26 October 2022

 

GABELLI MERGER PLUS+ TRUST PLC - FINAL RESULTS

 

GABELLI MERGER PLUS⁺ TRUST PLC

Financial Results for the year ended 30 June 2022

FINANCIAL HIGHLIGHTS

Performance	As at                  As at 30 June 22     30 June 21
Net asset value per share (cum income)	$9.35              $9.94
Net asset value per share (ex income)	$9.78             $10.27
Dividends per share paid during the year1	$0.48              $0.48
Share price	$9.00              $7.40
Discount to Net Asset Value2,3	(3.74)%         (25.63%)

 

Total returns	Year    ended 30 June 2022	Year ended 30 June 2021
Net asset value per share4	(1.34)%	12.12%
U.S. 3-month Treasury Bill	1.69%	0.09%
Share price5	29.06%	5.46%

 

Income	Year ended 30 June 2022	Year ended 30 June 2021
Revenue return per share	($0.09)	($0.14)

 

Ongoing charges6	Year ended 30 June 2021	Year ended 30June 2022
Annualised ongoing charges	1.67%	1.66%

Source: Portfolio Manager (Gabelli Funds, LLC), verified by the Administrator (State Street Bank and Trust Company).

1  The dividends paid during the year ended 30 June 2022 include the fourth quarter dividend for the year ended 30 June 2021.

2  Figures are inclusive of income and dividends paid, in line with the Association of Investment Companies (the "AIC") guidance.

3 These key performance indicators are alternative performance measures.

4 Net Asset Value per ordinary share, total return represents the theoretical return on NAV per ordinary share, assuming that dividends paid to shareholders were reinvested at the NAV per ordinary share at the close of business on the day shares were quoted ex dividend.

5 Share Price Total Return represents the theoretical return to a shareholder, on a closing market price basis, assuming that all dividends received were reinvested, without transaction costs, into the ordinary shares of the Company at the close of business on the day the shares were quoted ex dividend.

6 Ongoing Charges are operating expenses incurred in the running of the Company, whether charged to revenue or capital, but excluding financing costs. These are expressed as a percentage of the average net asset value during the period and this is calculated in accordance with guidance issued by the Association of Investment Companies.

 

CHAIRMAN'S STATEMENT

 

We share this Annual Report to Shareholders, encompassing the period from July 2021 through June 2022, and note certain developments post financial year end. This period marks the fifth year of operations for the Gabelli Merger Plus+ Trust Plc (the "Company") activating the Loyalty Programme tender offer and additional voting shares for qualifying shareholders. Gabelli Merger Plus+ Trust Plc operates globally in the highly specialised investment discipline of event driven merger arbitrage. The objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad equity and fixed income markets. The investment programme is global, encompassing a broad spectrum of special situations and event driven opportunities, with an emphasis on announced merger transactions. The portfolio is a highly liquid, non-market correlated alternative to traditional equity and fixed income securities.

 

The Company's primary objective is to seek to generate total return, consisting of capital appreciation and current income. The Company will seek a secondary objective of the protection of capital, uncorrelated to equity and fixed income markets. The Fund utilizes the Gabelli Private Market Value (PMV) with a Catalyst^TM investment methodology, and has built a diversified portfolio using catalyst event merger arbitrage strategies to create an optimal risk/reward profile. The investment programme is global, encompassing a broad spectrum of special situations and event driven opportunities, with an emphasis on announced merger transactions. The portfolio is a highly liquid, non-market correlated alternative to traditional equity and fixed income securities. Merger returns are derived through the narrowing of deal spreads from time of announcement until their expected closure. The spread is a function of three primary elements: the risk free rate, the risk premium associated with the transaction fundamentals, and the time value of money. The dynamic interplay across these components is evaluated within every investment by the Manager. Position sizing will vary according to a probabilistic assessment of the risk. The inherent risk in all merger investing is a broken deal rather than the standard deviation or price variance of the market price movements over the deal timeline. Gabelli Funds LLC, the Portfolio Manager, employs an active approach to analysing the fundamentals of a merger investment and has a long history of implementing such a programme. At its core, this differentiated investment approach utilises the Gabelli analytical methodology to manage risk amongst other inputs and factors. The full details of this investment programme were set out in the offering Prospectus and are found on the Company's web site, www.Gabelli. com/MergerPlus.

 

The Board is always receptive to feedback and is available should you have any questions or comments via the Portfolio Manager's Investor Relations group directly. We thank you, our shareholders, for your confidence in entrusting a portion of your assets to our team.

