Pre-events in Europe: what next?
27 January 2015 Europe
Image: Shutterstock
DealReporter analyst Adnan Siddique gives his comments on the latest pre-events in Europe.
Vodafone’s [LON: VOD] German CEO Jens Schulte-Bockum has reportedly commented that the company is not interested in buying Unitymedia Kabel BW from Liberty Global [NASDAQ: LBTYA].
In light of the bigger picture, this could mean a potential game changing merger between Vodafone and Liberty Global.
On 5 January Schulte-Bockum said he would like to see Vodafone Deutschland expand into the three remaining German states where it does not have cable network coverage.
To do this, it needed a company like Unitymedia, which has national coverage. Now he has said that there are no plans concerning Unitymedia. But, is it possible that this is because the company is eyeing the wider deal?
Germany is a crucial region for any Vodafone-Liberty combination given the significant operational overlap and potential antitrust complications. Assuming Vodafone is going for a mega merger with Liberty, Unitymedia is a side issue, and may potentially have to be disposed of to satisfy regulators.
Elsewhere, Sports Direct [LON: SPD] has seen a number of developments recently, including owner Mike Ashley selling down more of his stake, derivative bets on Debenhams [LON: DEB] and acquisition rumours.
Ashley reduced his holding in the sporting goods retailer by 2.57 percent to 55.14 percent. An intriguing aspect of this is that his remaining stake has been segregated into 4.43 percent into his main MASH Holding account, and the bulk 50.71 percent into a subsidiary MASH Beta account.
At market prices the 4.43 percent stake is worth around £190 million. Rationale for the restructuring of his stake includes tax reasons, family issues, or perhaps financing or collateral for a deal in the pipeline. Ashley cannot sell any more Sports Direct stock until early July 2015.
Sports Direct has terminated its prior 6.6 percent put option in Debenhams and opened a 10.1 percent put. The disclosure stated that Sports Direct “does not intend to make an offer for Debenhams”.
Some rumours have suggested that Ashley himself could be seeking to purchase the put from Sports Direct—the stake in the MASH Holding account should be ample to buy the position.
Ashley is consistently active in the acquisitions market and a reported expansion into cycling could be the next move. Ashley has been linked to a £100 million move for Evans Cycles. Again, the MASH Holding account would likely to be enough to fund this move.
The Swatch Group [VTX: UHR] has reportedly hinted a delisting could be an option for the company. After a 21 percent decline in the stock price following the SNB currency decision, CEO Nick Hayek can see the benefits of a take private move.
Hayek mentioned that, under a private structure, the company would have less bureaucracy and costs and stay focussed on his core vision. But, he tempered his view with concerns of the debt required for such a move.
In 2008 when Swatch’s share price started to fall, Hayek wanted a delisting but was similarly concerned about the debt issue. The current timing could be favourable to a delisting; the share price is down nearly 40 percent since a year ago and borrowing is still cheap.
The Hayek Pool, which includes shares of the Hayek family, totalled 40.8 percent at the end of 2013.
To purchase the remainder at market prices, Hayek would need to raise $13.2 billion, but $1.5 billion net cash on the company’s books would help.
If $11.6 billion were to be borrowed, Swatch would have leverage of 4.1x. But, given Swatch’s adversity to debt—it has not held a net debt position since 1998—it may need some coaxing from a private equity partner.
Elsewhere, SABMiller [LON: SAB] has appointed a very well-connected new director who could help drive its growth and, in the process, make it even more appealing to ABInbev [EBR: ABI].
Ex-South Africa Finance minister, Trevor Samuel, will take a seat on SABMiller’s board in March, and bring with him deal making skills from his role as deputy chairman for Rothschild South Africa.
Additionally, Samuel has connections with the UN, World Bank, IMF and African Development Bank. All these will be useful in SABMiller’s drive to expand its emerging markets business, a key objective for the company.
ABInbev, which has long been tipped to takeover SABMiller, may be keenly interested in the hiring. Its exposure to emerging markets, where global beer growth is primarily forecast, is a key reason for ABInbev’s interest in SABMiller.
