European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 15 October, <a href="https://www.smartkarma.com/entities/alfa-laval-ab" target="_blank" data-smartkarma-citation="entities:22270:1" rel="noopener">Alfa Laval AB (ALFA SS)</a> amended its recommended offer for <a href="https://www.smartkarma.com/entities/neles-oyj" target="_blank" data-smartkarma-citation="entities:29195:1" rel="noopener">Neles Oyj (NELES FH)</a>:
<ul>
<li>acceptance level condition lowered to &gt;50%</li>
<li>offer period to expire on 30 October 2020 at 4:00 p.m. (Finnish time)</li>
</ul>
<a href="https://www.smartkarma.com/entities/valmet-oyj" target="_blank" data-smartkarma-citation="entities:21789:1" rel="noopener">Valmet OYJ (VALMT FH)</a> has increased its stake in Neles from 14.88% to 29.54%.
Now, considering that the float (ex-Cevian's, ex-Valmet's) is 59.58%, 65.65% of the float shareholders must tender their shares to satisfy the minimum acceptance condition, even harder than before. Top shareholders in Neles, which together own 7.87% of Neles, are also top shareholders in Valmet. I suspect that Valmet is courting them.
Valmet's proposal will likely act as a support for Neles, even after the 30 October expiration of Alfa Laval's offer.
<div>
<ul>
<li>The chances of Alfa Laval's offer to succeed are increasingly dim, in my view, due to the holdings of Valmet and those of ETFs, in spite of Neles' preference for Alfa Laval bid.</li>
<li>a 2/3rds majority at Neles EGM would be required to carry out a statutory cross border merger. Valmet's holding makes reaching that threshold a bit difficult, to say the least. </li>
</ul>
It is highly likely that Valmet will come back with a stronger offer (more dilutive for Valmet's shareholders). Please note that the share price of Valmet has been decreasing since 9 September on the back of the likelihood of a counterbid.
I suspect that Valmet purchases have helped to keep Neles share price above Alfa Laval's price offer. Although I believe that the downside risk in Neles is contained, there is the possibility of a bump and I would wait for further decreases in the share price of Neles to build a position. 
</div>
On an exchange ratio basis, considering a 6% increase to Alfa Laval's offer, Valmet would issue c.42% new shares.

On 15 October, Alfa Laval AB (ALFA SS) amended its recommended offer for Neles Oyj (NELES FH):

acceptance level condition lowered to &gt;50%
offer period to expire on 30 October 2020 at 4:00 p.m. (Finnish time)

Valmet OYJ (VALMT FH) has increased its stake in Neles from 14.88% to 29.54%.
Now, considering that the float (ex-Cevian's, ex-Valmet's) is 59.58%, 65.65% of the float shareholders must tender their shares to satisfy the minimum acceptance condition, even harder than before. Top shareholders in Neles, which together own 7.87% of Neles, are also top shareholders in Valmet. I suspect that Valmet is courting them.
Valmet's proposal will likely act as a support for Neles, even after the 30 October expiration of Alfa Laval's offer.


The chances of Alfa Laval's offer to succeed are increasingly dim, in my view, due to the holdings of Valmet and those of ETFs, in spite of Neles' preference for Alfa Laval bid.
a 2/3rds majority at Neles EGM would be required to carry out a statutory cross border merger. Valmet's holding makes reaching that threshold a bit difficult, to say the least. 

It is highly likely that Valmet will come back with a stronger offer (more dilutive for Valmet's shareholders). Please note that the share price of Valmet has been decreasing since 9 September on the back of the likelihood of a counterbid.
I suspect that Valmet purchases have helped to keep Neles share price above Alfa Laval's price offer. Although I believe that the downside risk in Neles is contained, there is the possibility of a bump and I would wait for further decreases in the share price of Neles to build a position. 

On an exchange ratio basis, considering a 6% increase to Alfa Laval's offer, Valmet would issue c.42% new shares.

Neles - Alfa Laval: Lowered Acceptance Threshold, Extended Period. Enter Valmet.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Last Week In Event SPACE: ESR/Sabana REITs, Vedanta, Leyou, Alpha, Metlifecare, Melco, Neles

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/alfa-laval-ab" target="_blank" data-smartkarma-citation="entities:22270:1" rel="noopener">Alfa Laval AB (ALFA SS)</a> , a leading engineering solutions company, today made a tender offer for Neles, a recently independent flow control business for a 32.8% premium to the close price. However, 14.88% shareholder Valmet has suggested this deal is ‘not beneficial for Neles' while the stock traded above its offer price. More details below

Alfa Laval AB (ALFA SS) , a leading engineering solutions company, today made a tender offer for Neles, a recently independent flow control business for a 32.8% premium to the close price. However, 14.88% shareholder Valmet has suggested this deal is ‘not beneficial for Neles' while the stock traded above its offer price. More details below

