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General Category => Investment Ideas => Topic started by: writser on January 26, 2017, 02:26:35 PM

Title: ALIOY - Actelion
Post by: writser on January 26, 2017, 02:26:35 PM
Short writeup - I haven't done a lot of work on this. Curious to know if anybody else here has an opinion on it. JNJ (306b) is buying ALIOY (30b) for $280 per share or $70 per ADR. Current ADR price is $68 for a ~3% spread.

- Deal is through a tender offer with a 67% minimum acceptance threshold. Given that there has been a bit of a bidding war and shares are now trading at ~$68 up from ~$35 in November the price looks to be on the high side (above analyst estimates, also at first glance at 30x FCF) and is supported by both boards. I see no particular reasons for the tender offer failing.
- Deal also makes sense for JNJ, relatively small and they can use overseas cash for it, which would be taxed otherwise anyway (or so I would think).
- According to the press release (https://www.actelion.com/en/our-company/news-and-events.page?newsId=2073570&bb=js) deal is expected to close by the end of Q2 with the tender offer commencing next month.

The interesting part: JNJ will only take over the "core portfolio" of Actelion. Before the transaction, Actelion will spin off its research pipeline as a new company, called (very originally) R&D NewCo. NewCo will launch with ~$1b in cash according to the press release. Now, I'm no expert but if you are a 30b company and you spin off your R&D pipeline funded with 1b in cash then that should be worth something, right? Let's say at least 500m or ~$5 per share and probably more - these guys have a track record and are no biotech clowns.

So, depending on how you value the spinoff the spread is 5%-7% by my rough calculations. Looks quite juicy for a deal that is supposed to close in a few months. No tax inversion shenanigans, just a honest deal. Am i missing something? Swiss taxes? Antitrust issues? I couldn't find anything but what do I know ..

I bought a couple of shares.
Title: Re: ALIOY - Actelion
Post by: Haasje on January 26, 2017, 03:14:33 PM
Cons
-IF it breaks downside could be large
-Looks like a high price which can't be good for close %

Pros
-Insiders insisted to keep the R&D core and adviced to hang on to the shares
-Insiders built up $30 bil Actelion from a spin-out
-Insiders will be doing what they do best: drug discovery and company building: https://www1.actelion.com/en/scientists/r-and-d-approach/index.page?
-JNJ has a tax angle value likely split between parties, can only be good for the smaller party
-Return ok without the R&D core, monstrous with it
-JNJ has the cash
-The deal is so JNJ continues to have a sizeable stake in the spin-off. I think this increases odds the spin-off is very undervalued.
-Equity in spin-off may be attractive for JNJ from tax perspective (not sure)
-Actelion shareholders likely to vote with founders
-Actelion keeps a partnership with JNJ going

Title: Re: ALIOY - Actelion
Post by: writser on January 27, 2017, 10:46:34 AM
More reading: https://valueandopportunity.com/2017/01/27/actelion-ch0010532478-merger-arbitrage-meets-spin-off/ . Not much news - not too much information out there yet afaik.
Title: Re: ALIOY - Actelion
Post by: Haasje on January 27, 2017, 11:02:49 AM
https://www.bloomberg.com/news/articles/2017-01-27/hedge-funds-track-j-j-private-jet-for-an-edge-on-actelion-score
Title: Re: ALIOY - Actelion
Post by: Phaceliacapital on January 28, 2017, 08:10:06 AM
JNJ needs this deal. I doubt it would not go through...
Title: Re: ALIOY - Actelion
Post by: indirect on January 28, 2017, 10:00:44 AM
I agree. Spread is attractive for few months and Stub for free.
Title: Re: ALIOY - Actelion
Post by: ccplz on January 29, 2017, 07:18:52 PM
What do they have in the pipeline?

What is JNJ buying these guys for if not for their drug discovery ability?
Title: Re: ALIOY - Actelion
Post by: chrispy on January 30, 2017, 05:38:06 AM
This is a pretty interesting deal.  One question for those that are more familiar with these; if there is a market correction but the deal continues forward and completes, would the $68ADR price stay relatively stable and only fluctuate based on the likelihood of this deal completing?
Title: Re: ALIOY - Actelion
Post by: JayGatsby on January 30, 2017, 12:14:16 PM
Has anyone checked the fees on the ADR? I haven't done much similar with ADRs but the dividends I get from other companies can sometimes have hefty fees attached.
Title: Re: ALIOY - Actelion
Post by: Hielko on January 30, 2017, 12:43:34 PM
ADR fees are as far as I know (almost?) always in the range of $0.02/$0.05 per share per year. Not an issue for a stock with this price. But if you buy a one dollar stock it can be huge.
Title: Re: ALIOY - Actelion
Post by: netnet on January 30, 2017, 02:02:33 PM
If the deal goes through as expected the stub will be free, BUT the risk is the deal will not go through.  If you wait, the stub, will probably trade down from it's when issued price. which is still more expensive than free, but one risk will be removed.

For me the downside of a broken deal is too high.  I will wait for the spinoff.

