Nomura picks up on M&A theme with delta one public offer in Germany

Nomura will list its first public structured product offering based on research in Germany this Friday, capturing the M&A theme that has proved to be one of the latest must-haves for product manufacturers.

Catching the M&A wave

Nomura has picked up on the mergers and acquisitions theme with a structured product release in Germany that was launched on March 18 with the first listing, in Frankfurt, of the Nomura M&A Europe certificate to take place on March 25. Like most other M&A-based structured products that have arisen in Europe and the US over the past six months, the investment is based on a pick-up in activity in Europe.

"Usually structured products are disconnected to any kind of research opinion, which is where we try and make a difference," says Roland Lang, head of equity derivatives for Germany and Austria at Nomura in Frankfurt. "The product is available to retail on the exchange, but we will also look to sell it to asset managers who have private mandates." The product differs from others that rely on newly-created M&A indexes.

The Nomura product – designated NM001 on the exchange, reflecting the status of the bank's first public offer based on research in Germany – is entirely based on the company's equity research and is based on a static basket of 30 stocks with a three-year maturity. Stock selection is based of opinions within the research team about which companies in are likely to be taken over. Those that do get taken over leave the basket once a public takeover announcement is made and are cashed out: the cash stays within the certificate and accrues a basic interest rate until the product ends. The euro-denominated investment is available in units of €100.

"We expect activity to take place in 12 months, then it takes typically three, six or 12 months until the offer is really official," says Lang. "So, one year would not be sufficient to catch the full rise in the stock, and probably neither would two years."

"The payout is delta one on the equally-weighted basket," says Lang. The dividends go into the basket – so stay with the investor – and Nomura charges a 0.5% management fee.

The average size of products like this is €10 million, suggests Lang. Aside from the public offer in Germany, the product is available in the rest of Europe in private placement format.

Deutsche Bank and UBS already have M&A products available in Germany, but these are aimed at private wealth managers.

The Japanese bank is planning to launch of a Japan recovery basket next Monday (March 28).