Sold Actelion Pharmaceuticals
I decided to close out my position in Actelion Pharmaceuticals (Ticker: ALIOY) at $70.63 generating a net gain of 13.38% (~59% annualized). As the closing is fast approaching, I couldn’t get any clear answer from the ADR sponsor as to what would happen to the untendered ADRs. I didn’t want to be stuck in limbo as this was a relatively large position.
Now that Actelion is gone, my only remaining arb position is Syngenta (Ticker: SYT), which is looking likely to close next month. I’ve been adding to my Syngenta position by selling some Puts.
posted by Money Turtle @ 11:00 AM
93 comments
93 Comments:
is approval by India a major obstacle for SYT approval? BBG says only India remains.
Is it safe to assume they will approve it too
I believe India will approve prior to the expiration of the tender.
what is BBG?
Bloomberg. Probably in reference to the following link:
https://www.bloomberg.com/news/articles/2017-04-12/china-approves-syngenta-deal-with-chemchina-only-india-remains
if chemchina is not confident, they will not announce the final tender. Its really amazing that India took more than 1 yr to look into the merger. And they haven't been at 2nd phase yet. Dow/Dupont in 2nd phase and I wonder when they will get a result.
what you mean that they will not announce the final tender? and why shouldn't be confident if China approved.
Do you see any risk about India that can block it? please MT let me know, put options good yeld, thinking to sell a big position then here.
also what you think of the revised ALR deal with ABT?
the two companies made peace, can we add to watchlist this deal? it's interesting now and safe...
SYT: I believe it's highly unlikely that India will block this deal. They may drag it out a bit...
ALR: This is safe now. May play it...
is giving a dividend syngenta? 1.92 per share before the expiration of the tender? correct? so the yeld could be around 4.5% in less than a month?
ok ALR safe, and about cabelas CAB? is it safe it too now? or more risky than ALR?
SYT: No regular dividend payout prior to closing. They will make a special $1.00 dividend payout when the deal closes so $92.95 + $1 special dividend.
CAB: Not totally comfortable with it yet. Still need some approvals.
agree with MT. Alere is safer play but they still need to submit their annual statement i believe... Cabela as i highlighted last time, solving the credit card biz is just part of the puzzle. They also need to address regulators's concerns regarding their marketshares and store overlaps in phase 2.
For SYT, they had already announced the final tender at 4th May so sure they are confident! Jus that we do not know their negotiations with India and the timeline for approval. From what we see with ChemChina willing to divest a significant chunk of Adama assets for EU approval, they may do the same or even more for India considering its their last approval needed to close the merger.
There is no better merger play in the market than SYT i believe with a spread of 2.5% for worst case scenario of 2 mths time closure (End June latest).
Syngenta (SYT)/ChemChina Said to Meet India Regulator Today - Reports
Syngenta (NYSE: SYT) and ChemChina will meet with the Competition Commission of India today to find out if the review of their proposed merger will got to a Phase II investigation, according to Bloomberg, citing reports from PaRR and DealReporter.
PaRR said CCI is waiting for additional information from the parties. If the issue is not resolved by Monday, the deal could enter Phase II merger review.
Fri, 21 Apr 2017 07:26:46 -040
what do you think now? can happen INDIA say yes and the deal is done next week or what risks? stock is going down -0.5% now
mergipie why the spread is 2.5%? the dividend is 1.92 another 2.5% now the yeld is over 5%.
Another theory - India might be playing hardball with China due to issues going right now between the two countries regarding Dalai Lama and Tibet/Arunachal Pradesh. SYT still going down more. Are you still keeping 5% stop loss on this stock?
-3.65% i don't think we should panic after approva of all the world... just India is left, jitters as always
is giving or not the dividend of 1.92usd SYT on 27th april?
$1 dividend when the deal closes + $93 cash..
I'm hanging onto SYT. Can't see how India rejects this deal. Like the risk reward here...
ok 5% yeld so here and if today instead a bad news come the deal cleared with conditions is 5% in 1 day for monday.
if they enter in phase 2 probably just because CCI INDIA is slow to review, when do you think that the deal will close? maximum...?
I am modeling a close by the end of June. End of May close is still a possibility.
why not just 4 may close? may be monday we get the deal approved... you don't believe to it?
The following SEC filing provides a timetable of what to expect after the May 4th tender deadline:
https://www.sec.gov/Archives/edgar/data/1123661/000095010317003710/dp75295_6k.htm
so what will happen after 4? if india approve let's say 5 MAY, we will need for sure a close on 7 june or what? let's hope monday we get good new from India, can't india clear the deal before 4 may with conditions?