I should add that I like well funded heath tech/biotech/drug discovery spinoffs.  They seem to do quite well.
Title: Re: ALIOY - Actelion
Post by: indirect on January 30, 2017, 08:54:42 PM
Buying stub after the distribution lessens risk at a price.

Buying well financed spinoff, you always have to wonder if the management  couldn't sell to PE or competitor or wants to get rid of problem subsidiary. e.g. spne, agfs from dow, CRC loaded with debt ( 6 billion) from parent. This is obviously not the case here.

Title: Re: ALIOY - Actelion
Post by: rb on January 31, 2017, 08:26:46 AM
Anyone know why this thing was down 6%?
Title: Re: ALIOY - Actelion
Post by: udravi on January 31, 2017, 08:55:41 AM
From Deutsche Bank:

Actelion shares are trading down on news that the French drug agency (ANSM) has recommended in a letter to physicians that new patients should not be initiated on Actelionís drug Uptravi (~40% of 2020E sales) pending investigation into reports of patient deaths on initiation of therapy. The relationship between
these deaths and Uptravi is unclear. The letter is believed to have been made prior to the confirmed offer from J&J but has only now been picked up by the market. We believe it is most likely that J&J was aware of the warning prior to its confirmed offer to acquire the company but we are awaiting confirmation of this.
We believe the measure is likely to be precautionary and we remind investors that Uptraviís efficacy and safety has been proven in a large randomised Phase III trial and ~1500 patients were initiated on drug in the US as of the end of 3Q16 with no similar action by the FDA. Given the seeming rarity of these events, it is likely to lead to (at worst) tightened precautions and warnings when initiating patients on therapy. This is unlikely to materially impact the drugís commercial opportunity or conclusion of the transaction.

From Reuters

The trader said the spectre of potential problems with Actelionís newest PAH drug have prompted market uncertainty even though the French advisory was issued before J&J announced its $30 bln takeover of Actelion on Jan. 26
Title: Re: ALIOY - Actelion
Post by: rb on January 31, 2017, 08:57:49 AM
Thanks
Title: Re: ALIOY - Actelion
Post by: antao on February 01, 2017, 07:26:53 AM
Quick additional notes:

1. R&D NewCo will be led by Actelion founder and CEO Jean-Paul Clozel and Jean-Pierre Garnier, Actelionís chairman, will be its chairman.
2. The shares of R&D NewCo will be distributed to Actelion's shareholders as a stock dividend upon closing of the tender.
3. J&J will initially hold a 16 percent stake in R&D NewCo and will have rights to an additional 16 percent of the company's equity through a convertible note. It will also get an option on ACT-132577, a product within R&D NewCo being developed for resistant hypertension and now in phase 2 clinical development.
4. The transaction is expected to close by the end of the second quarter, with J&J commencing the tender offer by mid-February.
5. R&D NewCo preliminary valuations start to emerge:
- Berenberg Bank: $1 billion to $2 billion
- Jefferies: 14 to 20 CHF per share
6. Downside if deal breaks is mitigated by the existence of other suitors like Sanofi & others (rumors include Shire, Novartis and Amgen).

We like this deal a lot and the spinoff part of the consideration - which is being largely neglected - may very well become a very lucrative investment.
Title: Re: ALIOY - Actelion
Post by: netnet on February 03, 2017, 09:19:07 AM
Does anyone have the base rate on the number of deals like this that have not been completed?  Looks as if the only thing other than a Trump nuclear war would be 67% not tendering or some kind of major accounting scandal, I figure that it odds of the deal going through are 80 to 95%.
Title: Re: ALIOY - Actelion
Post by: roark33 on February 03, 2017, 11:33:02 AM

6. Downside if deal breaks is mitigated by the existence of other suitors like Sanofi & others (rumors include Shire, Novartis and Amgen).


If the deal breaks because of a MAC due to ph3 trials or Uptravi sales risk, then the mitigation might not be as great with the other suitors. 
Title: Re: ALIOY - Actelion
Post by: rb on February 03, 2017, 11:42:47 AM
Based on the premium JNJ is willing to pay if this doesn't go through it will be because of a serious issue comes up. If that's the case I don't think a lot of other suitors would step up.
Title: Re: ALIOY - Actelion
Post by: roark33 on February 03, 2017, 03:09:27 PM
Yep, I agree with that point about "serious issues".  My reading of the MAC clauses don't seem to point to any concern with pipeline phase trials, only with reduction in sales of current approved drugs.  I think the market probably always undervalues these deals with uncertain stubs afterwards, like CVRs, etc. 
Title: Re: ALIOY - Actelion
Post by: fareastwarriors on February 03, 2017, 05:21:37 PM
From


Deutsche Bank
Markets Research 1/31/17

Quote
Uptravi patient deaths; action likely
limited to label warnings in worst case

ANSM Dear Doctor letter on Uptravi

Actelion shares are trading down on news that the French drug agency (ANSM)
has recommended in a letter to physicians that new patients should not be
initiated on Actelion's drug Uptravi (~40% of 2020E sales) pending investigation
into reports of patient deaths on initiation of therapy. The relationship between
these deaths and Uptravi is unclear. The letter is believed to have been made
prior to the confirmed offer from J&J but has only now been picked up by the
market. We believe it is most likely that J&J was aware of the warning prior to its
confirmed offer to acquire the company but we are awaiting confirmation of this.
We believe the measure is likely to be precautionary and we remind investors that
Uptravi's efficacy and safety has been proven in a large randomised Phase III trial
and ~1500 patients were initiated on drug in the US as of the end of 3Q16 with no
similar action by the FDA. Given the seeming rarity of these events, it is likely to
lead to (at worst) tightened precautions and warnings when initiating patients on
therapy. This is unlikely to materially impact the drug's commercial opportunity
or conclusion of the transaction.

