European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Since Bloomberg reported that Elliot is amassing a stake, the shares have traded tight to terms, even rebasing the offer price. Uncertainty is growing around the deal.</li>
<li>The squeeze-out threshold is 90%, and reaching it seems increasingly difficult, in spite of a generous premium. Philip Morris could lower the acceptance threshold and/or extend the offer period.</li>
<li>My DCF valuation is SEK 113.17, potentially a 13% upside, although it would be difficult to twist Philip Morris's arm. I'd still be long just under the offer price.</li>
</ul>


Since Bloomberg reported that Elliot is amassing a stake, the shares have traded tight to terms, even rebasing the offer price. Uncertainty is growing around the deal.
The squeeze-out threshold is 90%, and reaching it seems increasingly difficult, in spite of a generous premium. Philip Morris could lower the acceptance threshold and/or extend the offer period.
My DCF valuation is SEK 113.17, potentially a 13% upside, although it would be difficult to twist Philip Morris's arm. I'd still be long just under the offer price.


Philip Morris/Swedish Match: Trading Tight to Terms

<ul>
<li>PMI is making a recommended cash offer for the Swedish Match at SEK106/share, valuing it at SEK161.2 billion ($16 billion), 39% premium, 17.5x EV/Fwd EBITDA and 23.1x Fwd P/E.</li>
<li>Swedish Match is strategic for PMI and a valuable asset amidst big tobacco diversification drive. Some shareholders make this point to try to extract a higher price.</li>
<li>As of close of 12 May, gross spread is 3.3%, an interesting 8.7% annualised (assuming settlement by 7 October). The risk of not completing the offer seems low.</li>
</ul>


PMI is making a recommended cash offer for the Swedish Match at SEK106/share, valuing it at SEK161.2 billion ($16 billion), 39% premium, 17.5x EV/Fwd EBITDA and 23.1x Fwd P/E.
Swedish Match is strategic for PMI and a valuable asset amidst big tobacco diversification drive. Some shareholders make this point to try to extract a higher price.
As of close of 12 May, gross spread is 3.3%, an interesting 8.7% annualised (assuming settlement by 7 October). The risk of not completing the offer seems low.


Swedish Match Set Alight by Philip Morris

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

Our outlook remains unchanged as the weight of the evidence continues to suggest a mixed, but overall constructive market. Cyclical value Sectors continue to be our favorite areas to overweight (i.e., Energy, Materials, Manufacturing, and Transportation), while defensive Sectors also continue to be worth a look (i.e., Staples, Health Care, and Real Estate).

Our outlook remains unchanged as the weight of the evidence continues to suggest a mixed, but overall constructive market. Cyclical value Sectors continue to be our favorite areas to overweight (i.e., Energy, Materials, Manufacturing, and Transportation), while defensive Sectors also continue to be worth a look (i.e., Staples, Health Care, and Real Estate). 

Global Equity Strategy: Value Remains Leadership But Defensives Improving

Upside momentum continues to wane for global equities. Price action this week has indeed confirmed lower highs for now in the MSCI ACWI, ACWI ex-US, EAFE, and EM indexes. These lower highs increase the probability for breakdowns and a deeper pullback, but we do not want to get ahead of ourselves. Until we see breakdowns we still view global equities as being in a period of consolidation. We outline important technical levels across markets and highlight actionable set ups within Technology, Health care and Staples.

Upside momentum continues to wane for global equities. Price action this week has indeed confirmed lower highs for now in the MSCI ACWI, ACWI ex-US, EAFE, and EM indexes. These lower highs increase the probability for breakdowns and a deeper pullback, but we do not want to get ahead of ourselves. Until we see breakdowns we still view global equities as being in a period of consolidation. We outline important technical levels across markets and highlight actionable set ups within Technology, Health care and Staples.

Global Equity Strategy: Stay Defensive With Technology, Health Care, Staples

The global rally appears to be losing steam as the bearish rising wedge patterns we highlighted last week in the MSCI ACWI, ACWI ex-US, EM, and EAFE indexes ended up breaking down. Additionally, the aforementioned indexes and major indexes in Europe, Japan, and Hong Kong have been unable to break above longer-term resistance. While we believe global equities remain vulnerable to a pullback, some near-term consolidation is another possibility. For now we believe some consolidation makes sense as we remain in a sort of wait-and-see period as it relates to what will happen as countries and states aim to re-open.

The global rally appears to be losing steam as the bearish rising wedge patterns we highlighted last week in the MSCI ACWI, ACWI ex-US, EM, and EAFE indexes ended up breaking down. Additionally, the aforementioned indexes and major indexes in Europe, Japan, and Hong Kong have been unable to break above longer-term resistance. While we believe global equities remain vulnerable to a pullback, some near-term consolidation is another possibility. For now we believe some consolidation makes sense as we remain in a sort of wait-and-see period as it relates to what will happen as countries and states aim to re-open.

Global Equity Rally Losing Upside Momentum

Sweden

Swedish Match AB manufactures and markets smokeless tobacco products. The Company offers products such as snus, moist snuff, and chewing tobacco. Swedish Match also manufactures and markets machine made cigars as well as matches and lighters.

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Swedish Match (SWMA SS)

Philip Morris/Swedish Match: Trading Tight to Terms

Since Bloomberg reported that Elliot is amassing a stake, the shares have traded tight to terms, even rebasing the offer price. Uncertainty is...

Jesus Rodriguez Aguilar

Swedish Match Set Alight by Philip Morris

Although the offer price seems fair, SWMA is a strategic acquisition for PMI, which could hike the offer price if challenged by a counteroffer or...

Jesus Rodriguez Aguilar

Global Equity Strategy: Value Remains Leadership But Defensives Improving

Cyclical value Sectors continue to be our favorite areas to overweight, while defensive Sectors also continue to be worth a look (i.e., Staples,...

Vermilion Research

Global Equity Strategy: Stay Defensive With Technology, Health Care, Staples

Upside momentum continues to wane for global equities. Price action this week has indeed confirmed lower highs for now in the MSCI ACWI, ACWI...

Vermilion Research

Global Equity Rally Losing Upside Momentum

The global rally appears to be losing steam as the bearish rising wedge patterns we highlighted last week in the MSCI ACWI, ACWI ex-US, EM, and...

Vermilion Research

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