 

The Investment Environment

Uncertainty surrounding the current state of the global macroeconomic environment, taxed supply chains and an ongoing war in Eastern Europe plagued the pace of deal making in the first half of 2022, which showed a 21% decrease in deals versus last year's levels in the second quarter alone. Deal making in the technology sector slowed 19% year- over-year, but remained the most active, followed by industrials and financials.

 

Despite COVID-19 cases trending significantly below peak, certain hot spots remain, particularly in China. This adds an element of uncertainty to capital allocation decisions evidenced in a further 17% decline in cross border activity when compared to last year.

 

Nevertheless, the number of deals greater than $10 billion increased 11% year-over-year, and several well-known targets entered into merger agreements. Microsoft began the year announcing its $69 billion acquisition of game developer Activision Blizzard.

 

In May, software company VMware Inc agreed to be acquired by Broadcom Inc in a cash and stock transaction valued at $61 billion. There was also Elon Musk's well- publicised bid to take Twitter private for $44 billion, the outcome of which remains uncertain.

 

The broad market still sits over 20% above the level where it ended in 2019, an 8% CAGR over a very fraught time. We as a society may have moved past COVID, but its aftereffects are still felt. Political, corporate and individual actors still need to sort through a variety of issues. Economic and market conditions may worsen before they improve, and there may be volatility in currency markets as Central Banks adjust interest rate policies, but the risks are more balanced today than they have been in some time.

 

Principal Developments on Investments During the Year

Throughout periods of the first half, we saw significant widening of deal spreads, some of which were tied to specific deal risks, including worries that buyers would walk away from transactions, leaving target companies vulnerable to market conditions. This led to relatively broad based selling across announced deals, with more pain felt in technology, given the sector's steep selloff this year following lofty valuations.

 

Spreads have since rebounded following the successful completion of several deals, as well as updates provided by buyers to reassure the market that they remain committed to closing their transactions. While the pace of acquisition announcements by strategic acquirers slowed, private equity backed deals remained plentiful. A total of $553 billion worth of deals were announced in the half, accounting for a quarter of all M&A activity. While some private equity sponsors have hit roadblocks attempting to secure financing, strategic buyers balance sheets remain strong with regards to cash levels and financial buyers' are coming off very robust years of capital raising.

 

We expect transaction activity to strengthen as companies gain more certainty in the face of current global concerns. As market valuations continue to reset, the strong US Dollar is enticing for corporate deal making, positioning American companies well in the competition for assets on a global basis. The Gabelli method is well organised to invest during such a period. Gabelli managers are fundamental and bottom up. Their analysts follow sectors globally, and seek to understand everything available relating to a business, and are agnostic of indices and market capitalisations. Their work emphasizes balance sheet and cash flows. Ultimately, they seek to identify businesses that are trading in the market at discounts to their estimates of the value an informed industrial acquirer would pay for the company in its entirety, thus establishing the Private Market Value ("PMV"). The Gabelli team also need event catalysts to invest, thus providing the potential for returns independent of the broad markets. Volatility has historically presented excellent opportunities to acquire a business through the fractional interest represented in its traded shares and we believe the PMV with a Catalyst method will fare well in the period ahead.

 

Performance

The Company's net asset value (NAV) plus dividends paid delivered a total return to shareholders during the year under review of -1.11% in U.S. dollars. This performance compared to the equivalent 13-week U.S. Treasury Bill which yielded 1.69% as of 30 June 2022, and also relative to the IQ Merger Arbitrage ETF, S&P Merger Arbitrage Index, and Credit Suisse Merger Arbitrage Liquid Index, which returned -7.44%, -1.59%, and -0.88%, respectively. The share price total return with dividends reinvested was 29.06%, with the discount narrowing during the year. The performance for shareholders at IPO through the tender period of 22 September 2022, was 19.08% with dividends reinvested, versus a return of 18.97% for the Credit Suisse Merger Arbitrage Liquid Index.