Likely a precautionary measure; tightened warnings in a worst case
We believe the ANSM's action is likely to be a precautionary measure and is
unlikely to lead to any drastic action such as withdrawal of drug from the market.
Uptravi has been rigorously tested in a large randomized Phase III trial (1,156
patients) and its risk benefit proven with a 40% reduction in risk of disease
progression. Investors may recall that a small imbalance in deaths as first event
was observed in the trial that favoured placebo (4.9% deaths on Uptravi vs 3.1%
on placebo). However, no increase in all cause mortality was seen in the overall
study and a numerically lower incidence of PAH related mortality was observed
vs placebo. We believe it is most likely that the decision of the ANSM is a
precautionary measure. We believe experience of treatment in France is likely to
be modest given restricted reimbursement and thus events are rare in the broader
context of the drug's use. If (in the unlikely event) these deaths are proven to
be related to the drug, it is likely to lead to (at worst) tightened precautions and
warnings when initiating patients on drug. We would expect the ANSM's decision
to lead to a broader assessment of the risks to patients when initiating treatment
by the EMA and FDA. However, the risk this leads to more draconian measures
such as severely restricted prescribing, our withdrawal from the market is very
small in our view.
Title: Re: ALIOY - Actelion
Post by: antao on February 10, 2017, 07:12:25 AM
EMA panel recommends that use of Actelion's Uptravi may continue (http://www.reuters.com/article/us-actelion-johnson-johnson-uptravi-idUSKBN15P1KU)
Title: Re: ALIOY - Actelion
Post by: writser on February 21, 2017, 09:45:29 AM
Some more details have been made available: link (http://www.prnewswire.com/news-releases/johnson--johnson-publishes-prospectus-for-actelion-tender-offer-300408192.html)

- Tender offer will run from March 3 to March 30 with a possible extension. At least 67% has to be tendered.
- 500m reimbursement fee if the offer isn't succesful.
- R&D Newco will be financed by 420m CHF cash from Actelion, and a credit facility plus a convertible loan of 580m CHF from JNJ.
- first tranche of convertible loan (235m) will automatically convert in a 16% stake in R&D Newco. The remaining tranche (345m) is convertible in an additional 16% stake.

So R&D Newco starts out with ~655m cash and the second tranche of convertibles imply a valuation of ~2.1b. If you value the spinoff at $750m upside is roughly 7%. Looks great but I don't think I can handicap regulatory issues / medical trials very well so I only have a small position.
Title: Re: ALIOY - Actelion
Post by: netnet on March 03, 2017, 04:34:07 PM
Article in the WSJ, Friday, March 3.

https://www.wsj.com/articles/actelions-founders-start-new-biotech-with-j-js-backing-1488456001 (https://www.wsj.com/articles/actelions-founders-start-new-biotech-with-j-js-backing-1488456001)

Quote
By Denise Roland
March 2, 2017 7:00 a.m. ET
0 COMMENTS

Jean-Paul and Martine Clozel had to sell their house and work out of a rented garage when they started biotech company Actelion Ltd.

Twenty years later, after selling the Swiss company to Johnson & Johnson in an unusual, $30 billion deal, the husband-and-wife team is starting over again. They are embarking on the creation of a new global biotech competitoróarmed with nearly $1 billion in capital, a deep-pocketed partner in J&J and soon, a stock listing in Zurich.

Dr. Clozel, 61 years old, is slated to walk away with about $1.5 billion for his 5% stake in Actelion. Johnson & Johnson persuaded him to sell only after agreeing to let him strip out Actelionís early-stage research and development to form a separate company.

I haven't looked it up, but WSJ says that the couple started and ran the firm, but the husband walked away with 1.5 billion, presumably they both walked away with the money, so it's a bit sexist.
Title: Re: ALIOY - Actelion
Post by: GatorCapital on March 23, 2017, 08:15:34 AM
I believe JP Morgan is the custodian bank for the ALIOY ADR.  Does anybody know if they are automatically tendering the underlying shares?
Title: Re: ALIOY - Actelion
Post by: writser on March 23, 2017, 08:31:09 AM
As far as I know it is Citigroup (https://www.citiadr.idmanagedsolutions.com/stocks/profile.idms?cusip=00507G102). They told me this a few weeks ago:
Quote
No formal announcement has been made with regard to the ALIOY ADR program. Typically, any spinoff share is sold and cash proceeds are paid the ADR holders.  In the event of a tender, you may cancel your ADRs and tender your shares (at your own expense and effort) at any time.  Once the offer becomes compulsory the depositary banks typically surrender their shares, distributing the cash proceeds to the respective ADR holders subject to a 5c cancellation fee.