India accounts for about 2% of syngenta's global sales or about 300 million.
Adama's Africa, middle-east and india sales excluding israel are about 300 million so India's sales alone maybe 150 million.
I believe ChemChina can make major concessions or even the entire Adama stake in India to gain India's approval if needed but thats highly unnecessary.
http://www.business-standard.com/article/companies/syngenta-hopes-to-maintain-20-revenue-growth-from-india-in-2015-115021300632_1.html
if India account for 2% only... like said MT can't see a way to block the deal, perhaps usually the regulators we are afraid the most in China and it's done there.
I hope monday SYT will be still to these prices and I will enter into aggressively. I think is a rare opportunity even with a close at end of june or july.
MT do you see any other risk that just a late close to june?
can be that India regulator it's just slow?
I need a view also on PNRA, there can be an higher bid. A strategy here?
And MGI, do you see the deal done with ANT or there are high risks
did you bought more $SYT on friday MT?
how much of your portfolio is concetraded on $SYT now?
thanks
I continue to maintain ~15% position via common in SYT and also have short Puts. I believe they will resolve any issues with India quickly. At this point, no one wants to drag this one out any longer.
PNRA: I don't see a higher bid.
MGI: There's a bit of regulatory risk, but I think BABA can resolve with the regulators.
Erik Fyrwald CEO Syngenta looks forward to merger closing in May 2017.
http://www4.syngenta.com/media/media-releases/yr-2017/24-04-2017
everything looks ok so far. CEO remains confident of closing in May. Friday's trading was probably a blip.
stock up 1% pre market, ok is done then, what to do? to increase immediatelly or wait?
I think that CEO comment can be hold if is the one that come with that link, may be. what do you think?
is there are swiss taxes for USA holders we need to worry about regarding div and shares if we are only holding ADRs?
thanks
even with the CEO comments this morning, the stock is only up 50cents..
end of day we will know India response, I think it's risky now, worth only below friday close
price negative, back to 90.50 as I was thinking, that news was old! we have to wait end of day, in case of panic below 89.5 good entry
don't read too much into the price movement because this is a china merger play...like QIHU last year the spread was big even till the last week of closing
Should get clarification soon as the tender deadline approaches. For many brokers, the tender deadline is prior to May 4th. The broker I use has a tender deadline of May 1st.
Mine is 3rd May. I will tender the shares.
Dec 90p selling for 1.35
While the shares only offer $1..
so any comment? MT... SYT? what happened
ChemChina Reconfirms Timeline for Public Offers for Syngenta (SYT) Shares and ADSs
In response to speculation in the market, ChemChina hereby reconfirms on behalf of the offeror that all regulatory approvals and conditions required for the closing of the offers have been obtained or satisfied. Subject to at least 67% of Syngenta's issued shares and ADSs being validly tendered into the offers and not withdrawn as of May 4, 2017, the offeror will purchase and pay for all such shares and ADSs at the first settlement on May 18, 2017.
so when it will close? 18 may? india approved?
I guess there's still time time value premium in those options. The option expiration will be accelerated once this deal closes.
SYT is pretty much a done deal at this point. If you tender, looks like the payout will be 5/18. I tendered my shares today after the news hit.
MT, i believe you have more experience with options.. if the 2nd settlement happens on 7th june as per scheduled, will that mean the options will be cancelled on the same date? if so selling the puts will generated a greater reward than just buying the shares as mentioned by the previous commenter..
e.g. a Sep 90 Put sells for $1.20-$1.35 while buying SYT now at $93 will only generate $0.95 max. Also in considerations are the swiss dividend tax (rate for me is 15% or 35% depending on tax treaty) and not counting the margins needed to sell puts or buying shares/CFDs. I will do some maths tonight...
I found selling the puts better option, since I am not sure about the Swiss tax on special dividend for American ADS holders. The premium will drop faster daily till may 4. Margin requirement will be lower once the deal closes and most of the options most probably expire by June opex..
I closed out my long dated short Puts yesterday. The premium remains high for some reason. Something is up with those... I can't figure it out...
Options market thinks there will be volatility with the stock??? Then it would be risky to hold the commons also??
There's talk of tax consequences for the potential squeeze out for those who did not tender. This may affect the long dated Puts.
