  liability whatsoever for any direct, indirect or consequential loss or damage of any kind arising out of the use of all or any of this material. 

 

The services, securities and investments discussed in this material may not be available to, nor are suitable for all investors. Investors should make their own investment decisions based upon their own financial objectives and financial resources and it should be noted that investment involves risk, including the risk of capital loss. Past performance is no guide to future performance. In relation to securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable.

 

All investors. Investors should make their own investment decisions based upon their own financial objectives and financial resources and it should be noted that investment involves risk, including the risk of capital loss. Past performance is no guide to future performance. In relation to securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable.

 

Entities

 

Makor Securities London Ltd is authorised and regulated by the Financial Conduct

Authority (FCA registration number 625054) of Dover House, 34 Dover Street,

London W1S 4NG.

 

Makor Capital, company number 514456466, is incorporated in Israel and is a 100% held

subsidiary of Makor Holdings Pte Ltd incorporated in Singapore. 

 

Makor Capital Markets SA, company number CH-660.2.999.011-0 is incorporated in Switzerland

and is also a 100% held subsidiary of Makor Holdings Pte Ltd.

 

Having trouble viewing this email? Click here


This email was sent to lchekroun@makor-cm.com by Research@Makor-Capital.com

Update Profile/Email Address | Unsubscribe | Report abuse


 V.I.Plus e-mail marketing

 

>>> Japan Prime Min Abe: govt is cooperating with BoJ and determined to do whate

Japan Prime Min Abe: govt is cooperating with BoJ and determined to do whatever necessary to put economy on robust growth path - comments at Bloomberg
- deflation mindset that plagued Japan for so long has been thrown off- wants to see increased demand through wage growth
- resolved to concluding TPP negotiations
- corporate reform is a top priority, need more transparency in management and on boards

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: TISI -11%, CMTL -9.4%, SNX -1.1%

M&A news: SLH -2.3% (in reaction to IHS comments on earnings call in which the co said it was not looking to add a competing bid on SLH).

Other news: ZSAN -54.1% (discontinued development of its Daily ZP-PTH treatment for severe osteoporosis; resumed development of its Weekly ZP-PTH product; terminates collaboration with Eli Lilly (LLY)), ESPR -13.8% (following update on ECT-1002 development plan; new wording suggests FDA could require a completed cardiovascular outcomes trial before approval), SNE -2.9% (Nikkei -4% overnight), TM -1.1% (Nikkei -4% overnight)

Analyst comments: ARMH -2.1% (downgraded to Neutral at Natixis Bleichroeder).

>>> US Gapping Up

Gapping up In reaction to strong earnings/guidance: ESNC +3.4%, AGN +3.2%, CHSP +0.6%

M&A news: PNX +168.6% (to be acquired by Nassau Reinsurance Group for $37.50 per share in cash), TEVA +1.3% (enters into $27 bln bridge loan credit agreement with various brokers; will use funds borrowed as a portion of the cash consideration for its pending acquisition of the global generics business of Allergan (AGN)), EXC +1.2% (Exelon and Pepco Holdings file for reconsideration of their merger; Settlement discussions underway with the District of Columbia government)

Select metals/mining stocks trading higher: HMY +5.4%, MT +3.7%, AKS +2.2%, GFI +1.6%, RIO +1.3%, X +1%, FCX +0.8%

Select oil/gas related names showing strength: PKD +6.3%, GDP +4.8%, SDRL +3.7%, STO +2.7%, RDS.A +2.4%, OAS +2.4%, RIG +2%, TOT +1.9%, SD +1.9%, BP +1.6%

Other news: CERE +17% (announced that KWS SAAT SE will evaluate Ceres' Persephone bioinformatics technology under a license agreement), CHLN +16.8% (approves a revised proposal for the contemplated reverse stock split with an increased cash-out price of $3.00/share), NVAX +7.4% (reports positive top-line data from its Phase 2 clinical trial of RSV F Vaccine, used to protect infants via maternal immunization; also awarded a grant of up to $89 million from the Bill & Melinda Gates Foundation, to support development of the RSV F Vaccine Phase 3 clinical trial), CANF +5.8% (Mitchell P. Kopin discloses 7.4% passive stake in 13G filing), YHOO +3.6% (provided update on Alibaba (BABA) stake spin off; co continues to expect completion in Q4; spin-off no longer conditioned upon receipt of a favorable ruling from the IRS), MWW +3% (announced sale of 50.01% owneship position in JobKorea for ~$85 mln), STM +3% (still checking), VALE +2.9% (proposes a dividend reduction), XON +2.3% (formed a new Exclusive Channel Collaboration with ZIOPHARM Oncology (ZIOP) to pursue cellular therapy approaches to autoimmune disorder), TTM +2.3% (RBI cut int rates by 50bps), SUNE +2.3% (modest rebound after recent weakness), FRO +2% (to delist from LSE), AA +1.4% (favorable commentary on Monday's Mad Money)

Analyst comments: RJET +9.6% (upgraded to Buy from Hold at Deutsche Bank), ALV +3.1% (upgraded to Neutral from Sell at Goldman), VRX +2.1% (initiated with a Buy at Nomura), GPRO +1.9% (initiated with a Buy at Sterne Agee CRT), MU +1.6% (upgraded to Outperform from Market Perform at Wells Fargo), MCD +1.3% (upgraded to Outperform from Neutral at Credit Suisse), CUDA +1.3% (initiated with a Buy at Stifel), BMY +1.2% (upgraded to Buy from Neutral at UBS), JNJ +1.1% (upgraded to Buy from Hold at Deutsche Bank), TXRH +0.8% (initiated with a Outperform at Telsey Advisory Group)