I haven't seen any formal announcent since. I sold my ADR's and bought common stock. Worst case Citi does not tender the underlying shares and the ADR's will be illiquid and trade at a discount after the tender offer. Then you would have to wait a few months for a squeezeout but you'll still be fine.

I bought a couple of extra shares last week. Deal looks to good to be true but what do I know.
Title: Re: ALIOY - Actelion
Post by: GatorCapital on March 23, 2017, 10:28:56 AM
writser,

Thanks for the reply.  So, by continuing to hold the ADR, I may not get ADR stub shares because the depository bank would sell any spin-off shares received?  I would need to own the Swiss shares directly to receive the stub shares?

Thanks again.
Title: Re: ALIOY - Actelion
Post by: writser on March 23, 2017, 10:34:46 AM
Well, no formal announcement has been made afaik. Citi could either sell the spinoff in the market or spin off an ADR to exisiting ADR holders. If you want to know for sure you'd have to contact Citi again to see if they tell you anything new.
Title: Re: ALIOY - Actelion
Post by: indirect on March 31, 2017, 02:22:13 PM
Market finally giving some value to spinout. ADR above buyout price of $70
Title: Re: ALIOY - Actelion
Post by: Grox on April 28, 2017, 10:07:14 AM
Anyone following recent selloff in ADRs?  As far as I know (from Citi), ADRs will receive  $70/sh  (minus 0.05 fees) plus cash in lieu of Idorsia shares.  No one (Citi, IR) been able to articulate to me, though, whether anything funky happens due to merger closing/squeeze out issues.   

You can see that the non-tendered Swiss shares have also sold off (ATLN vs ATLNEE).

If it's just a matter of (possibly) delayed timing on ADR payout, then ~6% gross spread today is attractive
Title: Re: ALIOY - Actelion
Post by: benhacker on April 28, 2017, 10:14:16 AM
On ALIOY, what about tax withholding?  Does the ADR have to withhold on the squeeze out (the tendered shares DO NOT... but I think squeeze out does).

I would imagine there would be a process through your broker to recover the tax withholding and/or claim on taxes... but I can imagine that may be some of the uncertainty.

Did you call CITI directly?  Contact?
Title: Re: ALIOY - Actelion
Post by: Grox on April 28, 2017, 11:06:09 AM
I called Citi directly just found a # for ADRs group on website (212-723-5435).

Done some more digging - I've now been told they don't know what resolution is, yet, for ADR holders, and they should know next week. 

My guess - the "$70 + cash out newco shares" guidance they gave is just what's typical in these situations...but not official.

Don't know about withholding taxes or how it would be calculated.

Title: Re: ALIOY - Actelion
Post by: Hielko on May 01, 2017, 01:27:46 PM
On ALIOY, what about tax withholding?  Does the ADR have to withhold on the squeeze out (the tendered shares DO NOT... but I think squeeze out does).

I would imagine there would be a process through your broker to recover the tax withholding and/or claim on taxes... but I can imagine that may be some of the uncertainty.

Did you call CITI directly?  Contact?
I bought Actelion in Switzerland directly and tendered, so I don't know if it was possible to tender ALIOY?

But all shares that are now still trading (ATLN in Swiss and ALIOY in the US) are all untendered shares and will face withholding taxes since the payment will be treated like a dividend with a 35% withholding tax on the partt that isn't classified as a return of capital (see page 40 of the offer prospectus: http://files.shareholder.com/downloads/JNJ/4027672102x0x928304/3AE27B38-F170-4034-99BF-13690D373BB2/Offer_Prospectus_English.pdf). So it will depend on your broker, the tax treaty your country has with Switzerland and how your country deals with dividend taxes what you can get/will get.
Title: Re: ALIOY - Actelion
Post by: Grox on May 02, 2017, 08:08:48 AM
You could have converted the ADRs (for a fee) through your broker into ATLN shares and tendered the ATLN shares.  Obviously, would have had to occur before the deadline.

I've spoken to a number of people at Citi / DB / my broker.  All pretty clueless and unmotivated to find an answer.  Some say 'you'll get the $70/share and cashed out Idorsia shares" but don't know about the withholding tax.  Others say it hasn't been settled yet.  Others say they don't even see that there was a transaction!

Anyway, lesson learned for me: read the fine print with ADRs.

Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax.  After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries).



Title: Re: ALIOY - Actelion
Post by: Hielko on May 02, 2017, 08:42:17 AM
You could have converted the ADRs (for a fee) through your broker into ATLN shares and tendered the ATLN shares.  Obviously, would have had to occur before the deadline.

I've spoken to a number of people at Citi / DB / my broker.  All pretty clueless and unmotivated to find an answer.  Some say 'you'll get the $70/share and cashed out Idorsia shares" but don't know about the withholding tax.  Others say it hasn't been settled yet.  Others say they don't even see that there was a transaction!

