European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Daily Mail & General Trust / Event-Driven

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<li>
Lord Rothermere has agreed to pay 255p a share for <a href="https://www.smartkarma.com/entities/daily-mail-general-trust-plc" target="_blank" data-smartkarma-citation="entities:21904:1" rel="noopener">Daily Mail &amp; General Trust (DMGT LN)</a> plus debts, up 1.6% from an £810 million or 251p a share proposal first made in July. The deal will be financed with cash from the cash element from the special dividend.
</li>
<li>
The consideration, worth 1263.3p/share as of 2 November (up from my 1,131p estimate in July), 39% premium to the 3-month VWAP, is broken down as follows: 255p/share for the share capital of DMGT + Special Dividend: 568p + 0.5749 Cazoo shares + Final dividend worth 17.3p/share.
</li>
<li>The deal will close, in my view. Gross spread as of 10 November was 8.5%. Recommendation is long DMGT LN. The risk is a declining share price of Cazoo, so 0.5749 Cazoo shares may be shorted per DMGT share to lock in the spread, but the hedge should be adjusted downwards if the share price of CZOO rises above the equivalent of 738p, as RCL will deliver a lesser proportion of CZOO shares.</li>
</ul>



Lord Rothermere has agreed to pay 255p a share for Daily Mail &amp; General Trust (DMGT LN) plus debts, up 1.6% from an £810 million or 251p a share proposal first made in July. The deal will be financed with cash from the cash element from the special dividend.


The consideration, worth 1263.3p/share as of 2 November (up from my 1,131p estimate in July), 39% premium to the 3-month VWAP, is broken down as follows: 255p/share for the share capital of DMGT + Special Dividend: 568p + 0.5749 Cazoo shares + Final dividend worth 17.3p/share.

The deal will close, in my view. Gross spread as of 10 November was 8.5%. Recommendation is long DMGT LN. The risk is a declining share price of Cazoo, so 0.5749 Cazoo shares may be shorted per DMGT share to lock in the spread, but the hedge should be adjusted downwards if the share price of CZOO rises above the equivalent of 738p, as RCL will deliver a lesser proportion of CZOO shares.


The shares of DMGT suffer from a double discount because of both the conglomerate structure and the unusual governance (the founding family has a 36% economic interest but all the voting power).
This would be an opportunistic bid where the family uses the cash from the special dividend to fund their take-private deal, for the very same reason that the Daily Mail charges against American private equity plunderers of listed UK companies: price.
I estimate that the whole package would be worth 1131p-1277p, therefore a 1%-15% premium to the closing price on 14 July. Beware though of the many moving parts and lack of clarity on the tax consequences of the RMS divestment and Cazoo listing. 
The price mooted for the newspaper and the rump businesses does not look particularly generous on 0.7x EV/Fwd sales, 6x EV/Fwd EBITDA, as most of those businesses have been hard hit by the pandemic.
Considering that the Rothermeres own all the voting shares, it is highly unlikely that there will be any interloper risk. It also seems difficult that the family will abuse its power to rip off minority shareholders. I reckon that the initial figures may be sweetened.
Further upside (around 100p/share) may come from a fairer valuation of consumer publishing and the other businesses, that would take the total package to a 24% premium to 14 July closing price.

The shares of DMGT suffer from a double discount because of both the conglomerate structure and the unusual governance (the founding family has a 36% economic interest but all the voting power).
This would be an opportunistic bid where the family uses the cash from the special dividend to fund their take-private deal, for the very same reason that the Daily Mail charges against American private equity plunderers of listed UK companies: price.
I estimate that the whole package would be worth 1131p-1277p, therefore a 1%-15% premium to the closing price on 14 July. Beware though of the many moving parts and lack of clarity on the tax consequences of the RMS divestment and Cazoo listing. 
The price mooted for the newspaper and the rump businesses does not look particularly generous on 0.7x EV/Fwd sales, 6x EV/Fwd EBITDA, as most of those businesses have been hard hit by the pandemic.
Considering that the Rothermeres own all the voting shares, it is highly unlikely that there will be any interloper risk. It also seems difficult that the family will abuse its power to rip off minority shareholders. I reckon that the initial figures may be sweetened.
Further upside (around 100p/share) may come from a fairer valuation of consumer publishing and the other businesses, that would take the total package to a 24% premium to 14 July closing price.

Many Moving Parts in Rothermere's Bid to Take DMGT Private

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

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on the Communications Sector as we are seeing steady relative strength ranking (RSR) improvements over the last couple of months. At the Group level, we highlight select smid-cap Casinos &amp; Gaming stocks. Finally, India’s S&amp;P BSE SENSEX is breaking out to new all-time highs as RS bullishly inflects, we highlight actionable stocks.