SABMiller is a leader in the key African market, generating 30 percent of earnings before interest, tax, depreciation and amortisation from the region and is well placed to benefit from favourable population trends.
Vodafone’s [LON: VOD] German CEO Jens Schulte-Bockum has reportedly commented that the company is not interested in buying Unitymedia Kabel BW from Liberty Global [NASDAQ: LBTYA].
In light of the bigger picture, this could mean a potential game changing merger between Vodafone and Liberty Global.
On 5 January Schulte-Bockum said he would like to see Vodafone Deutschland expand into the three remaining German states where it does not have cable network coverage.
To do this, it needed a company like Unitymedia, which has national coverage. Now he has said that there are no plans concerning Unitymedia. But, is it possible that this is because the company is eyeing the wider deal?
Germany is a crucial region for any Vodafone-Liberty combination given the significant operational overlap and potential antitrust complications. Assuming Vodafone is going for a mega merger with Liberty, Unitymedia is a side issue, and may potentially have to be disposed of to satisfy regulators.
Elsewhere, Sports Direct [LON: SPD] has seen a number of developments recently, including owner Mike Ashley selling down more of his stake, derivative bets on Debenhams [LON: DEB] and acquisition rumours.
Ashley reduced his holding in the sporting goods retailer by 2.57 percent to 55.14 percent. An intriguing aspect of this is that his remaining stake has been segregated into 4.43 percent into his main MASH Holding account, and the bulk 50.71 percent into a subsidiary MASH Beta account.
At market prices the 4.43 percent stake is worth around £190 million. Rationale for the restructuring of his stake includes tax reasons, family issues, or perhaps financing or collateral for a deal in the pipeline. Ashley cannot sell any more Sports Direct stock until early July 2015.
Sports Direct has terminated its prior 6.6 percent put option in Debenhams and opened a 10.1 percent put. The disclosure stated that Sports Direct “does not intend to make an offer for Debenhams”.
Some rumours have suggested that Ashley himself could be seeking to purchase the put from Sports Direct—the stake in the MASH Holding account should be ample to buy the position.
Ashley is consistently active in the acquisitions market and a reported expansion into cycling could be the next move. Ashley has been linked to a £100 million move for Evans Cycles. Again, the MASH Holding account would likely to be enough to fund this move.
The Swatch Group [VTX: UHR] has reportedly hinted a delisting could be an option for the company. After a 21 percent decline in the stock price following the SNB currency decision, CEO Nick Hayek can see the benefits of a take private move.
Hayek mentioned that, under a private structure, the company would have less bureaucracy and costs and stay focussed on his core vision. But, he tempered his view with concerns of the debt required for such a move.
In 2008 when Swatch’s share price started to fall, Hayek wanted a delisting but was similarly concerned about the debt issue. The current timing could be favourable to a delisting; the share price is down nearly 40 percent since a year ago and borrowing is still cheap.
The Hayek Pool, which includes shares of the Hayek family, totalled 40.8 percent at the end of 2013.
To purchase the remainder at market prices, Hayek would need to raise $13.2 billion, but $1.5 billion net cash on the company’s books would help.
If $11.6 billion were to be borrowed, Swatch would have leverage of 4.1x. But, given Swatch’s adversity to debt—it has not held a net debt position since 1998—it may need some coaxing from a private equity partner.
Elsewhere, SABMiller [LON: SAB] has appointed a very well-connected new director who could help drive its growth and, in the process, make it even more appealing to ABInbev [EBR: ABI].
Ex-South Africa Finance minister, Trevor Samuel, will take a seat on SABMiller’s board in March, and bring with him deal making skills from his role as deputy chairman for Rothschild South Africa.
Additionally, Samuel has connections with the UN, World Bank, IMF and African Development Bank. All these will be useful in SABMiller’s drive to expand its emerging markets business, a key objective for the company.
ABInbev, which has long been tipped to takeover SABMiller, may be keenly interested in the hiring. Its exposure to emerging markets, where global beer growth is primarily forecast, is a key reason for ABInbev’s interest in SABMiller.
SABMiller is a leader in the key African market, generating 30 percent of earnings before interest, tax, depreciation and amortisation from the region and is well placed to benefit from favourable population trends.
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