Anyway, lesson learned for me: read the fine print with ADRs.

Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax.  After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries).
But it's an unsponsored ADR, and given that JNJ acquired 92% of the shares I don't see how a withholding tax can be avoided at this point. I guess they could do a second tender offer, but so far they have communicated that they will do a squeeze out after acquiring 90%+
Title: Re: ALIOY - Actelion
Post by: writser on May 02, 2017, 09:18:23 AM
Well, the language in the offer document is ambiguous (emphasis mine):
Quote
The consideration paid to remaining Actelion minority shareholders (irrespective of their tax residence) in the squeeze-out merger may, depending on the structuring of the squeeze-out merger, be subject to Swiss withholding tax of 35% on the difference between (i) the amount of the consideration and (ii) the sum of the nominal value of the Actelion Shares concerned and of the proportionate part of Actelion's reserves from capital contributions (Reservenaus Kapitaleinlagen) attributable to the respective Actelion Shares.

I'd guess there will be some talks with the Swiss tax authorities given that we're talking about a 9-digit tax liability. Not sure what the exact laws are so I wouldn't say there is a 100% chance of a witholding tax. That said, I would not be comfortable owning the ADR at this point without a clear understanding of potential tax issues.

I think the way the big banks are handling this merger is terrible. I know the ADR's are unsponsored but still, depositories are not voting their shares, not giving holders the option to vote, so now there is a huge potential tax liability, there is no news about how the spin-off will be treated, no news about tax issues, etc. If you are a retail investor holding these ADR's you are royally screwed. I'm glad I switched into the Swiss line a few weeks ago.
Title: Re: ALIOY - Actelion
Post by: rijk on May 02, 2017, 09:48:53 AM
what is also remarkable disgusting in this case is that citi is the (unsponsored) adr depository bank + financial advisor in the tender offer, how can they not know? they designed this transaction.....

they are probably buying the shares of scared adr and untendered shareholders.......
Title: Re: ALIOY - Actelion
Post by: Grox on May 02, 2017, 09:58:47 AM
Writser - yes, I noticed the same language you bolded which is why I figured there is perhaps a way for the banks to get the ADRs off the hook with respect to taxes.

And it is a joke that none of Citi + Actelion + JNJ release any news re: the treatment of ADRs concurrent with the tender results...

In any case, it was a very small position for me so not worth the headache of wasting more time than I already have tracking down an answer.  Frankly at this point, even if i found someone who sounded competent at Citi to explain what will happen, I wouldn't trust that they actually know what they're talking about!
Title: Re: ALIOY - Actelion
Post by: Hielko on May 02, 2017, 10:32:15 AM
Well, the language in the offer document is ambiguous (emphasis mine):
Quote
The consideration paid to remaining Actelion minority shareholders (irrespective of their tax residence) in the squeeze-out merger may, depending on the structuring of the squeeze-out merger, be subject to Swiss withholding tax of 35% on the difference between (i) the amount of the consideration and (ii) the sum of the nominal value of the Actelion Shares concerned and of the proportionate part of Actelion's reserves from capital contributions (Reservenaus Kapitaleinlagen) attributable to the respective Actelion Shares.

I'd guess there will be some talks with the Swiss tax authorities given that we're talking about a 9-digit tax liability. Not sure what the exact laws are so I wouldn't say there is a 100% chance of a witholding tax. That said, I would not be comfortable owning the ADR at this point without a clear understanding of potential tax issues.
Knowing how the average tax authority thinks they will be very happy to see a 9-digit tax asset (for them!). JNJ doesn't care what happens with their money, they just want to get 100% of the shares and Citi doesn't care because they just want to get the ADR fee. They will all just refer to the offering document, say that you can reclaim it and that's it. But perhaps they will surprise me and I'll be wrong.
Title: Re: ALIOY - Actelion
Post by: writser on May 02, 2017, 10:52:54 AM
So cynical!

If I was the founder of Actelion I would certainly hire a few people to look into this (*). He wants to list his new company - I'd say it is not very smart (and not very nice) to squander ~$500m of shareholder wealth because he doesn't give a shit about shareholders. Same for Citi, if they pull this trick a few times people will start to notice - and the potential bad press should easily outweigh the costs of hiring a tax consultant or two.

(*) Actually I would be on my yacht telling my butler to do so.
Title: Re: ALIOY - Actelion
Post by: roark33 on May 02, 2017, 11:37:29 AM
The real solution to this is for JNJ to go out in the open market and buy up all the non-tendered shares.  I don't see why they don't do it, given they are effectively getting a 4% discount on the 280 price they need to pay. 
Title: Re: ALIOY - Actelion
Post by: Hielko on May 02, 2017, 12:03:59 PM
So cynical!

If I was the founder of Actelion I would certainly hire a few people to look into this (*). He wants to list his new company - I'd say it is not very smart (and not very nice) to squander ~$500m of shareholder wealth because he doesn't give a shit about shareholders. Same for Citi, if they pull this trick a few times people will start to notice - and the potential bad press should easily outweigh the costs of hiring a tax consultant or two.