 

Dividend

The Company's portfolio is largely focused on the Catalyst events of announced takeovers, where the terms are known and transparent to the market. Such investments generally have estimated return profiles in periods of less than nine months. The company will pursue other Catalyst Event opportunities as they surface, and will also invest occasionally in other forms of relative value arbitrage, such as such as share class arbitrage and holdco arbitrage. Holding periods average approximately 120 days. In arbitrage, the culmination of a position is effectively a return of cash as the position is closed. In order to allow the Shareholders to realise a predictable, but not assured, level of cash flow and some liquidity periodically on their investment, the Company has adopted a "managed dividend policy". This policy seeks to pay Shareholders a quarterly dividend in relation to the Net Asset Value of the Company at the time, which may be changed at any time by the Board. Between inception and 30 June 2022, the Company returned $2.27 per share to shareholders, consistent with its dividend policy. Dividends are paid only when declared by the Board subject to the Board's assessment of the Company's financial position and only if the Company has sufficient income and distributable reserves to make the dividend payment, and the level of dividend may vary over presented excellent opportunities to acquire a business through the fractional interest represented in its traded shares and we believe the PMV with a Catalyst method will fare well in the period ahead of time. As such, the portfolio's managed distribution of capital through the payment of quarterly dividends is under review as we enter the new Fiscal Year.

 

Tender Offer and Close Company Status

This report also addresses the period through October 2022 as a subsequent event to the fiscal year ending 30 June 2022. The Company commenced the Fifth Anniversary Tender Offer for Qualifying Registered Shares via two tranches beginning in September 2022 and ending February 2023. Shareholders whose shares are registered in the Loyalty Programme for five years are eligible to participate in the Company's tender offer. As of 7 October 2022 the Company successfully completed the tender for 3,005,957 shares at NAV less expenses. The Tranche Two tender offer will commence in January 2023, with an estimated maximum of approximately 343,000 Qualifying Shares Tender results present two significant developments for shareholder consideration: first, the overall portfolio assets under management are now USD 68 million versus USD 97 million; second, the post tender shareholder composition requires the Company to operate as a Close Company. The Board of Directors acknowledges the broad shareholder participation in the tender, and notes that the largest shareholder, Associated Capital Group, elected not to tender and has expressed its view that the Company should continue. Associated Capital Group, legal and beneficial owner of 6,216,256 shares at the time of this writing, has confirmed via a letter of Deed, which contains enforceable irrevocable undertakings, that it will both vote in favour of continuation of the company and not participate in the  tender offer. As a result, the Company will operate as a Close investment company, and therefore will be subject to UK corporate taxes, and thus no longer avail itself to investment trust status. The Board of Directors will assess shareholder considerations and undertake the analysis of options for the continuing Company, including operational and structural alternatives oriented towards expense and tax savings, as it progresses. Finally, in accordance with the charter, remaining registered loyalty Programme Five-year shareholders are eligible to receive an additional vote per individual share held. The Loyalty Programme has been implemented in accordance with the offering prospectus.

 

Final Thoughts

With heartfelt sadness we write this letter after the passing of Her Majesty Queen Elizabeth II, whose steadfast leadership will be missed. Today's post World War II order is facing intense challenges, yet this Company has performed consistently and non-correlated to the broader indices since inception. It has endured COVID-19, the onset of inflation and higher interest rates, and a fragile regulatory environment lead by the geo-political wrangling between the US and China. The list continues, as will the Gabelli Merger Plus+ Trust Plc in the United Kingdom.

 

Marc Gabelli

Chairman

 

 INVESTMENT OBJECTIVE AND POLICY

 

Investment objective

The Company's primary investment objective is to seek to generate total return, consisting of capital appreciation and current income. The Company will seek a secondary objective of the protection of capital, uncorrelated to equity and fixed income markets.

 

Investment policy

The Company will seek to meet its investment objective by utilising the Gabelli Private Market Value (PMV) with a CatalystTM, investment methodology, maintaining a diversified portfolio of event merger arbitrage strategies to seek to create an optimal risk/ reward profile for the portfolio.

 

"Event Driven Merger Arbitrage" is a highly specialised active investment approach designed principally to profit from the differences between the public market price and the price achieved through corporate catalyst events. Catalysts are utilised to earn returns independent of the broad markets' direction. This includes corporate events such as announced mergers, acquisitions, takeovers, tender offers, leveraged buyouts, restructurings, demergers and other types of reorganisations and corporate actions ("deals").

 

The Company will invest globally although it is expected to have an emphasis on securities traded in the United States, predominantly equity securities issued by companies of any market capitalisation. The Company is permitted to use a variety of investment strategies and instruments, including but not limited to: convertible and non-convertible debt securities; asset-backed and mortgage-backed securities; fixed interest securities, preferred stock, non-convertible preferred stock, depositary receipts; shares or units of UCIs or UCITS; rights qualifying as transferable securities; when issued, delayed delivery transferable securities; forward contracts; swaps; recently issued transferable securities; repurchase agreements, money market instruments and warrants.

