We are closing our long on Tele2 today, +13.8% absolute return (+13.0 vs SXXP Index).

We saw the break-up as the most bullish catalyst for TELE2 to outperform. However recent price action due to bid spec has seen the stock return 13.8% in fewer than 2 months.

Undoubtedly the break-up is still a possible catalyst but at these levels, downside risks outweigh the upside for us.

Berenberg who were big advocates of the break-up, downgraded them today. They stated that at these level the share price is now at their base case valuation.

However it’s not a name we would be short; even at these levels. We just don’t think you can short M&A plays as seen from today’s price action.

One to keep on the radar and look to buy back into at a later stage.

Time to book profits and move on for now.



Friday • 07 February 2014 • 07:55

Tele2 is called down -2-3% this morning…will be a nice entry point for these.

I think alot of people will probably want them lower but the potential bid/break up will hold them up.

Worst TMT performer this year but for good reason but the bid/break up is coming this year..BUY!

Further details…

Called down this morning post numbers on the FCF downgrade but market is going to start focusing on the breakup.

They can’t continue to exist like this, they’ve ruined the growth opportunities in Norway & the Netherlands (which KPN is already repricing for).

Its been beaten up and the market is up to speed with the operational issues now so the bid/breakup is on its way and the sum of the parts will be worth a lot more…..