Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>We have completed roughly half of the 20-day Reference Period for the DAX Equity Indices family for the September 2022 Rebalance.</li>
<li>In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.</li>
<li>Three names could move from SDAX to MDAX while the SDAX index could see another 4 ADDs/DELETEs.</li>
</ul>


We have completed roughly half of the 20-day Reference Period for the DAX Equity Indices family for the September 2022 Rebalance.
In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Three names could move from SDAX to MDAX while the SDAX index could see another 4 ADDs/DELETEs.


DAX/​​MDAX/​​SDAX Quiddity Leaderboard Sep 2022: Final Expectations

European Event-Driven Analyst

Jesus Rodriguez Aguilar

ADVA Optical Networking SE / Event-Driven

<ul>
<li>Adtran lowered the minimum acceptance threshold from 70% to 60%; the condition was thus fulfilled by the end of the initial acceptance period. Additional acceptance period runs until 14 February. </li>
<li>The consummation of the offer continues to be subject to closing conditions not yet fulfilled, especially foreign direct investment approval in Germany.</li>
<li>A 15% increase in the ADVA share price since the threshold condition was fulfilled has caused the spread to become negative (-3.4%). If you were already long, recommendation is tender.</li>
</ul>


Adtran lowered the minimum acceptance threshold from 70% to 60%; the condition was thus fulfilled by the end of the initial acceptance period. Additional acceptance period runs until 14 February. 
The consummation of the offer continues to be subject to closing conditions not yet fulfilled, especially foreign direct investment approval in Germany.
A 15% increase in the ADVA share price since the threshold condition was fulfilled has caused the spread to become negative (-3.4%). If you were already long, recommendation is tender.


ADTRAN/​ADVA Optical Networking: Additional Acceptance Period

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares Russell 2000 ETF / Technical Analysis

<ul>
<li>The market continues to send mixed signals - some neutral or healthy signals but some risk-off signals as well.</li>
<li>As long as the Russell 2000 index (IWM) is above $208, Russell Micro Cap index (IWC) is above $134-$135, and the S&amp;P 500 is above 4495, we cannot be bearish.</li>
<li>Treasury yields are not breaking down below 1.40%-1.45% support on the 10-year Treasury yield and 1.76% support on the 30-year Treasury yield.</li>
</ul>


The market continues to send mixed signals - some neutral or healthy signals but some risk-off signals as well.
As long as the Russell 2000 index (IWM) is above $208, Russell Micro Cap index (IWC) is above $134-$135, and the S&amp;P 500 is above 4495, we cannot be bearish.
Treasury yields are not breaking down below 1.40%-1.45% support on the 10-year Treasury yield and 1.76% support on the 30-year Treasury yield.


Continued Absence Of Breakdowns Is A Positive Sign; Many Bottoms-Up Stock Recommendations

<a href="https://www.smartkarma.com/entities/adtran-inc" target="_blank" data-smartkarma-citation="entities:14322:1" rel="noopener">Adtran Inc (ADTN US)</a> seeks to gain scale and strengthen its position in the fibre market, by acquiring vendor <a href="https://www.smartkarma.com/entities/adva-optical-networking-se" target="_blank" data-smartkarma-citation="entities:21579:1" rel="noopener">Adva Optical Networking Se (ADV GR)</a> in an all-stock deal. The transaction aims to create a global end-to-end fibre networking solutions leader that combines ADTRAN's global leadership in fibre access, fibre extension and subscriber connectivity solutions with ADVA's global leadership in metro Wavelength Division Multiplexing (WDM), data center interconnect, business Ethernet and network synchronization solutions.
ADTRAN and ADVA have complementary customers and product lines. Access and aggregation account for 61% of ADTRAN's turnover, while cloud interconnect/metro WDM accounts for 70% of ADVA’s turnover.
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There is a market opportunity created by the stimulus to roll out fibre networks and the displacement of eastern vendors. 
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</div>
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ADTRAN offers 0.8244 ADTN US x 1 ADV GR. This is equivalent to €14.98 per ADVA share based on ADTRAN’s 3-month VWAP as of 27 August, thus representing a premium of 22% to the 3-month VWAP. For an equity value of €789 million, and an EV of €759 million, an implied multiple of 1.3x LTM Revenue. It also represents 1.4x EV/Fwd Revenue, 7.5x EV/Fwd EBITDA and 18.9x Fwd P/E (source: Capital IQ consensus).
ADTRAN has received irrevocable undertakings from Egora (13.7% stake and ADVA’s largest shareholder). The transaction is subject to customary closing conditions, including, ADTRAN shareholders’ approval and minimum acceptance condition of at least 70% of all outstanding ADVA shares.
My fair value estimate for ADVA is €17.79/share, DCF based (see calculations in the insight).
Median ADTRAN's TP on Capital IQ consensus is $27.5/share ( €23.23/share in euro).
As for the deal, this is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the spread.