Alfa Laval Bids for Neles: Plugging the Valves

<a href="https://www.smartkarma.com/entities/alfa-laval-ab" target="_blank" data-smartkarma-citation="entities:22270:1" rel="noopener">Alfa Laval AB (ALFA SS)</a> , a Swedish engineering company, has agreed a recommended cash offer for Finnish valves manufacturer <a href="https://www.smartkarma.com/entities/neles-oyj" target="_blank" data-smartkarma-citation="entities:29195:1" rel="noopener">Neles Oyj (METSO FH)</a>. After striking a "combination agreement" with Neles, Alfa Laval will carry out a tender offer for all issued and outstanding shares of Neles.
<ul>
<li>The offer is EUR 11.50 per share of Neles, adjustable for any dividend or capital distribution by Neles.</li>
<li>It values Neles at EUR 1,727 mn.</li>
<li>This represents a premium of c. 32.8% vs. last close on 10 July.</li>
</ul>
Neles opened today at EUR 11.67 per share, and closed at EUR 11.94, a 3.8% premium to the offer terms. In less than two weeks after becoming a listed company, Neles has been the target of a friendly takeover bid from Alfa Laval.
Neles is in turnaround mode. Neles has a Return on Capital of 2.9% vs. 10.8% for Alfa Laval.
The key issue is rival Valmet's 14.88% stake in Neles, which can prevent a delisting of Neles. Valmet stated its intention to seek a seat on the Board of Directors of Neles and to increase its shareholding over time. Valmet says it doesn’t consider Alfa Laval offer beneficial for Neles.
On a comps basis Neles trades slightly below closest comps: 19.35x EV/Forward EBITDA vs. the median of 19.81x (and vs. 13.06x for Alfa Laval).
By taking the median multiple of 19.81x, a raised bid of EUR 12.21 per share of Neles could be justified. This would be a 6% increase to the current offer by Alfa Laval.
At the current share price of Neles, there is 4% downside risk to go long Neles, but I suspect there may be a sweetened bid, a 6% increase can be justified on an EV/forward EBITDA basis. Valmet could counter offer or try to extract a higher price to tender its stake, and has already started signaling so.
Please read below for deal terms and related information.

Alfa Laval AB (ALFA SS) , a Swedish engineering company, has agreed a recommended cash offer for Finnish valves manufacturer Neles Oyj (METSO FH). After striking a "combination agreement" with Neles, Alfa Laval will carry out a tender offer for all issued and outstanding shares of Neles.

The offer is EUR 11.50 per share of Neles, adjustable for any dividend or capital distribution by Neles.
It values Neles at EUR 1,727 mn.
This represents a premium of c. 32.8% vs. last close on 10 July.

Neles opened today at EUR 11.67 per share, and closed at EUR 11.94, a 3.8% premium to the offer terms. In less than two weeks after becoming a listed company, Neles has been the target of a friendly takeover bid from Alfa Laval.
Neles is in turnaround mode. Neles has a Return on Capital of 2.9% vs. 10.8% for Alfa Laval.
The key issue is rival Valmet's 14.88% stake in Neles, which can prevent a delisting of Neles. Valmet stated its intention to seek a seat on the Board of Directors of Neles and to increase its shareholding over time. Valmet says it doesn’t consider Alfa Laval offer beneficial for Neles.
On a comps basis Neles trades slightly below closest comps: 19.35x EV/Forward EBITDA vs. the median of 19.81x (and vs. 13.06x for Alfa Laval).
By taking the median multiple of 19.81x, a raised bid of EUR 12.21 per share of Neles could be justified. This would be a 6% increase to the current offer by Alfa Laval.
At the current share price of Neles, there is 4% downside risk to go long Neles, but I suspect there may be a sweetened bid, a 6% increase can be justified on an EV/forward EBITDA basis. Valmet could counter offer or try to extract a higher price to tender its stake, and has already started signaling so.
Please read below for deal terms and related information.

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

Coming off of oversold levels, the recent USD pullback to the prior breakout level over the last week has led to a reprieve for broad MSCI EAFE, EM, and ACWI ex-US indexes. However, we believe the USD will hold support at 95, and price and RS downtrends will remain intact for the aforementioned broad MSCI indexes. In other words, the current reflex rally in these indexes will probably be short-lived.  We provide a broad overview of major markets and highlight attractive defensive groups and stocks withing Consumer Staples, Utilities, and Manufacturing (primarily Aerospace &amp; Defense Groups).

Coming off of oversold levels, the recent USD pullback to the prior breakout level over the last week has led to a reprieve for broad MSCI EAFE, EM, and ACWI ex-US indexes. However, we believe the USD will hold support at 95, and price and RS downtrends will remain intact for the aforementioned broad MSCI indexes. In other words, the current reflex rally in these indexes will probably be short-lived.  We provide a broad overview of major markets and highlight attractive defensive groups and stocks withing Consumer Staples, Utilities, and Manufacturing (primarily Aerospace &amp; Defense Groups).

Global Ex-US Rally Underway - But Will It Last?

Sweden

Alfa Laval AB provides specialized products and engineering solutions.  The Company's product line includes equipment and systems for heating, cooling, separation, and transportation of products such as oil, water, chemicals, beverages, starch, foodstuffs, and pharmaceuticals.  Alfa Laval sells and markets worldwide.

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Alfa Laval AB (ALFA SS)

Neles - Alfa Laval: Lowered Acceptance Threshold, Extended Period. Enter Valmet.

It is highly likely that Valmet will return with a stronger offer. Although I believe that the downside risk in Neles is contained, I would wait...

Jesus Rodriguez Aguilar

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David Blennerhassett

Alfa Laval Bids for Neles: Plugging the Valves

Alfa Laval AB (ALFA SS) , a leading engineering solutions company, today made a tender offer for Neles, a recently independent flow control...

Rickin Thakrar

Neles - Alfa Laval Agreed Offer

Alfa Laval AB (ALFA SS) , a Swedish engineering company, has agreed a recommended cash offer for Finnish valves manufacturer Neles Oyj (METSO FH)....

Jesus Rodriguez Aguilar

Global Ex-US Rally Underway - But Will It Last?

Coming off of oversold levels, the recent USD pullback to the prior breakout level over the last week has led to a reprieve for broad MSCI EAFE,...

Vermilion Research

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