Can you elaborate please?
the market is not efficient?
what are the tax implications?
can't be that volatility of puts is due the fact there is a risk they don't tender 67% o shares? that's it... it's china play, puts are just trading the same of you hold the stock ok a bit more, but nothing special.
please MT try to helop us with the puts, i don't see why you are worried, its a yeld just for the june and more because theere is the risk with china play that can happen something and we finish in june and not in may, or something like that.
the puts are as always, if you short it, you can't tender the shares, if they don't tendere 67% this risk is for everybody, so the issue probabily is on the clause of 67%
Open interest in the puts is very low in case they not even tendered 67% wean be reached just with common
if they don't tender 67%, holding shares now is risker than puts.. in the event of a failure, cost of share buyers is $92.94... seller of 90 Sep puts are $88.85 ($1.15 premium)..so that doesn't make sense..
the only diff is the margins for selling put is $1680 for 1 option while 1 CFD margin is $1162 and 1 Reg T share margin is 2323.
I just sold 2 puts hope we can learn something from this.
I didn't want to take any chances with some kind of screw up. I had a fairly large short Put position on the Sept $85 and $90s.
This is what I saw in a Seeking Alpha comment regarding the SYT options:
“Obviously it is the prospect of the possible 35% tax on the proceeds that is leading the options mkt to have premium in those lower strikes. (And the possibility of the OCC settling those strike options for cash and saying they're "in the money" due to a tax.)”
ok but if they don't tender 67% what happen? they extend and we lose some month or we risk the deal end? we knew this 67% rule before not? we shouldn't be so much worried.
can you make an example? if you sell 1 put short 90 at 1$ premium, is 100$ which is the risk, to pay 35% on your 1$ premium?? or what? clarify
but there should be no tax problems...short puts will expire worthless - nobody will exercise the 90 puts when the price is at 93...
short puts are not entitled any cash, just take the premium received when the option expires worthless..
One reason i can think of is when the tender does not get 100% and so shares are left over.. for example a small number of AVG shares (AVGTF) are now still trading in OTC although tender process is over. there is still a 25 jun 17 options available for trading.
so now my theory is that the main risk of SEP 90 Put option is the time value of the margin...your margin is locked up for another 3 months for that extra 0.25 - 0.50 per share...
if its for other reasons..then i consider any losses my lesson fees..:)
ok interesting your view. so SYT similar to AVG, what happened to AVG that keep it trading in PINK? and why SYT so would do the same? in which case? I mean even if they tender more than 67% of share you see this risk like AVG?
i try to move my position from SEPT to JUNE and I risk so max 1 month margin more.
Mergerpie, Thanks for the explanation. Does make a bit more sense now...
So MT, what if we just sell may 90p trading for .45cents?
May should be safe since the Second Settlement payout will take place on 06/07.
according to swiss tender rule and chemchina's offer docs, if chemchina gets 98% or more, then the squeeze out will occur after 2nd settlement. This is the best scenario for short puts holders.
if chemchina gets between 90%-98%, the company can seek a merger with the new parent to consolidate the shares. then the minority holders may seek court appraisal (this is what happened to AVG as some holders are not satisfied with $25 pps) for this. This gets complicated and swiss tax withholding applies although refund requests can be submitted. How the tax is calculated and on what amount is specified in the offer docs and beyond my expertise at the moment.
if chemchina gets below 90%, then it can do nothing about the remaining shares (aside from negotiating with the owners).
In all 3 scenarios, chemchina can still seek delisting the shares if the no. of shares outstanding is very low.
What happens to the options are not clearly stated but i think they will continue to trade until the existing options series all expire. It is only when scenario 1 happens that the options will cease trading shortly. When the other two scenarios happen, i don't expect the options to be easily tradable. There will be little to no available shares to exercise. The only option is to wait for expiry.
**Do note that the above is based on some of my research and does not constitute actual investment or legal advice.
As a supplement, read what happens to AVG options according to the author at his post: https://seekingalpha.com/article/4052556-sell-avg-technologies-now
The same may or may not apply to SYT options as I don't have the expertise.
another supplement from the same author:
https://seekingalpha.com/article/4009153-avg-technologies-hidden-way-profit-arb
i remember reading this but it didn't dawn to me that the same situation may apply to SYT options.
now its very interesting..so holding the short puts is not a guaranteed win. It will be a win only if chemchina get 98% and above.
I do not have time for additional analysis so those interested can read swiss tax/merger laws.
i may be closing my small puts position soon as i am not familiar with the situation at hand..out of my depth at the moment. I had asked the author of the seekingalpha for his opinion and hopes he can answer. I hope we can all learn something from this episode.