Adtran Inc (ADTN US) seeks to gain scale and strengthen its position in the fibre market, by acquiring vendor Adva Optical Networking Se (ADV GR) in an all-stock deal. The transaction aims to create a global end-to-end fibre networking solutions leader that combines ADTRAN's global leadership in fibre access, fibre extension and subscriber connectivity solutions with ADVA's global leadership in metro Wavelength Division Multiplexing (WDM), data center interconnect, business Ethernet and network synchronization solutions.
ADTRAN and ADVA have complementary customers and product lines. Access and aggregation account for 61% of ADTRAN's turnover, while cloud interconnect/metro WDM accounts for 70% of ADVA’s turnover.



There is a market opportunity created by the stimulus to roll out fibre networks and the displacement of eastern vendors. 



ADTRAN offers 0.8244 ADTN US x 1 ADV GR. This is equivalent to €14.98 per ADVA share based on ADTRAN’s 3-month VWAP as of 27 August, thus representing a premium of 22% to the 3-month VWAP. For an equity value of €789 million, and an EV of €759 million, an implied multiple of 1.3x LTM Revenue. It also represents 1.4x EV/Fwd Revenue, 7.5x EV/Fwd EBITDA and 18.9x Fwd P/E (source: Capital IQ consensus).
ADTRAN has received irrevocable undertakings from Egora (13.7% stake and ADVA’s largest shareholder). The transaction is subject to customary closing conditions, including, ADTRAN shareholders’ approval and minimum acceptance condition of at least 70% of all outstanding ADVA shares.
My fair value estimate for ADVA is €17.79/share, DCF based (see calculations in the insight).
Median ADTRAN's TP on Capital IQ consensus is $27.5/share ( €23.23/share in euro).
As for the deal, this is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the spread.

ADTRAN/ADVA Optical Networking: Friendly Merger, Spread

United States

Adtran Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, focuses provides networking and communications equipment that enables voice, data, video and Internet communications across any network infrastructure. Adtran Holdings serves customers worldwide.

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ADTRAN Holdings (ADTN US)

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Final Expectations

Delivery Hero has to climb one rank to get into DAX. MDAX and SDAX could see multiple index changes. Takkt's recent negative momentum could have...

Janaghan Jeyakumar, CFA

ADTRAN/ADVA Optical Networking: Additional Acceptance Period

By the end of the acceptance period, the offer had been accepted by more than 60% of all ADVA shares. The minimum acceptance threshold has...

Jesus Rodriguez Aguilar

Continued Absence Of Breakdowns Is A Positive Sign; Many Bottoms-Up Stock Recommendations

As long as the Russell 2000 index (IWM) is above $208, the Russell Micro Caps index (IWC) is above $134-$135, and the S&P 500 is above 4495, we...

Vermilion Research

ADTRAN/ADVA Optical Networking: Friendly Merger, Spread

This is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the...

Jesus Rodriguez Aguilar

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

DAX/​​MDAX/​​SDAX Quiddity Leaderboard Sep 2022: Final Expectations

Delivery Hero has to climb one rank to get into DAX. MDAX and SDAX could see multiple index changes. Takkt's recent negative momentum could have...

Janaghan Jeyakumar, CFA

ADTRAN/​ADVA Optical Networking: Additional Acceptance Period

By the end of the acceptance period, the offer had been accepted by more than 60% of all ADVA shares. The minimum acceptance threshold has...

Jesus Rodriguez Aguilar

Continued Absence Of Breakdowns Is A Positive Sign; Many Bottoms-Up Stock Recommendations

As long as the Russell 2000 index (IWM) is above $208, the Russell Micro Caps index (IWC) is above $134-$135, and the S&P 500 is above 4495, we...

Vermilion Research

ADTRAN/ADVA Optical Networking: Friendly Merger, Spread

This is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the...

Jesus Rodriguez Aguilar

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Final Expectations

ADTRAN/ADVA Optical Networking: Additional Acceptance Period