Ghost Bites (Ascendis | Mondi | Old Mutual)

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Ascendis will be investigated by the TRP (JSE: ASC)

After loads of mud-slinging on social media, the regulator is going to take a detailed look

The Takeover Regulation Panel (TRP) has many responsibilities. One of them is to investigate any complaints regarding affected transactions and offers. The potential take-private of Ascendis clearly falls within that ambit.

There has been a lot of noise and accusations around this deal, thrown in just about every direction you can think of on social media. There are defamation lawsuits. There are posts ranging from sensible to downright ridiculous. At some point, it needed a regulator to come in and actually take a proper look to see if any regulations have been breached.

The TRP notes that it has received approximately 20 complaints related to this transaction, with Ascendis having already taken remedial action on a “considerable number of them” in the form of issuing a supplementary circular with corrected disclosure of concert parties. They also had to reconstitute the independent board.

The regulator is planning to move quickly it seems, with a deadline of 10 calendar days for any further complaints to be submitted. This period ends at noon on 29 April 2024. The parties against whom complaints have been lodged will then have 20 business days to respond once they have received the collated complaints. The TRP will take 3 business days between the deadline for submissions and the presentation of the collated complaints to the impugned parties.

And finally, the complainants will then have 10 calendar days to respond to the responses by the impugned parties. No, I’m not sure why it’s business days in some cases and calendar days in others.

Whatever the outcome, this is exactly what needed to happen – the regulator investigating the complaints, rather than ongoing damaging interactions on social media that call the functioning of the entire market and regulatory system into question.

The clock is now ticking and the lawyers are billing.

Mondi walks away from DS Smith (JSE: MNP)

This is a useful reminder that deals fall over regularly

A deal isn’t a deal until all suspensive conditions have been met. This means that there’s a risk of failure right up until the 11th hour. When a transaction is little more than an early-stage investigation into whether a deal might make sense, the failure risk is even higher. This is why investors should always be cautious of getting too excited when they see news of potential deals.

In a perfect example of this, Mondi has decided not to proceed with the all-share merger with DS Smith. This is after conducting a due diligence and considering the value of the merger. The market responded positively to the corporate discipline, sending the Mondi share price 9% higher on the day.

What the Mondi announcement neglects to mention is that US rival International Paper came in as a competing bidder for DS Smith. Mondi chose to step out of the way of a bidding war, which isn’t quite the same thing as doing a due diligence after a deal announcement and then walking away. Same outcome, but based on the pricing of the deal rather than the quality of the DS Smith business.

Starting a bank baby, starting a bank (JSE: OMU)

Old Mutual steps bravely into a tough market

If you don’t remember the “starting a band baby, starting a band” TV advert, then you and I didn’t grow up in the same era.

Moving from deodorants to banks, Old Mutual has finally received Section 17 approval to establish a bank. The Prudential Authority has given the all-important nod to Old Mutual’s plans. This is a big deal, as you don’t just rock up at the offices and fill in a three-page form to get clearance.

For shareholders, the spending really starts now. As we’ve seen at Discovery, it’s not cheap to start a bank. In fact, it costs an absolute fortune if you’re going with the full-service model – even without having a branch network. And whilst Capitec has proven that success is possible in this game, it was achieved through strong differentiation from competitors and excellent strategic execution. I think it’s quite tough to argue that Discovery’s banking efforts have truly made waves in the market.

As for Old Mutual, we will have to see what they build here. Another me-too bank doesn’t make a great deal of sense in the South African market. You may also recall that Old Mutual walked away from its investment in Nedbank, so this is a slightly odd full-circle moment.

There’s already a green bank in the market. I can’t help but wonder what colours Old Mutual will go with. In my experience, purple is quite fun!

Little Bites:

• Director dealings:
  • A director of Italtile (JSE: ITE) has sold shares worth R185k.

• All conditions for the disposal of Eqstra Investment Holdings by enX (JSE: ENX) have been met, with the Takeover Regulation Panel having issued a compliance certificate. The transaction will be implemented during June 2024. You may recall that the buyer here is Nedbank (JSE: NED) and I think it’s a pretty interesting strategic move.

• Cognition Holdings (JSE: CGN) is under offer from Caxton and CTP Publishers and Printers (JSE: CAT). In case you’re keeping track of this deal, the scheme meeting is scheduled for 24 May.

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