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The recent passage of the new U.S. tax code has confirmed our optimism for event-driven opportunities in 2018. Corporate management and boards have greater clarity around taxes, and we believe the decrease in the corporate tax rate from 35% to 21%, coupled with a one-time tax on the repatriation of foreign cash to the US, will lead to increased corporate activity.
A trend is beginning to emerge in the biotech space as recent transactions were announced with very large premiums. Celgene paid a 91% premium for its acquisition of Juno Therapeutics while Sanofi paid a 64% premium for its acquisition of Bioverativ. Despite sound, stable buyers, these deal premiums have led to high initial deal spreads as pre-announcement holders are less sensitive to selling and booking a profit (given the massive run-ups in these stocks).
We have also seen robust activity of “strategic alternatives” for companies such as Xerox, Microsemi Corp., and Akamai. These situations may develop into compelling special situation opportunities including speculative mergers and acquisitions, spin-offs, assets sales, and debt repurchases.
Please click here to view the most recent top ten holdings for each of our funds.