LINKEDIN CORP LNKD
November 06, 2016 - 11:59pm EST by
elehunter
2016 2017
Price: 187.60 EPS 0 0
Shares Out. (in M): 135 P/E 0 0
Market Cap (in $M): 25 P/FCF 0 0
Net Debt (in $M): -2 EBIT 0 0
TEV ($): 23 TEV/EBIT 0 0

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Description

Recommendation

We are recommending a long in LinkedIn (LNKD) common shares at current levels ($188/share). We believe that the recently announced acquisition of LNKD by Microsoft will likely close within the next 2-3 months (and as soon as shortly after November 22).  At the acquisition price of $196 per share, this represents an arb spread of 4.3% and an annualized return of 17% to 50%+.

 

Background

  • On June 13, Microsoft (MSFT) announced an all-cash acquisition of LNKD at $196 per share (~$26.2 billion)
  •  On August 19, LNKD shareholders approved the acquisition by MSFT.
  • ·         The transaction has already been reviewed and cleared unconditionally in the US, Canada and Brazil. 
  • ·         LNDK/MSFT is awaiting regulatory approval from the European Commission on Competition, which is expected to rule on November 22.
  • ·         In September, Salesforce (CRM) which was rumoured to be interested in acquiring LNKD, sought to block the transaction on antitrust issues.

 

Discussion

·          Obtaining regulatory approval is the lone major factor to deal closing.  Wwhile predicting EU regulatory rulings is no easy task, we believe that the transaction has a high probability of closing.  At the heart of the matter is LNKD's massive data-set, which Salesforce is complaining that it could provide MSFT with an unfair advantage.  However, judging by fairly recent transactions which included the acquisition of rich data-sets, the EU has approved deals such as GOOG/Doubleclick and Facebook/Whatsapp.  Furthermore, it can be argued that Salesforce never had access to LNKD's datas-set to begin with.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

  • EU regulatory approval on Nov 22, 2016.
  • MSFT acquisition close by year-end.
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