(*) Actually I would be on my yacht telling my butler to do so.
Because I have seen it happen before, wouldn't be the first time ADR holders get screwed.

The real solution to this is for JNJ to go out in the open market and buy up all the non-tendered shares.  I don't see why they don't do it, given they are effectively getting a 4% discount on the 280 price they need to pay.
Yeah, would be a sort of no-brainer if they could just do it. But usually there are laws/rules/regulations that make this hard for the company (no idea how it works in Switzerland).
Title: Re: ALIOY - Actelion
Post by: Jurgis on May 02, 2017, 12:22:48 PM
The real solution to this is for JNJ to go out in the open market and buy up all the non-tendered shares.  I don't see why they don't do it, given they are effectively getting a 4% discount on the 280 price they need to pay.
Yeah, would be a sort of no-brainer if they could just do it. But usually there are laws/rules/regulations that make this hard for the company (no idea how it works in Switzerland).

Wouldn't the last 0.0X% of shares go parabolic if someone tried to buy all remaining shares in open market?

I agree with Hielko about laws, but even without laws you can't really buy out the last couple percentage without hugely spiking the price.
Title: Re: ALIOY - Actelion
Post by: writser on May 02, 2017, 12:36:38 PM
Does that matter? Why would JNJ buy shares at any price? If allowed they could just put a bid in the market around 278 and everybody would be happy.
Title: Re: ALIOY - Actelion
Post by: Jurgis on May 02, 2017, 12:46:55 PM
Does that matter? Why would JNJ buy shares at any price? If allowed they could just put a bid in the market around 278 and everybody would be happy.

If everyone is forced to accept 278, they would.
If they were not forced to accept, by law of supply and demand the price would go higher than that since you have a forced buyer that has to get to 100%.

Yeah, sure if JNJ can always switch to some other method to squeeze out the last 0.0X%, then the holdouts risk getting worse price, but roark33 suggested buying all remaining shares in the market. And this just does not work. You have to wield the stick too to get the holdouts to tender.
Title: Re: ALIOY - Actelion
Post by: benhacker on May 02, 2017, 12:54:07 PM
Jurgis,

Quote
Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax.  After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries).

I think the point being, why isn't JNJ buying when teh price on offer now is demonstrably less than they are contractually committed to pay.  His use of "all" was only a slight mispeak.  The value to JNJ of doing what Roark proposes is proportional to # of shares they can get.... they don't need to get all of them...
Title: Re: ALIOY - Actelion
Post by: Jurgis on May 02, 2017, 01:02:02 PM
Jurgis,

Quote
Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax.  After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries).

I think the point being, why isn't JNJ buying when teh price on offer now is demonstrably less than they are contractually committed to pay.  His use of "all" was only a slight mispeak.  The value to JNJ of doing what Roark proposes is proportional to # of shares they can get.... they don't need to get all of them...

Yeah, that part is probably based on laws and/or them not caring much about getting slight discount on small percentage of holdouts.

 8)
Title: Re: ALIOY - Actelion
Post by: benhacker on May 02, 2017, 01:06:43 PM
Quote
Yeah, that part is probably based on laws and/or them not caring much about getting slight discount on small percentage of holdouts.

There is no law against buying in a squeeze out in Europe to my knowledge.

Certainly, JNJ could not care about the $$$ amount here...
Title: Re: ALIOY - Actelion
Post by: Hielko on May 02, 2017, 01:11:29 PM
Quote
Yeah, that part is probably based on laws and/or them not caring much about getting slight discount on small percentage of holdouts.

There is no law against buying in a squeeze out in Europe to my knowledge.

Certainly, JNJ could not care about the $$$ amount here...
If there is no law, rule or regulations complicating this, the million dollar question is why wouldn't JNJ be buying every single day the past months?
Title: Re: ALIOY - Actelion
Post by: benhacker on May 02, 2017, 01:15:11 PM
Quote
If there is no law, rule or regulations complicating this, the million dollar question is why wouldn't JNJ be buying every single day the past months?

My comment was post tender only... after you are in the squeeze out period.  Prior to that, I believe there are laws preventing it.
Title: Re: ALIOY - Actelion
Post by: Sunrider on May 02, 2017, 02:55:11 PM
If I read the final notice and offering prospective correctly jnj may choose to,simply delist actelion or carry out a scqueeze out. Presume former means no money for non tendered shares, latter does - worth talking a risk on this "post merger spread"?

C.
Title: Re: ALIOY - Actelion
Post by: roark33 on May 02, 2017, 04:11:30 PM
Yeah, I meant they could steadily put in a bid to buy shares.  I bought quite a number of shares on Friday before I realized the tax implications and sold them on Monday and the price didn't move a ton. 

Interestingly, at 98% ownership, the squeeze out takes a different form that doesn't have the same tax implications, i.e. no withholding. 

