Mergers and acquisitions will be a core theme for investors over the next couple of years, but the much-anticipated consolidation in the telecoms industry has failed to emerge.
That is according to Elif Aktug, co-manager of the €1.2 billion PTR-Agora fund, which was recently closed to new investors after the Alt Ucits – Market Neutral fund saw an acceleration of inflows 18 months after launching.
In a commentary piece, Aktug said the M&A backdrop had been supported by stimulus efforts both in Europe and more globally, but it had not delivered in some areas.
‘We are still very excited about M&A and the beginning of quantitative easing in Europe this year has added fuel to the fire by lowering financial costs for companies that want to raise money for acquisitions. These favourable conditions should stay with us for a couple of years yet.
‘We also have to recognise when M&A as a driver is receding in some sectors. This is currently the case in telecoms where there has been some short term negative news flow from the European regulator, making some transactions harder to execute in the short term.’
Leading managers, such as Stuart Mitchell of SWMC and DNCA’s Isaac Chebar, had previously championed telecoms as a strong bet for 2014. The predicted consolidation of the industry was viewed as potentially making a leaner and more efficient marketplace.
Oil on the up
One of the so-called mega-mergers of 2015 saw Shell move for BG Group, which Aktug said, presented an interesting opportunity for her team to switch their position on oil.
‘Generally we have been slightly net short oil – with our short positions being more geared to the oil price than our longs – which has helped our performance given the oil price rout of recent months,’ she said.
‘However, we think Shell is an interesting company compared to some of its peers in terms of having a strong balance sheet, and following the BG deal, it will be able to benefit from some of the diversification and synergies that the merger would bring.’
Aktug said it was important not to move too early on the deal, given the widespread industry rumours having run for a while, but believes Shell was being punished too much with relation to negativity about the broad industry.
Other deals Aktug said she would be keeping a close eye on relate to consolidation in the beer sector, which could see AB InBev taken over by SAB Miller. In addition, she is keeping a close eye on Imperial Tobacco, which she has purchased due to its status as a potential takeover target.
The PTR-Agora fund returned 13.7% over the 12 months to the end of October 2015. This compares to a return of 3.1% by the average manager in the Alternative Ucits – Market Neutral sector over the same timeframe.