 

 

The Company may invest part of its net assets in cash and cash equivalents, money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having at least a single A (or equivalent) credit rating from an internationally recognised rating agency or government and other public securities, if the Portfolio Manager believes that it would be in the best interests of the Company and its Shareholders. This may be the case, for example, if the Portfolio Manager believes that adverse market conditions justify a temporary defensive position. Any cash or surplus assets may also be temporarily invested in such instruments pending investment in accordance with the Company's investment policy.

 

The Company may take both long and short positions in equity and debt securities. For shorting purposes, the Company may use indices, individual stocks, or fixed income securities.

 

The Company may utilise financial derivative instruments to create both long and synthetic covered short positions with the aim of maximising positive returns. The Company may use strategies and techniques consisting of options, futures contracts, and currency transactions and may enter into total rate of return, credit default, or other types of swaps and related derivatives for various purposes, including to gain economic exposure to an asset or group of assets that may be difficult or impractical to acquire.

 

The Company may also use derivatives for efficient portfolio management purposes including, without limitation, hedging and risk management and leverage.

 

The Company has broad and flexible investment authority and, accordingly, it may at any time have investments in other related or unrelated areas. Strategies and financial instruments utilised by the Company may include: (i) purchasing or writing options (listed or unlisted) of any and all types including options on equity securities, stock market and commodity indices, debt securities, futures contracts, future contracts on commodities and currencies; (ii) trading in commodity futures contracts, commodity option contracts and other commodity interests including physical commodities; (iii) borrowing money from brokerage firms and banks on a demand basis to buy and sell short investments in excess of capital; and (iv) entering into swap agreements (of any and all types including commodity swaps, interest rate swaps and currency swaps), forward contracts, currencies, foreign exchange contracts, warrants, credit default swaps, synthetic derivatives (for example, CDX), collateralised debt obligations tranches, and other structured or synthetic debt obligations, partnership interests or interests in other investment companies and any other financial instruments of any and all types which exist now or are hereafter created.

 

There has been no change to the investment policy since the launch of the Company on 19 July 2017. No material change will be made without shareholder approval.

 

 

PORTFOLIO MANAGER'S REVIEW

 

Methodology and Market Opportunity Gabelli Funds would like to thank our investors for allocating a portion of their assets to the Gabelli Merger Plus+ Trust ("GMP"). We appreciate the confidence and trust you have placed in our organization through your investment in GMP. Our investment objective is to compound and preserve wealth over time while remaining non-correlated to the broad markets. As a firm, we have invested in mergers since 1977 and created the Gabelli group's first dedicated, announced merger fund more than thirty years ago. We remain vigilant in the application of our investment philosophy and in our search for opportunities. In this context, let us outline our investment methodology and the investment environment through 30 June 2022.

 

We remain vigilant in the application of our investment philosophy and in our search for opportunities. In this context, let us outline our investment methodology and the investment environment through 30 June 2022. Merger arbitrage is a highly specialised investment approach designed principally to profit from corporate events, including the successful completion of proposed mergers, acquisitions, takeovers, tender offers, leveraged buyouts, restructurings, demergers, and other types of corporate reorganizations and actions. As arbitrageurs, we seek to earn the differential, or "spread," between the market price of our investments and the value ultimately realized through deal consummation.

 

We are especially enthusiastic about the opportunities to grow client wealth in the decades to come, and we highlight below several factors that should help drive results. These include:

 

•     Increased market volatility, which enhances our ability to establish positions for the prospect of improved returns;

 

•     A robust market for corporate deal making as conditions continue to provide an accommodative market for mergers and acquisitions.

 

•     A rising interest rate environment, providing attractive merger spread opportunities;

 

•     The Fund's experienced investment team, which pursues opportunities globally through the disciplined application of Gabelli's investment methodology;

 

Global Deal Activity¹

Global deal merger and acquisition activity ("M&A") totalled $2.2 trillion during the first half of 2022, a year- over-year decrease of 21%; however, the deal flow remained notably consistent, capped off with $1 trillion in deals in the second quarter. This marked the eighth consecutive quarter to pass $1 trillion. There were twenty-six deals completed with values greater than $10 billion, accounting for $609 billion in aggregate, up 11% year over year. Deals with values between $1-$5 billion accounted for $562 billion during the year, a decrease of 35% compared to the first half of 2021.

 

 

 

Cross border M&A activity totalled $687 billion for the calendar year, marking a decrease of 17% year-over-year. The value of private equity-backed buyouts remained robust at $553 billion in the first half, an all-time high. This accounted for nearly 26% of total M&A activity.