Mergerpie,
Thanks for your feedback on the Puts. I got out of the Puts because I simply could not understand all of the potential outcome. The options associated with foreign takeovers can be a bit tricky…
ALIOY at 69 now..
ALIOY: The non tendered shares will trade strange. I wouldn't touch it...
thanks
ok SYT confusing
but so, if may options expire 19 may are you sure are safe 100% because of the settlement 18 may?
about JUNE and SEP options, like in the case of AVG, it's just a questions about margin blocked or do you think there is a risk that the price of SYT can go lower 90 and you get a loss?
SYT: Nothing is 100%, but looking at the time table from SYT, May 18th is the first settlement. They have another settlement on June 7th. So end of May / early June should finally be the end of it...
Time table from the SEC filing:
May 5, 2017 Provisional notice of the interim result of the Offer
May 10, 2017 Definitive notice of the interim result of the Offer
May 11, 2017 Start of the Additional Acceptance Period
May 16, 2017 Payment of Special Dividend
May 18, 2017 First Settlement
May 24, 2017 End of the Additional Acceptance Period
May 26, 2017(at the latest) Provisional notice of the end result of the Offer
May 31, 2017 Definitive notice of the end result of the Offer
June 7, 2017 Second Settlement
i read the article. So if happen the same, for the put june, if the price will be above 90, will expire... or will not expire till a court will decide it?
the exchange rate risk with CHF for 1 month will be few risk.
my broker let me tender till 3 may, can I still buy today correct and tender to get the dividend and the 93.95 per share?
It's 92.95 plus $1 dividend..
yes I meant it, 92,.95 + 1.0
which witholding will you have in the US on the 1.0 dividend? net how much will be accrued? 0.85? or 0.7?
Is it too late to tender shares of Alioy? Thanks.
U cannot tender ALIOY..
ABCO received 20 initial bids.. wow
Yes, you can buy SYT and tender by the deadline to receive $92.95+ $1.00 dividend (I'm modeling $0.65 after taxes for the dividend). I bought more yesterday and tendered the same day.
ALIOY: Tender offer has expired. It's over...
yes its almost like a free $0.65..for those staying in countries with tax treaty like me, even better...15% tax..i may get $0.85..
Jun puts should be safe although i can't vouch for 100%..read the seeking alpha article and the comments...in one of the article there is a similar situation... if the courts have not decided a price, then the 90 jun puts will expire worthless as the merger price is at $93.
but MAY put are safe or not? or because they expire after 1 day the 18 may legally they can make problems?
MBLY another foreign merger, in this case isreael, what do you think?
is risky here to hold put options short? better cash again on the stock?
read here:
IB has made this election available to facilitate the collection of Israeli Tax Declaration Forms with respect to the recently completed merger involving Intel Corporation and Mobileye N.V., and the subsequent processing of the merger entitlement.
At this time, the merger consideration can only be allocated to holders who complete and submit the Israeli Tax Declaration Form to IB. Upon receipt, IB will forward the documents to the paying agent where it will be sent to the Israeli Tax Authority (ITA) for review. Once approved, the paying agent will provide confirmation to IB and the position will be queued for payment.
Choice(s)
Description
Current Choices
(%)
New Choices
(%)
1 (Default) Take no action 0 (0) (-)
2 Submit shares for cash, tax exemmpt 0 (0) (-)
3 Submit shares for cash, less 25% w/h tax 0 (0) (-)
4 Submit shares for cash, variable tax rate
what do you suggest MT and mergerpie?
MT check out INVN, they are pushing down the stock, 13.00 is the offer with deal closing around 19 mqay after the meeting of shareolders, regulatory approvals all ok. They want to push down more the stock jitters, would you enter?
the ghost news are always the same they try to scare that contract with apple is ended. yeld is now at 12.82 over 1.40% in less of 2/3 weeks.
Is down from 0.3% of just 2 dqays ago....
please study this, we can beat jitters and insiders.
12.79 now, as I think... is happening something anybody here checking?
yeld 1.65% now
I haven't done any work on INVN, but it does look interesting. Looks like just shareholder vote remaining.
I failed to tender ALIOY. Will I get $70 anyway.
http://www.six-swiss-exchange.com/shares/security_info_en.html?id=CH0010532478CHF1
Donw 8 francs
ALIOY: I don't know what happens to ALIOY now. Can try to contact Citibank since they are the custodian of the ADR.
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