LTG LN / GA : General Atlantic decided to keep the offer unchanged and final after LTG postponed the vote to 6/2 (Thursday). GA last day to change to a tender is tomorrow.
The adjournment of the meeting was followed by LTG Earnings, which highlighted the hit and future risk on US revenue and growth at affirmity following Trump order regarding equal employment - DEI education / compliance. We understand that the company could suffer -10% ebit and a less growth profile. Also, affirmity is 3x the blended ebit % of LTG
=> We now see downside around 60/65p and 78% implied
LTG was trading on a 50% implied prob last week of Jan. The stock ticked up when Octopus (potential deal blocker) disclosed 1.2m shares buying on 30/1... LTG is now trading on c.80% implied post this move
We understand the EGM was postponed on the basis that LTG knew for a fact the vote was not going through. GA has 27.8% irrevocable commitment from founders/directors. On the other hand, no public statements from Liontrust (14%) and octopus investment (7.6%) who we identify as key shareholders who could try to bloc this deal.
We recreated the register based on offer doc and latest disclosure available (including 8.3s). Below we outline the possible scenarios:
Key assumptions is that (i) 90% or more attendance at EGM and (ii) 98% of unidentified voting in favor
Scenario 1: Liontrust AM & Octopus vote against, deal approved with 75.3%, but will fail if attendance is below 89%
Scenario 2: Liontrust AM votes against, Octopus in favor, deal approved with 83.9%. But will fail if attendance is below 65%
Scenario 3: Liontrust AM & Octopus vote in favor, deal approved with 99.7%
Conclusion = deal would fail if both Liontrust AM & Octopus vote against and attendance below 90%
Worth mentioning scheme meeting average attendance in UK is well above 90%.
We have no view on how these 2 will vote but they probably opposed the deal initially (delaying the vote). Key question if the offer looks attractive enough post earning?