If I were JNJ, I would do it, but I think big corporations are pretty lazy, probably have to loop in a few dozen lawyers to figure out if they can do this, etc, etc. 
Title: Re: ALIOY - Actelion
Post by: roark33 on May 03, 2017, 07:54:21 AM
I suspect JNJ might be doing this now, between yesterday and today, they are starting to make a real impact on the volume and price.  The best idea probably would have been to just buy the non-tendered ATLN shares and let JNJ slowly take them from you.  Alas, I did not do that. 
Title: Re: ALIOY - Actelion
Post by: writser on May 03, 2017, 08:59:22 AM
I suspect JNJ might be doing this now, between yesterday and today, they are starting to make a real impact on the volume and price.  The best idea probably would have been to just buy the non-tendered ATLN shares and let JNJ slowly take them from you.  Alas, I did not do that.

If you believe that why not buy today? Still a large discount to deal value.

Personally I think it is very unlikely JNJ is buying ADRs in the open market. Probably all sorts of regulatory issues with that and average daily value traded in ALIOY is like $3m per day which is ~.01% of deal value. Hardly a drop in the bucket.
Title: Re: ALIOY - Actelion
Post by: roark33 on May 03, 2017, 09:15:06 AM
I don't think they are buying the ADR's, I think they are buying ATLN, which is the non-tendered shares.  I think the ADRs don't have a shot at being tendered because Citi isn't going to do it.  The volume and value of ATLN is much higher. 
Title: Re: ALIOY - Actelion
Post by: netnet on May 24, 2017, 03:02:16 PM
Idorsia is the name of the spinout company. 

Here is the latest webcast: https://www1.actelion.com/en/investors/events/investor-update.page? (https://www1.actelion.com/en/investors/events/investor-update.page?) (This is only an update on drug candidates going forward for Idorsia.)
Title: Re: ALIOY - Actelion
Post by: writser on June 15, 2017, 02:30:05 AM
Tomorrow Idorsia starts trading and the cash component should settle. Have been looking a bit at the Idorsia prospectus, trying to peg a value onto it. Doesn't really look like my thing. Idorsia is burning cash like crazy and I have no clue about the value of their pipeline. There will be some forced selling tomorrow probably but I doubt it reaches levels where I'd be intrinsically interested in the spinoff. We'll see what happens.
Title: Re: ALIOY - Actelion
Post by: Voodooking on June 15, 2017, 05:30:55 AM
I've never bought a Spinoff 'off the bat' before, I've always given it a month or two for the price to settle, see who else buys it, and do a bit more research on the management etc.

However, on this occasion I've been watching the situation for a while and would like to buy the shares in Idorsia as soon as they become available.

Looking at my brokerage screen I can't search for it at the moment (presumably as it's not listed), so when can I expect to see it, will it just show up tomorrow morning? I'm based in the UK so would like to buy through my Degiro brokerage account and AJ Bell Youinvest Pension and ISA accounts. Will they be added immediately?

I think the fact that the old founders are staying on within the new companies, and have a great track record, means this will be a great opportunity!
Title: Re: ALIOY - Actelion
Post by: writser on June 16, 2017, 02:36:32 AM
Well, this merger turned out ok. Idorsia now trading at a market cap of ~1.5b CHF before further dilution by JNJ. Upper end of my (conservative) estimate. I bought some more Idorsia shortly after the opening - opening auction volume was ~2% of free float and I thought it was reasonably likely some holders were blindly dumping their shares. Bit of a gamble but that turned out very nice. Closed out half my position at 13.80 CHF, will keep the rest for a few days to see how things develop. I think it's quite possible it is worth more but I absolutely have no clue how to value their IP ..
Title: Re: ALIOY - Actelion
Post by: Hielko on June 16, 2017, 03:14:18 AM
Yes, pretty amazing to get what was in hindsight an spread of approximately 8% on a merger like this.
Title: Re: ALIOY - Actelion
Post by: writser on June 29, 2017, 02:54:50 AM
Idorsia now up ~75% since listing a few days ago. Pretty amazing. CEO and his buddy have raised their stake (http://www.nasdaq.com/article/idorsia-ceo-scientific-boss-boost-their-stake-20170629-00150) from 15% to 23% in a few days.

I sold all my shares last week. Maybe that was too early but I heard that that's the trait of a good value investor ... Anyway, no clue how to value this thing so I can't be too unhappy about my decision to sell. Congrats to those still holding on.
Title: Re: ALIOY - Actelion
Post by: rijk on June 29, 2017, 03:19:44 AM
fascinating to be invested in a biotech stock, you can almost feel the animal spirits......

this is far from a value stock, but the field they are in has endless potential and the team has
demonstrated to be capable in building a 30 billion business from scratch in no time

never done this, but i plan to stick with this one for the long run.....
Title: Re: ALIOY - Actelion
Post by: Hielko on June 29, 2017, 03:27:34 AM
Idorsia now up ~75% since listing a few days ago. Pretty amazing. CEO and his buddy have raised their stake (http://www.nasdaq.com/article/idorsia-ceo-scientific-boss-boost-their-stake-20170629-00150) from 15% to 23% in a few days.

