Short cuts: EGIS, Hornbach/Praktiker, Rhoen Klinikum, KPN


This is from a broker report issued end of September by “Wood & Company”_

During the brief analysts’ conference call yesterday morning, Servier stressed two points: 1) regardless of the acceptance of the offer, Servier plans to delist the shares; and 2) Servier’s HUF 28,000/sh offer is final and will not be revised.
The minimum threshold to trigger a squeeze out under Hungarian regulations is 90%, which means that Servier needs acceptance from 79.63% of the outstanding free float, or 3.043m shares.
Regardless of the acceptance of the offer, Servier still intends to call an EGM to delist the shares from public trading, a step that requires a 75% majority of the votes cast; to block the delisting would require an absolute minimum of c.1.32m votes against, or c.35% of the free float.

Their recommendation is as follows:

Although Servier’s HUF 28,000/sh offer appeared generous at first glance, if taken in the context of the company’s improved profitability seen the past 24-18 months, the upside from its biogenerics and the M&A potential that Servier would be keeping, we believe it is worth asking if the offer could not be better. As the tender process is just beginning, we would probably wait to see if the bid is not improved.

That sounds reasonable.

I am speculating that there might be a speculation taking the price above the 28k HUFs at some point in time. The downside for this speculation is basically zero.


The sale process for the Praktiker subsidiary Max Bahr seems to have a deadline on Thursday this week. Handelsblatt reports that there are 2 bidders left (Hellweg, Globus), a local newspaper reports that only Hellweg is remaining.

For Hornbach, the sale to a mid-sized competitor might be not as good as an outright bankruptcy, but better than Kingfisher entering the market.

Today, three was a report in Handelsblatt, that the recovery for bond holders will be ZERO, as the remaining funds will not even be enough in order to pay for the liquidation.

Rhoen Klinikum

On Tuesday, one of the two shareholders who blocked the original deal with Fresenius, Braun Melsungen, disclosed that they have increased their stake from around 5% to 11%.

As some of my readers already commented, it is not clear why Braun is doing this, the revised deal will not be impacted by this.

Let’s wait and see but that might explain also the performance of the shares in the last few days.


Yesterday, Carlos Slim dropped the bid for KPN. To me it is not clear why, but in any case, the price for KPN dropped almost 10%. However, I think that this is NOT the end of the story.


  • Hi memyselfandi007,

    Thank you very much for sharing your thoughts etc.

    I am just interested in your opinion of the following extract from the 9m-report (p. 16):
    “Es bestehen im Wesentlichen Verpflichtungen aus Miet-, Pacht-, Erbbaurechts- und Leasingverhältnissen, bei denen die Unternehmen des HORNBACH-Baumarkt-AG Konzerns nach den IFRS-Vorschriften nicht wirtschaftliche Eigentümer der gemieteten Vermögenswerte sind (Operating Lease). Zum Ende des Dreivierteljahres am 30. November 2013 betragen diese 1.103,8 Mio. € (28. Februar 2013: 1.125,0 Mio. €). ”

    Hornbach Baumarkt has more than EUR 1.1bn in leasing obligations. If I count it like common debt, the balance sheet looks quite different. Do they “hide” debt?


    • no, that’s just the part of the real estate they don’t own. 50-60% of their real estate belongs to them, the rest is leased. Some of that is leased from Hornbach holding.

      Edit: under current accounting standards, that is the way you account for leased real estate. This will change however.


      • What is your opinion about the new unpromising Hornbach earnings target today:
        “EBIT for the same period fell year-on-year by around 43% to EUR 21.3 million (2014/2015:
        EUR 37.2 million). ”

        What do you expect from the the December 21st report?


        • that was clearly a surprise. I don’t undertand why. Interestingly, they refer to EBIT, not to EBITDA.

        • I still think it is very good company, but IIRC sometime ago the family sold large number of shares and I expected some troubles ahead. And besides I live in Eastern Europe now and many HB stores are visibly struggling (huge discounting, restructuring….). I value your opinion a lot, so if you come with some thoughts about HB , it will be great.

          BTW did you abandoned the portfolio performance review you used to write regularly?

        • The German stores seem to do pretty good but maybe the problem is indeed in Eastern Europe ? But we have to wait for the report, anything else is speculation.

          No, I only lowered the frequency to quarterly. Monthly doesn’t make too much sense….

        • I think in Germany, unlike here in EE, they have very little (if any) competition. I am very interested in German family businesses like HB, BMW, ALDI, Schwartz etc.. and whenever price slides hugely, like now in HB, (even with temporary performance down and general economy downtrend) it is opportunity to enter, I just wish not to miss some basic fact that could obstruct the long term path.

