In today’s briefing:
- Costa Group (CGC AU): Binding Proposal Comes with Risks
- Hedin and Lithia Struggle for Pendragon
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Connecting the Dots
- Symbio (SYM AU): Superloop’s Best and Final Offer
Costa Group (CGC AU): Binding Proposal Comes with Risks
- Costa Group Holdings (CGC AU) has entered a scheme implementation deed with Paine Schwartz Partners (PSP) led consortium at A$3.20 per share.
- The key conditions are regulatory and shareholder approval. China SAMR regulatory approval poses a risk, primarily related to timing. Costa anticipates completion in 1Q24.
- The headcount test related to the retail vote remains a risk. The risk/reward is unfavourable as the deal break downside (10%+) outweighs the offer’s upside (3.6% at last close).
Hedin and Lithia Struggle for Pendragon
- My comparables derived valuation of Pendragon PLC (PDG LN) is 32p/share, above the value of Lithia’s “package” and spot-on Hedin’s unsolicited & preliminary revised offer (well above its initial lowball offer).
- The market seems skeptical about the future prospects of Pinewood. Putting it on a 13.3x multiple, the value of the business would still be c. 11p/share, hardly a game-changer.
- The revised Hedin’s offer is 17% above Lithia’s, with no execution risk (Hedin backing off again seems less likely), and probably enough to win Board’s recommendation. Gross spread, 5.6%. Long.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Connecting the Dots
- Weekly summary of vol changes and moves across Global Markets
- Analysing ATM volatility and skew changes over the last 5 days
- We suggest a few trades to take advantage of the implied vol surfaces
Symbio (SYM AU): Superloop’s Best and Final Offer
- Symbio Holdings (SYM AU) disclosed a revised indicative “best and final” proposal from Superloop Ltd (SLC AU). The terms (A$1.425 cash and 2.14 SLC shares per SYM share) remain unchanged.
- The two key changes are there is no due diligence condition and a mix-and-match option subject to scale back to achieve a maximum of 60% cash or 60% scrip.
- The offer is conditional on entering a scheme implementation agreement by 29 September. The offer is palatable and the Board is likely to succumb and sign a binding agreement.
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