 

The slowdown of deal activity, compared to the record-breaking levels of 2021, was driven mainly by U.S. based targets, which saw $958 billion in deal activity, a decrease of 28% year-over-year. European M&A tallied $527 billion of transactions over the same period, a decrease of only 4%.

 

The Technology sector was the biggest contributor to merger activity during the first half, totalling $531 billion. This accounted for 25% of total announced deal volume, a record. Financials and Industrials sectors were also large contributors, each accounting for 12% of M&A activity.

 

 

1 Thomson Reuters M&A Review - First Half of 2022

 

PORTFOLIO IN REVIEW

The first half of 2022 was the worst for markets since 1970 with the S&P 500 shedding nearly 21%. Similar to 1970, the main cause of the market turmoil was inflation. Economists often define inflation as too many dollars chasing too few goods. Both those conditions have been eminently true of late. Years of easy monetary policy formed the underbrush while $5 trillion in rescue stimulus, $5 trillion in Quantitative Easing, supply chain snafus, and pent-up demand triggered by COVID provided the spark for an explosion in prices. The war in Ukraine, which has perhaps permanently altered global food and energy flows, accelerated the fire. Unfortunately, most central banks, including the Fed, entered this year behind the curve. In order to restore credibility and avoid the fate of 1970s Chair Arthur Burns, Jerome Powell has had to act aggressively with increases of 150 basis points over the last six months. The Fed can neither pump more oil nor harvest more wheat, but it can act on the demand side of the equation.

 

Against this backdrop of rising rates, macroeconomic concerns, and regulatory uncertainty, deal making slowed to $2.2 trillion in the first half of the year. While this was down 21% compared to the same period last year, 2021 was a record year and a likely outlier for M&A activity. The first two quarters of 2022 each saw deal volume above $1 trillion, the 7th and 8th consecutive quarters to reach that level. We expect we will continue to see a robust deal environment, as a reset in valuations should provide opportunities for both strategic and private equity buyers.

 

As we have noted in the past, the merger arbitrage strategy is a beneficiary of rising rates, as the risk free rate is one of the components of a deal spread. As rates rise, nominal spreads should widen, all things being equal. Fixed income markets are currently anticipating an additional 200 basis points of rate hikes this year, which would bring the Fed Funds rate to 3.5%.

 

Currently, the spreads in the portfolio are as wide as we have seen since the beginning of the COVID pandemic. Aggressive antitrust policy rhetoric has increased volatility in deal spreads, which provides us an opportunity. Mispriced risk allows us to add to our highest conviction positions at lower prices, generating more attractive returns as deals progress towards closing.

 

We continue to find attractive investment opportunities in newly announced and pipeline deals. We remain focused on investing in highly strategic, well-financed deals with an added focus on near- term catalysts, and are upbeat about our prospect to continue to generate absolute returns.

 

 

 

Notable contributors to performance include:

·        Arena Pharmaceuticals, Inc. (ARNA- NASDAQ), a biotechnology company that develops therapeutics for autoimmune diseases, was acquired by Pfizer in March after the companies received U.S. antitrust approval. In February, Pfizer withdrew and refiled its application for antitrust approval in the hopes of avoiding a second request that would have extended the timeline for approval. The companies had already received antitrust approvals in Germany and Austria, and Arena shareholders voted to approve the transaction in February. Under the terms of the agreement, Arena shareholders received $100.00 cash per share, or about $6 billion.

 

·        Meggitt plc (MGGT LN-London), an engineering firm that designs and manufactures components for the aerospace, defence and energy industries, agreed to be acquired by Parker-Hannifin for £8.00 cash per share, or about £7 billion. Meggitt has made considerable progress securing various approvals needed to consummate the transaction and awaits only UK government approval. The deal was completed on 13 September 2022.

 

·        Sanderson Farms, Inc. (SAFM- NASDAQ), a producer and processor of fresh and frozen chicken products, agreed to be acquired by a consortium led by Cargill for $203 cash per share, or about $5 billion. As the deal awaits its final regulatory approval from the U.S. Department of Justice, the stock has traded favourably on Sanderson's fundamentals. The company's results have greatly benefited from poultry pricing and the consensus is that the stock would trade significantly higher in the event the deal cannot be completed.

 

·        Swedish Match (SWMA SS- Stockholm), a manufacturer of smokeless tobacco products, including the market-leading product ZYN, agreed to be acquired by Philip Morris International for SEK106.00 cash per share, or about $16 billion. In June, the companies received antitrust approval in the U.S. The spread then tightened further upon reports that Elliott was building a stake in Swedish Match to oppose the sale at current terms.

