Today (8 February), the trust’s board revealed the sale, first proposed in October 2023, faced a delay of up to 135 working days as a result of the Icelandic anti-trust investigation, likely preventing the anticipated approval date of Q1 2024.
A Phase II investigation typically involves market surveys, economic analysis and possible negotiations of commitments that may eliminate any concerns the authority may have regarding anti-competitive effects of the merger.
This entails a 90-working day period to conduct the investigation, which can be extended to 135 working days, although D9’s board reiterated the regulator is not obliged to use the entire period to conclude its review.
Liberum analysts suggested this type of investigation was “fairly common”, although the timeline extension was “unhelpful given the market’s current perception of the company”, which sits on a 77.5% discount, according to data from the Association of Investment Companies.
In 2022, Iceland’s Competition Authority received 30 merger notifications, of which ten went to Phase II investigations, with all ten cleared with conditions, according to and Organisation for Economic Co-operation and Development report.
Winterflood Research analyst James Wallace added the Icelandic anti-trust authority had recently approved Ardian’s takeover of the nation’s largest telecoms infrastructure service provider, which resulted in the “somewhat expected” additional scrutiny of the Ardian acquisition of Verne Global.
Wallace said that while any potential rejection of the deal would not necessarily be final “as remedies can be proposed, such as the exiting of a portion of existing holdings or joint ventures, it certainly would complicate the managed wind-down that was envisioned by the D9 board”.
Liberum added the trust’s investors had been “principally been focusing on the volcano risk aspect, which was addressed by the board in a recent shareholder update call, noting that no disruption was expected on account of this”.
The announcement was only the “latest piece of negative news”, according to Stifel analyst Sachin Saggar, who noted the board had indicated the transaction was progressing smoothly earlier this week.
“While we expect the Verne transaction to eventually close and lenders to be accommodative in the interim, the share price is likely to react negatively to this news,” he said.