From the Securities Lending Trading Desk: BBH 12/12/17 : Aurora Musis Amica.

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Mega merger news this week in the health care sector as CVS Health announced plans to acquire Aetna for $69 billion in cash and stock. We are seeing shares in Samsung Heavy Industries plung to a record low after the company announced plans to raise much needed capital.  Meanwhile in Europe, the Steinhoff CEO resigned following the company admitting accounting irregularities. 

Below please find this week’s edition of From the Trading Desk, which provides timely commentary about top security earners, revenue drivers and other factors influencing the securities lending market from the BBH Securities Lending Trading Team.

Americas 

The week started out with mega merger news in the health care sector, CVS Health announced plans to acquire Aetna for $69 billion in cash and stock. The merger would create a company with revenue greater than any other US company except Walmart. It is also believed that this merger will reshape the industry and result in more mergers in the sector, as companies look to gain synergies, cut costs, and provide defence against competition from the likes of Amazon. This merger also comes with a hefty termination fee for both sides. According to Bloomberg, “CVS Health Corp. could owe Aetna Inc.$2.1 billion if the drugstore chain’s acquisition of the health insurer fails and Aetna would owe CVS $2.1 billion if the deal fell apart because of opposition from Aetna shareholders or board, or if the company took a better offer”. Despite the lofty fee potential, some analysts suggest there is only a 70% change of this merger being approved by regulators. The lower percentage is due to the fact that drugstores and health insurers have been unsuccessfully trying to merge in recent months, for example, Aetna recently had to pay insurer Humana Inc. a $1 billion as the merger was blocked by a federal judge. With this deal not expected to close until fourth quarter 2018, demand has been sparse, however we expect this sector to remain in focus.

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After trading of Wins Finance Holdings (WINS) was halted for six months, the stock finally started trading again last week. The stock price plunged nearly 78% in the first day of trading, closing at $84.99. In its last day of trading in June, WINS had jumped from $81.00 on 6/6 to $205.01 on 6/7 and Nasdaq halted the stock. In August, the index announced plans to de-list the Chinese loan guarantor for alleged violations of listing rules. In addition, the FTSE Russell announced “Because WINS did not resume trading by November 29th (the Wednesday before the first Friday of December) it is to be removed from all indexes with notice”. As the stock price has continued to decline throughout the week we have seen more client sales as long holders look to minimize exposure on this volatile position.

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