 

·        Xilinx, Inc. (XLNX-NASDAQ), a designer of advanced programmable semiconductors used in automotive, aerospace, and consumer applications, was acquired by Advanced Micro Devices. The companies received approval from Chinese antitrust regulator SAMR in January, but were required to re-file their application in the U.S., given it had been more than one year since receiving U.S. antitrust approval, which was granted on 9 February, 2022. The deal subsequently closed on 14 February, 2022. Under the terms of the agreement, Xilinx shareholders received 1.7234 shares of AMD common stock per share of Xilinx, which valued the company at $48 billion.

 

Notable detractors from performance include:

·        Avast  plc  (AVST LN-London), a provider of cyber security software, agreed to be acquired by NortonLifeLock for $7.61 cash and 0.0302 shares of NLOK, valuing the transaction at $8 billion. While the deal secured all global regulatory approvals outside of the UK, in March the UK antitrust regulator referred the deal to a stage two review, and the stock sold off due to the uncertainty. In the end, the transaction secured approval from the Competition and Markets Authority, with a completion date of 12 September 2022.

 

·        Twitter Inc. (TWTR US), a provider of online social networking services, Twitter agreed to be acquired by Elon Musk for $54.20 cash, or $44 billion. In July, Elon Musk unilaterally terminated the merger agreement with Twitter, citing material breach of the access to information and financing cooperation covenants in the context of spam accounts. Twitter sued Musk in Delaware Chancery court for Specific Performance, essentially asking the court to compel Musk to close the deal on terms. Musk's attempt to terminate the transaction caused some disruption at the company. This, coupled with a deteriorating environment for digital- advertising spending, negatively impacted Twitter's stock price. On 4 October 2022, Musk again reversed course and stated that he would move ahead with the acquisition at the original price of $54.20. At the time of writing, the outcome of this deal is still uncertain.

 

SELECT PORTFOLIO HOLDINGS AS OF 30 JUNE 2022

·    Activision Blizzard, Inc. (ATVI- NASDAQ) agreed to be acquired by Microsoft Corp. (MSFT-NASDAQ). Activision Blizzard develops and publishes interactive entertainment content and services. Under the terms of the agreement, Activision shareholders will receive $95.00 cash per share, valuing the transaction at approximately $74 billion. The transaction is subject to shareholder as well as regulatory approvals, and is expected to close in late 2022 or 2023.

 

·     Avast plc (AVST LN-London) agreed to be acquired by NortonLifeLock, Inc.   (NLOK-NASDAQ).   Avast provides digital security and privacy products. Under the terms of the agreement, Avast shareholders will receive $7.61 cash and 0.0302 shares of NortonLifeLock common stock per share, valuing the transaction at approximately £6 billion. The transaction was subject to shareholder as well as regulatory approvals, and closed in mid-September 2022.

 

·     Coherent, Inc. (COHR-NASDAQ) agreed to be acquired by II-VI, Inc. (IIVI-NASDAQ). Coherent provides lasers, laser-based technologies, and laser-based system solutions. Under the terms of the agreement, Coherent shareholders received $220.00 cash and 0.91 shares of II-VI common stock per share, valuing the transaction at approximately $7 billion. The transaction was subject to approval by shareholders of both companies, as well as regulatory approvals, and closed in July 2022.

 

·     First Horizon Corp. (FHN-NYSE) agreed to be acquired by The Toronto- Dominion Bank (TD CN-Toronto). First Horizon operates as the bank holding company for First Horizon Bank, which provides various financial services. Under the terms of the agreement, First Horizon shareholders will receive $25.00 cash per share, valuing the transaction at approximately $13 billion. The transaction is subject to shareholder, as well as regulatory approvals, and is expected to close in late 2022 or early 2023.

 

·     Mandiant, Inc. (MNDT-NASDAQ) agreed to be acquired by Alphabet, Inc. (GOOGL-NASDAQ). Mandiant provides cyber defence solutions. Under the terms of the agreement, Mandiant shareholders will receive $23.00 cash per share, valuing the transaction at approximately $5 billion. The transaction is subject to shareholder as well as regulatory approvals, and is expected to close in the second half of 2022.