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on the Communications Sector as we are seeing steady relative strength ranking (RSR) improvements over the last couple of months. At the Group level, we highlight select smid-cap Casinos &amp; Gaming stocks. Finally, India’s S&amp;P BSE SENSEX is breaking out to new all-time highs as RS bullishly inflects, we highlight actionable stocks.

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

The TPG Consortium (collectively TPG Group, Ontario Teacher’s Pension Plan Board [&amp; affiliates]) has <a href="http://www.asx.com.au/asxpdf/20170515/pdf/43j81hwvsxdhch.pdf" target="_blank">issued</a> a revised indicative proposal for 100% of <a href="https://www.smartkarma.com/entities/8996" target="_blank" data-smartkarma-citation="entities:8996:1">Fairfax Media Ltd (FXJ AU)</a> at A$1.20/share, less any dividends proposed or paid after 14 May 2017.The revised offer compares to the indicative <a href="http://www.asx.com.au/asxpdf/20170508/pdf/43j2zgsf5mgk1q.pdf" target="_blank">proposal</a> last week which involved paying cash for <a href="http://www.domain.com.au/group/" target="_blank">Domain</a> and FXJ's mastheads and leaving FXJ shareholders with regional newspapers, radio ops and other less-than-exciting businesses.  That clunky, inter-conditional proposal appears to have a faced a tepid reception from shareholders which TPG has swiftly (attempted) to remedy with a full cash offer.Below the fold, for subscribers, is a recap of the revised offer and comments on how it may be received.

The TPG Consortium (collectively TPG Group, Ontario Teacher’s Pension Plan Board [&amp; affiliates]) has issued a revised indicative proposal for 100% of Fairfax Media Ltd (FXJ AU) at A$1.20/share, less any dividends proposed or paid after 14 May 2017.The revised offer compares to the indicative proposal last week which involved paying cash for Domain and FXJ's mastheads and leaving FXJ shareholders with regional newspapers, radio ops and other less-than-exciting businesses.  That clunky, inter-conditional proposal appears to have a faced a tepid reception from shareholders which TPG has swiftly (attempted) to remedy with a full cash offer.Below the fold, for subscribers, is a recap of the revised offer and comments on how it may be received.

Frontier and emerging markets (Vietnam)

Dylan Waller

Nomadic Equity

Thematic (Sector/Industry)

Transition from the Irish Stock Exchange to the London Stock ExchangeDragon Capital’s fund <a href="https://www.smartkarma.com/entities/22754" target="_blank" data-smartkarma-citation="entities:22754">Vietnam Enterprise Investments Limited</a>, which currently trades on the Irish Stock Exchange, may trade on the main market of the London Stock Exchange next month.  The company plans to hold an Extraordinary General Meeting on June the 21st to vote on the approval of this transfer, which is expected to potentially take place next month.  The fund currently manages over $850 million, and is most notable for…

Transition from the Irish Stock Exchange to the London Stock ExchangeDragon Capital’s fund Vietnam Enterprise Investments Limited, which currently trades on the Irish Stock Exchange, may trade on the main market of the London Stock Exchange next month.  The company plans to hold an Extraordinary General Meeting on June the 21st to vote on the approval of this transfer, which is expected to potentially take place next month.  The fund currently manages over $850 million, and is most notable for…

Dragon Capital's VEIL Fund: A 3rd London Listing for Vietnam May Emerge Next Month

United Kingdom

Daily Mail and General Trust PLC owns and administers a wide range of media interests. The Company specializes in the publication and printing of newspapers and periodicals. Daily Mail is active in television, radio, teletext, magazines, exhibitions, book publishing, and operates a number of internet sites.

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Daily Mail & General Trust (DMGT LN)

RCL/DMGT: Package Value and Spread

This somehow cheeky bid is likely to close. There's cash for the newspapers, plus a special dividend, partly in CZOO shares. Gross spread is 8.5%....

Jesus Rodriguez Aguilar

Many Moving Parts in Rothermere's Bid to Take DMGT Private

The whole package could be worth 1131p-1277p, a 1%-15% premium to the 14 July closing price. Many moving parts and lack of clarity on taxes....

Jesus Rodriguez Aguilar

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on...

Vermilion Research

Fairfax – New Offer for New Media

The TPG Consortium (collectively TPG Group, Ontario Teacher’s Pension Plan Board [& affiliates]) has issued a revised indicative proposal for...

David Blennerhassett

Dragon Capital's VEIL Fund: A 3rd London Listing for Vietnam May Emerge Next Month

Transition from the Irish Stock Exchange to the London Stock ExchangeDragon Capital’s fund Vietnam Enterprise Investments Limited, which currently...

Nomadic Equity

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