Alstom (ALO) – Tender Offer – 28% price differential

Current Price – Eur 27.27

Offer Price – Eur 35

Upside – 28%

Expiration date –  20 January 2016

Tender document

Alstom is listed in France


This is a materially different tender compared to the ones usually posted on this site. So do your own due diligence before making the purchase.

Alstom is buying back 30% of the outstanding shares. There is no odd lot provision. The largest shareholder (Bouygues, 29% holding) has indicated that it will tender the shares, therefore I would expected the offer to be oversubscribed, and proration somewhere in the range of 30-50%. Items to pay attention to:

– The offer is closed to US residents.

– The company is due to announce 9 month orders and sales on the 14th of Jan. This might have material impact on the share price.

– Taxes. I have tried to get further clarification on this, but with no luck (IR not responding neither by phone nor email). My current understanding is that in France gains on the tender will be taxed as dividends with 30% withholding tax. These gains will be calculated as the difference between the tender price (Eur 35) and the closing share price on the 20th of Jan.

Thus those participating in the tender will have at least 30% of the shares bought back and will be allowed to keep 70% of the gains. Assuming the remaining (prorated) shares can be closed out without losses (there is possibility to hedge via puts) the return on the whole position will be 6%, not bad for a 2 weeks trade.

However, my strategy here is different. I see limited risk of share price dropping below current levels till the expiration of the tender, but it is likely to drift upwards as we get closer to the expiration date. I plan to close out the position if the price reaches 30-31 Eur.