Cheyne Capital Is Betting Big On M&A In 2016

London-headquartered Cheyne Capital is one of the largest global alternative asset management firm based out of Europe. It was started by Jonathan Lourie and Stuart Fiertz – both of whom worked at Morgan Stanley together for 9 years- in 2000. Since the fund invests in a variety of securities across the globe, its exposure to US equities generally is only a fraction of its total assets under management (AUM) at any given point. However, it runs a fairly concentrated US equity portfolio and bets a large amount of money only on a handful of stocks. This trait of Cheyne Capital was again revealed by its recently submitted 13F filing with the Securities and Exchange Commission (SEC) for the reporting period ending December 31. According to the filing, the fund’s US equity portfolio at the end of December was worth $184.78 million and consisted of 32 long positions. However, the top five equity holdings of the fund alone accounted for 77.38% value of its equity portfolio at the end of 2015 and out of those five stocks,three were new entrants in the fund’s portfolio. In this article we are going to reveal and analyze those five stocks.

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#5 EMC Corporation (NYSE:EMC)

– Shares Owned by Cheyne Capital (as of December 31): 958,731

– Value of Holding (as of September 30): $24.615 million

Since Cheyne Capital regularly employs an event-driven strategy, it isn’t a surprise that it initiated a stake in EMC Corporation (NYSE:EMC) during the fourth quarter of 2015. In October, hardware major Dell Inc. announced that it would buy EMC Corporation (NYSE:EMC) for $67 billion, making it the largest technology acquisition in history. Shares of EMC Corporation spiked in October right before the merger was officially disclosed following rumors of a potential deal, but since then they have given up those gains. Last month, EMC Corporation submitted a regulatory filing, which revealed that it would be laying off several of its employees this year in a major cost-cutting drive. For the last quarter, EMC posted earnings of $0.31 per share, missing the estimates of $0.36, while the full-year EPS of $0.65 was in line with expectations. During the fourth quarter, Seth Klarman’s Baupost Group initiated a stake in EMC Corporation and reported 29.25 million shares in its latest 13F filing.

#4 LivaNova PLC (NASDAQ:LIVN)

– Shares Owned by Cheyne Capital (as of December 31): 455,214

– Value of Holding (as of September 30): $27.03 million

London-based medical technology company LivaNova PLC (NASDAQ:LIVN) made a debut on the London Stock Exchange and NASDAQ in October last year. Shares of the company started drifting lower right after it started trading and are down by over 10% this year alone. According to the company’s last submitted quarterly report, it had a loss of $0.96 per share on revenue of $67.52 million for the quarter ending October 31, 2015. For the same quarter last year its generated EPS of $0.64 on revenue of $73.42 million. On December 29, LivaNova PLC (NASDAQ:LIVN) received a warning letter from the United States Food and Drug Administration (FDA) alleging certain violations of FDA regulations at its manufacturing facilities in Germany and Colorado. On January 5, the company provided its investors an update on this, stating that it believes that less than 1% of its 2016 consolidated sales could be impacted by this Warning Letter and the concerns raised by the FDA can be resolved without putting a toll on the company’s financials.

#3 Precision Castparts Corp. (NYSE:PCP)

– Shares Owned by Cheyne Capital (as of December 31): 124,635

– Value of Holding (as of September 30): $28.92 million

After having initiated a stake in Precision Castparts Corp. (NYSE:PCP) during the third quarter, Cheyne Capital boosted it by 62% during the fourth quarter. Shares of Precision Castparts Corp. (NYSE:PCP) remained range-bound since Warren Buffett’s Berkshire Hathaway announced on August 10 that it would purchase the company for $235 per share. In January, regulators at the European Commission approved the acquisition, paving way for the deal to get completed and at the end of the last month, the deal was completed, totalling $37.2 billion, including the company’s outstanding debt.

#2 Cablevision Systems Corporation (NYSE:CVC)

– Shares Owned by Cheyne Capital (as of December 31): 947,731

– Value of Holding (as of September 30): $30.22 million

Cheyne Capital increased its stake in Cablevision Systems Corporation (NYSE:CVC) by 26% during the fourth quarter after having initiated a stake in it during the third quarter. In September last year billionaire Patrick Drahi’s Altice NV had announced that it would acquire Cablevision Systems Corporation (NYSE:CVC) for $10 billion or $34.90 per share. Though shares of Cablevision Systems Corporation surged after the deal was made public, they have cooled off since then and currently are 2% in the green year-to-date. One of the major factors that affected the stock’s performance was the announcement by New York City’s government that it would not allow the deal to materialize if it is against the public’s interest. Billionaire Mario Gabelli‘s GAMCO Investors held 9.13 million shares of Cablevision Systems at the end of last year.

#1 Atmel Corporation (NASDAQ:ATML)

– Shares Owned by Cheyne Capital (as of December 31): 3.73 million

– Value of Holding (as of September 30): $32.18 million

Atmel Corporation (NASDAQ:ATML) was a new addition to Cheyne Capital’s equity portfolio during the third quarter. In September, England-based Dialog Semiconductor made an offer to buy Atmel Corporation (NASDAQ:ATML) for $4.6 billion in cash and stock. However, due to the decline of the Dialog’s stock price, the bid was lowered to $4 billion. In January, Atmel Corporation announced that it received a ‘superior’ offer from Microchip Technology Inc. (NASDAQ:MCHP) for $3.42 billion. Following the announcement Dialog Semiconductor said that it wouldn’t revise its offer leaving Atmel Corporation free to accept Microchip’s bid. However, according to the terms of the merger agreement between Atmel Corporation and Dialog Semiconductor, the former will have to pay $137.3 million if the merger is terminated. In its latest 13F filing, Clint Carlson’s Carlson Capital reported a new stake in Atmel Corporation, which contains 3.06 million shares.

Disclosure: None