Missing payday

24 March 2020 By Dasha Afanasieva Follow @dasha_reuters

Funds which bet on M&A deals have suffered hefty losses. Gyrating markets triggered risk limits, forcing some to sell out of deals that are very likely to go ahead, like luxury group LVMH’s $16 bln takeover of Tiffany. Arbitrageurs will lose much more than they stood to gain.

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Drugmaker AbbVie in June 2019 said it would buy Allergan in a deal that would give the Botox maker’s shareholders 0.866 AbbVie shares and $120.30 in cash for each share they owned. On Dec. 31, 2019 Allergan shares were trading at a 3% discount to the value of AbbVie’s offer. The spread widened to 5%, based on market prices on March 23.

French luxury group LVMH in November 2019 said it would acquire Tiffany & Co for $135 per share in cash, valuing the U.S.-listed jeweller’s equity at approximately $16.2 billion. Tiffany shares initially jumped to $133. On March 23 they were trading at $123, a discount of 10% to the offer price. The companies said on March 17 they expected to complete the deal in mid-2020.

The Frère and Desmarais families on March 11 said they intend to simplify their ownership structure of investment holding company Groupe Bruxelles Lambert. Minority shareholders in Pargesa, a Swiss-listed entity controlled by the families, were offered 0.93 GBL shares for each share they own.

On March 12 Pargesa shares were trading at a 1% discount to the implied value of the GBL offer. This widened to a 7% discount by March 20, before narrowing to 4% on March 23. The exchange offer is expected to last for a month until June 8 and the transaction is expected to close in the third quarter of 2020.

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