European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Neles - Alfa Laval: Preliminary Results, Valmet

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.