        • Mamm=n,
          actually I think the German DIY market is the hardest market in the world with brutal competition. Margins in Germany in DIY are generall lower than in any other market. For a long time, margins in Eastern Europe were 2-3 times higher than in Germany and it seems that those times are over now and come donw to German levels.

          But we will see, in general, Hornbach’s results always corellated well with the weather and autumn was fantastic. You can still see most construcion sites active even now in Decemeber. So I have absolutly no idea where that sudden loss comes from.


        • IMHY the hardest markets in the world are Airlines and automakers. I invest into BMW, because I their dedication,even though I doubt it is great investment moneywise :-). In HB I think it still has a potential from an investors angle. But not being present in Germany for very long time, I can easily be missing the point. Is OBI The competition to HB in Germany? DIY or Aauto in Germany will make for a nice articles series one day on your blog 🙂

          On another note, do you have opinion on office real estate businesses in Sweden and Switzerland ? I have seen some nicely managed companies there, but do not know much about their field

        • Is there any chance HB will follow the path of bauMax and be eaten by OBI?

        • Out of curiosity to see the DIY market before x-mas, I went yesterday to see nearby huge bauMax, build just few years ago, (Hornbach market is too far from my place to visit now) – the enormous building is all empty and there is a small paper notice in main entrance saying the place is in liquidation and may reopen next year.

        • Baumax has been struggling for a long time. They expanded aggressively but took on too much debt, similar to Praktiker.

          The founder concentrated more on his art collection than on his company.

        • 21.12.2015 report

          They say: “reluctance on the part of German
          consumers to make purchases” and yet “DIY store sales up 5.9% in third quarter”, so were the discounts (and “changes
          in the product mix”) the main reason for their consolidated net income going 48.6% down?

          If that is the case what is your take on their future? Thanks

        • Full report is here

          Click to access ers_master_hbm_konzern_q3_15_16.pdf

          I have not digest it yet, but I see:

          “The downturn in earnings primarily involved the DIY business in Germany and was chiefly due to a
          lower gross margin and disproportionate cost increases compared with the development in sales.”

          “Sector sales in Germany stagnated in the fall months. Given the persistently high numbers of asylum seekers arriving in the country and the public debate surrounding the management of the refugee crisis, a deterioration in consumer confidence became apparent. ”

          Isn’t that going to be even worse next year? I cant see what may turn the card, in the months ahead? Do you?

  • It has nothing to do with this post, but as you and many readers are German, I just wanted to ask your opinion on two German mid-caps: Muehlbauer and Indus Holding. Has anyone ver analysed these two companies? Any particular thoughts (both positive and negative)?


    • Matteo,

      it might make sense to start such a discussion with some points from your side. Why did you bringe them up ?


      • They appeared in a screen for “quality&cheapness” that I run on German small/mid-caps, but I’ve just started looking at them.

        Before going into a more detailed analysis, I was wondering if anyone wanted to share their thoughts because they already looked at the two companies (for eample: management is a “bad” allocator of capital; news in German newspapers are not positive; etc), something that a non-German like me might not know firsthand.

        I’ll be glad to start the discussion/share my conclusions once I’m done, but if you or anyone else think it’s a waste of time I’d rather know now!


  • Hi MMI, what do you think about this:

    Click to access EGI131018ER01E.pdf

    A fund has build up a five percent stake in EGIS. Any thoughts on how this will influence the merger process?



  • Apropos Shortuts: Thermador published its 3-quarter-Turnovers:–Turnover-at-September-30-2013-36-17361636/
    They still struggle with weak markets, but they do it quite well. Especially I do like two points:
    – “Our customers have not indicated any improvement in the market on their side, which means that our market shares are growing.”
    – “Creation of the subsidiary AXELAIR: Having completed an in-depth market survey, we took the decision to create a new company, AXELAIR, intended to offer our wholesale customers a complete range for home ventilation systems as from the beginning of 2014.”

    So they invest their cash to enhance organic grothw possibilities. Just in line with their tradition, just what I hoped they would do. If France prosper angain, Thermador should do really fine.

    • Argh, two hours too late ;-). Saw the news this afternoon on BB also noting the above bullet points. Nice to read that “third-quarter turnover stands at a record EUR 51.6m, up 4.3%”.

      General PMI data in the eurozone has been quite positive recently. For quite a long time only German manufacturing and services PMI data was okay, but if countries like France and Italy see this development also materialized in “harder” data it could be a surprise on the upside.

    • thanks for the link. Yes, Thermador is a very good company.

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