 

·     Meggitt plc (MGGT LN-London) agreed to be acquired by Parker-Hannifin Corp. (PH-NYSE). Meggitt designs and manufactures components and sub-systems in the UK, rest of Europe, the U.S., and internationally. Under the terms of the agreement, Meggitt shareholders will receive £8.00 cash per share, valuing the transaction at approximately £7 billion. The transaction is subject to shareholder as well as regulatory approvals, and is expected to close in the third quarter of 2022.

 

·     Rogers Corp. (ROG-NYSE) agreed to be acquired by DuPont de Nemours, Inc. (DD-NYSE). Rogers designs, develops, manufactures, and sells engineered materials and components worldwide. Under the terms of the agreement, Rogers shareholders will receive $277.00 cash per share, valuing the transaction at approximately $5 billion. The transaction is subject to shareholder as well as regulatory approvals, and is expected to close in the second half of 2022.

 

·     Shaw Communications, Inc. (SJR/B CN-Toronto) agreed to be acquired by Rogers Communications, Inc. (RCI/B CN-Toronto). Shaw Communications operates as a connectivity company in North America in the Wireline and Wireless segments of the market. Under the terms of the agreement, Shaw shareholders will receive C$40.50 cash per share, valuing the transaction at approximately C$26 billion. The transaction is subject shareholder as well as regulatory approvals, and is expected to close in the second half of 2022.

 

·     Swedish Match AB (SWMA SS- Stockholm) agreed to be acquired by Philip Morris International, Inc. (PM-NYSE). Swedish Match develops, manufactures, markets, and sells snus and other smokeless tobacco products, nicotine pouches, and other tobacco products in Scandinavia, the U.S., and internationally. Under the terms of the agreement, Swedish Match shareholders will receive SEK 106.00 cash per share, valuing the transaction at approximately $16 billion. The transaction is subject to the tender of at least 90% of shares outstanding, as well as regulatory approvals, and is expected to close in the fourth quarter of 2022.

 

·     Tower Semiconductor Ltd. (TSEM- NASDAQ) agreed to be acquired by Intel Corp. (INTC-NASDAQ). Tower Semiconductor operates foundries, proving manufacturing of integrated circuits  (ICs)  worldwide.  Under the terms of the agreement, Tower shareholders will receive $53.00 cash per share, valuing the transaction at approximately $5 billion. The transaction is subject to shareholder as well as regulatory approvals, and is expected to close by the first quarter of 2023.

 

 

·     Vifor Pharma AG (VIFN SW- Switzerland) agreed to be acquired by CSL Ltd. (CSL AU- Sydney). Vifor Pharma develops and manufactures pharmaceutical products in Switzerland, rest of Europe, the U.S., and internationally. Under the terms of the agreement, Vifor shareholders will receive $179.25 cash per share, valuing the transaction at approximately $12 billion. The transaction is subject to the tender of at least a majority of shares outstanding, as well as regulatory approvals, and closed in August.

SELECT CLOSED DEALS AS OF 30 JUNE 2022

 

·    Arena Pharmaceuticals, Inc. was acquired by Pfizer Inc. in March 2022. Arena Pharmaceuticals focuses on developing novel medicines in the areas of gastroenterology, dermatology, and cardiology. On 13 December, 2021, Pfizer announced it would acquire Arena for $100.00 cash per share, valuing the transaction at approximately $6 billion.

 

·    Cerner Corp. was acquired by Oracle Corp. in June 2022. Cerner provides health care information technology solutions and tech-enabled services in the U.S. and internationally. On 20 December, 2021, Oracle announced it would acquire Cerner for $95.00 cash per share, valuing the transaction at approximately $30 billion.

 

·    Crown Resorts Ltd. was acquired by Blackstone, Inc. in June 2022. Crown Resorts operates in the entertainment industry primarily in Australia. On 13 February, 2022, Blackstone announced it would acquire Crown for A$13.10 cash per share, valuing the transaction at approximately A$9 billion.

 

·    CyrusOne, Inc. was acquired by KKR & Co., Inc. and Global Infrastructure Partners in March 2022. CyrusOne is a premier global REIT specializing in design, construction, and operation of more than 50 high- performance data centres worldwide. On 15 November, 2021, KKR announced it would acquire CyrusOne for $90.50 cash per share, valuing the transaction at approximately $15 billion.

 

·    Ferro Corp. was acquired by Prince International, a portfolio company of American Securities LLC, in April 2022. Ferro produces and markets specialty materials in the U.S., Europe, the Middle East, Africa, the Asia Pacific, and Latin America. On 11 May, 2021, Prince announced it would acquire Ferro for $22.00 cash per share, valuing the transaction at approximately $2 billion.

