value and opportunity

First of all thanks to the readers that mentioned these two potential M&A arbitrage situations.

Acacia/Cisco

Acacia, a US based received a take over offer from Tech Giant Cisco valuing the company at 2.6bn or 70 USD per share. The offer price included a 46% premium on the undisturbed price. The stock traded at the time of writing at 64,75 USD, indicating a 5,25 USD or a 8,1% premium.

The transaction is expected to close at the end of Cisco’s Q2 FY 2020 which if I have read it correctly translates into January 2020.

Cisco clearly has the money to execute the transaction (among others 10 bn cash per last quarter) and the transaction seems to make a lot of sense from a strategic point of view.

However for me two issues make this less interesting for me:

1. I know next to nothing about the company and the business and have no idea if the value is justified or not
2. I have no insight if there are any regulatory approvals required

In the very competitive US market I feel that I am at a information disadvantage. So for me this is a “pass” despite the potentially interesting annualized yield of ~16%.

Grandvision / EssilorLuxottica

Grandvision, the Dutch based retailer of glasses, seems to have been approached by EssilorLuxottica, the giant producer of shades and contact lenses that merged only in Octover 2018.

I had briefly looked at Grandvision some time ago and put it on my “to do list”,  With a 77% stake, Dutch based HAL trust ist the dominating shareholder and needs to make up its mind if they want to sell.

Looking at the long term chart it is obvious that Grandvision (grandvision yellow, Fielmann blue) didn’t create a lot of stock market value since their IPO in 2015 at EUR 20 per share:

According to HAL trust’s 2018 anual report, Grandvision is by far the largest position in their portfolio:

Revenues of the optical retail and unquoted companies for 2018 amounted to € 6,123
million of which the optical retail activities represented 61%. At the end of 2018 the stock market value of HAL’s ownership interest in its optical retail subsidiary GrandVision N.V. was € 3.7 billion, representing 33% of the net asset value of HAL.

So it remains to be seen if HAL trust is happy with the offered price. There are also some doubts on the timing of the deal from Essilor/Luxottica side and anti competition clearly is an issue.  This explains the current 3,50 EUR or  ~14% “discount” of Grandvisions stock price against the rumoured 28 EUR take over price.

Anyway, at the current stage with only “talks” happening, it is for me much to difficult to handicap this one. However, if time allows, I will take a better look at Grandvision in the next few days. I am also happy for any information/opinions on the stock.