RIB Software (RIB.DE) – Merger Arbitrage – 9% Upside

Current Price: €26.66

Offer Price: €29.00

Upside: 9%

Expected Closing Date: Q2 2020

Press release

 

Schneider Electric, French electrical equipment group, is acquiring German construction and building information modeling company RIB Software. Consideration stands at €29/share in cash (9% upside to current prices). The transaction is conditioned on >50% tender offer acceptance rate and antitrust approvals from Germany, Austria, US and South Africa. A blessing from CFIUS will be needed as well.

Acceptance period is expected to start this month and last until April. Closing is estimated in Q2.

The offer has already received support from the two largest shareholders (32% combined) - Thomas Wolf (CEO) family that owns 17% and ENA Investment Capital 15% stake. Moreover, if I understand it correctly, the press release states that treasure shares (7%) will be counted towards approval as well, meaning that only 11% of additional votes are required.

Thus tender acceptance condition seems highly likely to be satisfied. Regulatory approvals also should not be a big hurdle (correct me if I'm wrong here).

RIB shares used to trade with a tight spread till last Friday when the spread widened to the current levels. This increase is intriguing as I did not manage to find any specific reasons behind it aside from overall sell-off in the market.

 

Rationale 

RIB Software (€1.4bn market cap) offers a software platform for planning, costing and real-time construction monitoring.

Schneider Electric (€49bn) generates half of its revenues from products for buildings and data centers, so this merger will strengthen its competence in smart and carbon-free buildings and also increase its its capabilities in the Build/Construction phase, which currently suffers from a high level of inefficiency due to very low adoption of digital technologies (less than 5%).

Companies also see significant synergies and cross-selling opportunities (investor presentation).

3 COMMENTS

  1. Ilja

    Spread has shrunk to 1%. Given the further uncertainties with regulatory approvals and the current situation in the markets, I am inclined to close the position with ~8% profit in 2 weeks.

  2. Zulu Investor

    Hi, the spread has widen signficantly again to almost 13%. Are there any updates you have for this? It seems surprising that this has widen a lot against the overall market rally recently.

    1. Ilja

      There’s no trade here anymore. Acceptance period has ended by the end of April (and 11th of May for the additional period) and Schneider stated that they will not go any further with this: “In addition, Schneider Electric would like to reiterate that – irrespective of the current tender result
      – it has no intention to enter into a domination and/or profit and loss transfer agreement with RIB.”.

      https://www.se.com/ww/en/assets/564/document/133069/release-rib-software-end-acceptance-period.pdf

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