 

·    IHS Markit Ltd. was acquired by S&P Global, Inc. in February 2022. IHS Markit provides critical information, analytics, and solutions for various industries and markets worldwide. On 30 November, 2020, S&P announced it would acquire IHS for 0.2838 shares of S&P common stock per share, valuing the transaction at approximately $44 billion.

 

·    Intersect ENT, Inc. was acquired by Medtronic plc in May 2022. Intersect ENT operates as an ear, nose, and throat medical technology company in the U.S. On 6 August, 2021, Medtronic announced it would acquire Intersect for $28.25 cash per share, valuing the transaction at approximately $1 billion.

 

·    Mimecast Ltd. was acquired by Permira in May 2022. Mimecast provides cloud security and risk management services for corporate information and email. On 7 December, 2021, Permira announced it would acquire Mimecast for $80.00 cash per share, valuing the transaction at approximately $6 billion.

 

·    Nuance Communications, Inc. was acquired by Microsoft Corp. in March 2022. Nuance Communications provides conversational and cognitive artificial intelligence innovations. On 12 April, 2021, Microsoft announced it would acquire Nuance for $56.00 cash per share, valuing the transaction at approximately $17 billion.

 

·    Veoneer, Inc. was acquired by QUALCOMM, Inc. in April 2022. Veoneer designs, develops, and manufactures automotive safety electronics primarily in North America, Europe, and Asia. On 4 October, 2021, QUALCOMM announced it would acquire Veoneer for $37.00 cash per share, valuing the transaction at approximately $4 billion.

 

·    Xilinx, Inc. was acquired by Advanced Micro Devices, Inc. in February 2022. Xilinx designs and develops programmable devices and associated technologies worldwide. On 27 October, 2020, Advanced Micro Devices announced it would acquire Xilinx for 1.7234 shares of Advanced Micro common stock per share, valuing the transaction at approximately $34 billion.

 

·    Z Energy Ltd. was acquired by Ampol Ltd. in May 2022. Z Energy sells transport fuel in New Zealand. On 12 October, 2021, Ampol announced it would acquire Z Energy for NZ$3.78 cash per share, valuing the transaction at approximately NZ$3 billion.

 

PORTFOLIO SUMMARY

       

         Largest Portfolio Security holdings (excluding cash and cash equivalents)

Security1                              Offsetting short position2	As at 30 June 2022
	% of total portfolio3 (gross)	Market value4 $000	Offsetting market value5 $000	% of total portfolio6 (net)
Shaw Communications Inc	2.7	3,143		2.7
Activision Blizzard Inc	2.5	2,870		2.5
Coherent Inc                        II-VI Inc	2.3	2,693	(399)	2.0
Mandiant Inc	2.1	2,486		2.1
Vifor Pharma AG	2.1	2,442		2.1
Change Healthcare Inc	2.1	2,389		2.1
Rogers Corp	2.0	2,327		2.0
First Horizon Corp	1.9	2,245		1.9
PNM Resources Inc	1.9	2,179		1.9
Tower Semiconductor Ltd	1.8	2,112		1.8
BioHaven Pharmaceutical
Holding Company Ltd	1.8	2,076		1.8
Aerojet Rocketdyne Holdings
Inc	1.7	1,960		1.7
Citrix Systems Inc	1.7	1,924		1.7
Nielsen Holdings plc	1.5	1,750		1.5
Intertape Polymer Group Inc	1.4	1,672		1.4
Altaba Inc	1.4	1,666		1.4
SailPoint Technologies Inc	1.4	1,630		1.4
Tegna Inc	1.4	1,592		1.4
Zendesk Inc	1.4	1,567		1.4
MoneyGram International Inc	1.2	1,412		1.2
Sub-total	36.3	42,135	(399)	36.0
Other holdings7	63.7	78,868	(4,901)	64.0
Total holdings	100.0	121,003	(5,300)	100.0

 

¹      Long position.

²      The offsetting short position of II-VI taken in advance of its acquisition of Coherent Inc., which was converted into the right to receive $220 in cash plus 0.91 share of II-VI common stock.

³      Represents the market value as a percentage of the total portfolio value.

⁴      Market value of the long position.

⁵      Market value of the offsetting short position.

⁶      Represents the total position value (market value plus the offsetting market value) as a percentage of the total portfolio value.

⁷      Including derivatives and equity short positions, and excluding U.S. Treasuries. A Statement of Portfolio Changes is available from the Administrator upon request.

 

STRATEGY