I sold all my shares last week. Maybe that was too early but I heard that that's the trait of a good value investor ... Anyway, no clue how to value this thing so I can't be too unhappy about my decision to sell. Congrats to those still holding on.
I have a very small position as a result of the merger arb, and I decided to just hold it until there is a good reason to sell. I can't value this company either, but I do like the situation. Small spin-off that might be undervalued because former Actelion holders don't want it. CEO that has been very successful with Actelion now doing again what he loves doing. That's the kind of spin-off you should want to own, or at least not just sell it as soon as you get it. I don't want to be the guy that blindly sells to create an opportunity for someone else. Since I can't value it I'm not buying it either, but selling a spin-off (especially one with a good structure/background like this) just feels wrong to me.
Title: Re: ALIOY - Actelion
Post by: netnet on June 29, 2017, 02:52:54 PM
Idorsia now up ~75% since listing a few days ago. Pretty amazing. CEO and his buddy have raised their stake (http://www.nasdaq.com/article/idorsia-ceo-scientific-boss-boost-their-stake-20170629-00150) from 15% to 23% in a few days.

I sold all my shares last week. Maybe that was too early but I heard that that's the trait of a good value investor ... Anyway, no clue how to value this thing so I can't be too unhappy about my decision to sell. Congrats to those still holding on.
Although press reports had it opening at 10, I believe it opened at 13 and change;  was in available to you on a when issued basis (my broker did not have the when issued shares.)

Quote
this is far from a value stock, but the field they are in has endless potential and the team has
demonstrated to be capable in building a 30 billion business from scratch in no time

You can cut value many ways.  A proven, shareholder friendly operator at a reasonable valuation, i.e. money in the bank for development with a pipeline and a marketing partner is a value in my estimation. Honestly, this would count as a better 'value' than BRK when Buffett took over. (It won't be but prospectively it looks better. i.e. better looking prospects with a proven operator, which Buffett was not, he was 'only' a proven investor.)
Title: Re: ALIOY - Actelion
Post by: writser on June 29, 2017, 04:16:22 PM
Although press reports had it opening at 10, I believe it opened at 13 and change;  was in available to you on a when issued basis (my broker did not have the when issued shares.)

This was not an IPO, no when-issued trading AFAIK. The opening auction was at 10. VWAP for the first 30 minutes of trading was 10.62.
Title: Re: ALIOY - Actelion
Post by: Jurgis on June 29, 2017, 07:23:09 PM
netnet, I remember we talked about biotech spinoffs including Idorsia and how they are good places to invest. I looked at it the day it opened, no way to value, stock up 30%+, put in order around the bid/ask, it ran away, I said screw it, won't chase.

I see the meta-thesis and it's likely you gonna make a bunch of money on this. But it's tough to buy without any valuation and no upcoming valuation for quite a while. And with a runup out of the gate.

Yeah, I bought a tiny bit of KHTRF some time ago and still holding, but really it's tough.

Good luck.

8)
Title: Re: ALIOY - Actelion
Post by: netnet on June 30, 2017, 02:08:19 PM
netnet, I remember we talked about biotech spinoffs including Idorsia and how they are good places to invest. I looked at it the day it opened, no way to value, stock up 30%+, put in order around the bid/ask, it ran away, I said screw it, won't chase.

I see the meta-thesis and it's likely you gonna make a bunch of money on this. But it's tough to buy without any valuation and no upcoming valuation for quite a while. And with a runup out of the gate.

Yeah, I bought a tiny bit of KHTRF some time ago and still holding, but really it's tough.

Good luck.

8)

Thanks. Yes it is hard to value, but you have to make an educated guess on the pipeline, (good), operator(excellent, and proven) and, so as to overall value, this is hard but frankly I have seldom seen a insider buying into a spin (except John Malone).

Title: Re: ALIOY - Actelion
Post by: netnet on July 03, 2017, 01:36:53 PM
My problem with this spinoff is that disciplined limit orders meant that I only got a small fraction of what I wanted before it got away, now up 2x.
Title: Re: ALIOY - Actelion
Post by: Voodooking on July 05, 2017, 02:27:28 AM
I started buying in at 12CHF and I'm still buying up to 20CHF and every time it dips below 20CHF in order to build a large position.

I feel that this is what Clozel has done / is doing and that this is a textbook Greenblatt spinoff opportunity.

Large insider ownership, insider ownership increasing in number of people and in value, Actelion was one of the biggest companies on the Swiss stock index, meaning institutional investors who owned a 30bn pharma company likely won't want to or won't be able to own a 2bn R&D biotech company, this means forced / blind selling which keeps the price stable for buyers.

Couple this with someone who turned a garage business with his wife into a 30bn concern, still has all his staff, and wants to do it all over again... I think this is the type of person we want to bet on and along with the drugs he has already in development, I'd venture as far as to suggest that this is what Buffett would call a moat.

I view this as something with a long runway and a possible 10x / 10-bagger in a few years. I'll be comfortable holding up to 30% of my portfolio in this and hoping for the best.
Title: Re: ALIOY - Actelion
Post by: Jurgis on July 05, 2017, 07:47:46 AM
this means forced / blind selling which keeps the price stable for buyers.

So nowadays 80% runup is called blind selling that keeps price stable.  ::)  :o

Oh well.