Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The December 2022 index changes for DAX, MDAX, and SDAX were announced late last night (5th December 2022).</li>
<li>
<a href="https://www.smartkarma.com/entities/dr-ing-h-c-f-porsche-aktiengesellschaft" target="_blank" data-smartkarma-citation="entities:36343:1" rel="noopener">Porsche AG (P911 GR)</a>'s addition to the DAX Index is the main talking point. There are more changes for the MDAX and the SDAX indices. </li>
<li>In this insight, we take a closer look at our expectations for index flows and potential trading ideas.</li>
</ul>


The December 2022 index changes for DAX, MDAX, and SDAX were announced late last night (5th December 2022).

Porsche AG (P911 GR)'s addition to the DAX Index is the main talking point. There are more changes for the MDAX and the SDAX indices. 
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.


DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News

<ul>
<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>Based on current rankings, <a href="https://www.smartkarma.com/entities/commerzbank-ag" target="_blank" data-smartkarma-citation="entities:21596:1" rel="noopener">Commerzbank AG (CBK GR)</a> could move from MDAX to DAX and <a href="https://www.smartkarma.com/entities/puma-se" target="_blank" data-smartkarma-citation="entities:21697:1" rel="noopener">Puma SE (PUM GR)</a> could move from DAX to MDAX.</li>
<li>I also expect multiple changes for the MDAX and SDAX indices including the impact of the recently-listed <a href="https://www.smartkarma.com/entities/dr-ing-h-c-f-porsche-aktiengesellschaft" target="_blank" data-smartkarma-citation="entities:36343:1" rel="noopener">Porsche AG (P911 GR)</a>. </li>
</ul>


In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Based on current rankings, Commerzbank AG (CBK GR) could move from MDAX to DAX and Puma SE (PUM GR) could move from DAX to MDAX.
I also expect multiple changes for the MDAX and SDAX indices including the impact of the recently-listed Porsche AG (P911 GR). 


DAX/​​​​MDAX/​​​​SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!

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

<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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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

Germany

ADVA Optical Networking SE designs, develops, and manufactures optical networking products.  The Company's products include wave length division multiplexing (WDM) communications systems, high-speed fiber optic converters, EDFA modules, and all-optical switches.  ADVA's products are used in high-speed centralized data storage and disaster recovery.

ADVA Optical Networking SE (ADV GR)

DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News

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Janaghan Jeyakumar, CFA

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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

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 Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News

Porsche AG (P911 GR)'s DAX addition is a positive surprise. I have previously discussed this possibility in my DAX Leaderboard insight. All the...

Janaghan Jeyakumar, CFA

DAX/​​​​MDAX/​​​​SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!

Recently listed Porsche AG could get added to the MDAX index or the DAX index in the December 2022 index review. The stock has gained some momentum...

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

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 Dec 22: Porsche AG Gets a Headstart!

ADTRAN/ADVA Optical Networking: Additional Acceptance Period