M&A Updates: CME/NEX +4% Return In 2 Months

Includes: CME, D, MNI, PX, SCG, TPCO
by: Special Situation Investor

Tribune Publishing is evaluating 3 buyout offers.

Dominion's revised offer largely increases the chances of getting regulatory approval for the deal with SCANA.

Linde/Praxair have completed their merger and now have to decide on the compensation amount for minority shareholders.

Welcome back to our M&A posts. I have taken almost two weeks off and it seems they were quite eventful. So let's get back to business and take a look at the updates first and in the later posts I’ll introduce you to some new deals.

CME Group (CME)/NEX Group +4% Return In 2 Months

The largest derivatives marketplace (CME) has completed the acquisition of UK listed financial exchange service provider (NEX) on the 2nd of November. As expected by the management there were no problems with the regulatory approvals and the deal closed a bit earlier than expected, with NEX shareholders getting 5 GBP ($6.5) in cash + 0.0444 CME Group shares for each of their NEX shares.

Tribune Publishing (TPCO) has received three buyout offers from McClatchy (MNI), Donerail Group and AIM Media in the first round of bids. Previously it looked like McClatchy has the upper hand as it reportedly had the backing of a billionaire Patrick Soon Shiong (who also owns a quarter of TPCO), however now it seems that Soon Shiong is no longer willing to inject money into the deal, but still wants to stay as a player in the combined company. Despite that, McClatchy managed to secure Apollo Global Management as the lender. Donerail Group led by Will Wyatt, could be an attractive buyer, but its intention seems to be to sell TPCO apart, which contradicts rumored Soon Shiong’s plans of staying in the media game. The last, but not least AIM Media, formed in 2012 has been making smaller publishing asset acquisitions here and there and apparently this time set their eyes on a much bigger fish. AIM is reportedly backed by billionaires Jerry Jones and Ross Perot, which is not the first time they cooperate. No details of any of the offers are clear yet, except that McClatchy is rumored to offer some stock to ease their potential financial burden after being let down by Soon Shiong and to attract shareholders, which are interested in holding a stake in the combined company. It is rumored that price is at 19$-20$ levels as demanded by the largest TPCO shareholder and ex-CEO Michael Ferro (owns 26%), however the market still seems to be very skeptical, as the spread (26%) to the rumored price is currently even higher than it was the last time (20%) I wrote about this deal. Tribune should gather to evaluate the offers today (the 5th of Nov).

As expected, Dominion Energy (D) bluffed about its offer of 10$ bill cut and 1000$ refund for SCANA’s (SCG) customers being the final one as well as their threats to walk away if current temporary cut rate (22$) is accepted. Dominion has recently revised the offer to 20$ bill cut, increased the total amount of customer payback from 1.3$b to 1.9$b and extended the debt repayment to 20 years from the previous 8 years. Despite that, the revised offer did not include the previously promised 1000$ cash payment for each customer, but instead will use that money to reduce SCANA’s subsidiary nuclear debt and allow this new 2x bigger bill cut. This is a very positive step towards the success of the deal and a lead speaker of South Carolina House called it a victory for both regulators and ratepayers. He also wrote a letter to the utility where he advised utility watchdog to not to pursue a rate cut too large as it could be defeated in court and cost more in the long term. He advised to choose a rate in between the current regulatory cut rate and the Dominions newly proposed one. Current temporary cut rate, if accepted permanently, would make the average customer pay 1280$ for the failed nuclear project in 20 years compared to 1700$ in Dominion’s new revised and 3000$ in the previous offer. The decision is going to be made after all the hearings in December. Spread shrunk to 16% from 22% since the last time I wrote about it.

After getting FTC approval even with the conditions to divest more assets, Linde (LIN.DE)/Praxair (PX) have finally completed their merger. Both Linde AG and PX shares have been removed and a combined company is trading underLIN” on the NYSE. What left is to complete the divestments and squeeze out the 8% minority shareholders. As previously announced, they will receive 188.4 EUR in cash and to resolve this transferring Linde AG will hold an EGM on the 12th of December. Apparently Linde AG share price has exceeded compensation price making a spread -2% so far, as the minority shareholders are expecting a raise in the cash out. According to the current price of Linde plc (combined company), Linde AG shares are worth 212 EUR (1.54 Linde AG shares were exchanged into 1 Linde plc), which is 13% premium to compensation amount, so the increase seems likely. Moreover, even after the compensation price will be set, minority shareholders might push it even more by turning to court, which might extend this procedure by 1-2 years.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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