Sapec SA – follow up

Annual Report 2016

So now Sapec is out with their annual report for the last year (or 15 months).

The report is in French, so I am not sure if understood everything by 100% but I try to summarize the relevant issues:

  • Book value per share at year-end was 191,6 EUR
  • The operating result of the business ex the sold business is slightly negative
  • The Agro business was sold at 318,4 mn equity value, resulting in a gain of 226 mn EUR
  • They provisioned the full 36 mn Novo Bank guarantee.

  • They made another ~17 mn in restructuring charges throughout the remaining entities
  • This results in around 160 mn net income including all “special effects”
  • “official” net cash is 274 mn EUR or 203 EUR per share
  • “real” net cash deducting the Novo Bank provision is 238 mn or 176 EUR per share
  • it seems that they have a buyer for a bulk terminal in Cadiz which would net them another 7 mn EUR cash (or ~5 EUR per share)
  • there seem to be transaction related payable which economically decrease net cash further (see below)
  • they sold a loss making company (Citri, 1,3 mn loss in 2016) for 1 EUR

Overall it looks like that they used the occasion to clean up and maybe even “kitchen sink” a lot of issues throughout the remaining Group. I would therefore assume that the stated NAV per share is rather on the conservative side and that operating results should improve.

Reality check: How does this compare to the initial case ?

This is what I wrote back then (no escape here….)

After the deal (which is very likely in my opinion), the company will have 230 EUR cash plus any other assets. The expected distribution might help to unlock some of the value. I think it would not be unreasonable that the stock price will be at ~200 EUR before the distribution, an upside of almost 50%. Of course if the deal fails there is some downside, but the probability in my opinion is very low and the value of the underlying business is quite obvious.

So compared to the initial case, the resulting net cash balance is lower than I expected.

One main difference is the Novo Banca guarantee which consumes around 27 EUR net cash and NAV per share. To me it was not clear that they would need to provision this so quickly. I am not sure if there is any upside.

The second main difference is that they retained more debt than I thought. At YE 2015, total financial debt was ~178 mn EUR. So less the 140 mn that should have been transferred in the deal, they should end FY 2016 with 38 mn EUR debt, however the balance sheet shows ~57 mn EUR debt.

On page 65 are the details. It turns out that “only” 128 mn EUR of debt were transferred and around 14 mn of net cash, so only net debt of 114 vs. the 140 that I assumed. This is a difference of 26 mn EUR or ~19 EUR per share.

Another position which irritates me (but maybe shouldn’t) is the following passage (page 74):

Note 25
Autres passifs courants
Au 31 mars 2017, la rubrique d’autres passifs courants comprennent 21.634 k€
d’ensemble des frais en liaison avec la cession de l’Agrobusiness non encore payées.

With my bad French this should mean: Costs related with the sale of the Agro Business which haven’t been paid yet. I guess these are investment banking and advisory (legal)  fees. If that’s the case (and the amount is realistic), we would need to deduct this from net cash as well as these are not normal “payables” which roll over every period but rather a financial liability.

If we deduct this, then net cash would go down from 238 mn  EUR or ~176 EUR per share to 216 mn EUR or 160 EUR per share.

The dividend & taxes 

So now comes the part which seems to get most investors really excited: The dividend (and taxes). One important point/disclaimer  here:

I am not a tax specialist, so please be very cautious when you read the following part. Plus I only know a little about German taxation and I will only write about my personal situation.


DO YOUR OWN RESEARCH !!!!!!!!!!!!!!!!!!!!!!!

As a German retail investor, the situation in principle is the following:

It doesn’t matter if I make a gain on an investment or if I receive a dividend, I always pay the same amount of tax on any profit which is around 30% (including add ons like “Soli” and “Kirchensteuer”).

However, if I make a loss on an investment I can deduct the loss against any gains from other investments (not against dividends).

So in SAPEC’s case, the following logic would apply if I would buy the stock right now at 155 and then receive a 150 EUR dividend:

  1. first of all there would be 30% withholding tax in Belgium, of which only 15% are credited directly against my German tax duties.
  2. Then I would need to pay an additional 15% above the already credited 15% here in Germany which would bring up my gross tax to around 45%. So I only receive 82,5 EUR in Cash directly
  3. Due to double taxation treaties, I have a right to get reimbursed for the Belgium withholding tax above 15%.  I will need to file a claim to the Belgian fiscal authorities which will most likely last 1 year but I will get that amount of money back with very high certainty which would be 15% of the dividend or 22,5 EUR. In the comments there was already a big discussion if and when Belgium will reimburse the money. I have to admit that I have no direct experience as I was too lazy to claim the credit for Miko. From what I have found on German internet boards, Belgium seems to need around 1 year to reimburse the money to Germany.
    But aigain: DO YOUR OWN RESEARCH !!!!
  4. Now, for taxation reasons, the remaining stub value of 5 EUR would represent my current market value against a purchase price auf 155 EUR. So I have an implicit loss on this position of 150 EUR (taxable dividends in Germany do not reduce the cost base for taxation purposes). So if I directly sell and buy back the stub (at 5 EUR), I can offset my capital gains tax. For those taxes I already paid this year I get actually credited those amounts right away. For further realized gains I would not need to pay cash when I sell other shares. If I assume that I already paid enough capital gains taxes this year, i would therefore directly receive 30% x 150 = 45 EUR per share
  5. Al in all, I end up with 82,5 EUR +22,5 EUR + 45 EUR = 150 EUR and the stub. There is clearly always the delay for the Belgian tax and the timing also depends on how much capital gains I have realized already. Plus trading costs.

I think the key to understand this mechanism is the fact that a dividend paid out of profits does not impact the cost base for taxation purposes in Germany and capital gains and dividends are taxed at the same rate. If I would receive a non-taxable dividend instead, I would of course save the direct tax but my cost basis would go down as well and I would lose the tax credit. I am not sure what would have happened if I would have received 150 EUR non taxable dividend with my cost base of 133.

For investors in countries where for instance the capital gains tax is lower than the dividend tax, then the situation in this very specific case could be very different. But for a German investor with sufficient realized gains, the whole taxation is practically a “wash” with some delays.

Stub Value and further action

I think it is super difficult to really come up with a detailed stub value. Conservatively I would say that we are left with around 15 EUR net cash per share and ~41 EUR book value which I think is reserved relatively conservatively. There is till some goodwill in the balance sheet (8 or 9 EUR per share), but there might be also some very conservative reserving.

I am not sure what this is worth but clearly more than 5 EUR. Is it worth 15 EUR or 20 or 25 ? I don’t know.

The current situation clearly creates a potential advantage for investors how are patient and have a similar tax position like I do or who pay no taxes at all.

That’s why I do think for the time being for me it is worth to keep the shares and try to realize the stub value despite the fact that I will have some “time leakage”. If the stub is worth 20 EUR, I still can make ~10% at the current price of 155 within maybe one year which for me is quite attractive, especially as I get most of the capital back pretty soon.

The biggest risk is that there is some kind of “fxxx up” with the taxes but I am willing to take this risk as I also see some upside if the underlying business recovers. Spain is doing quite well these days and maybe this will help the business (and the value of the real estate in Portugal) at some point in time.

So for me and the time being the strategy is clear: keep the stock and bite the (tax) bullet. If the stock price would go down below (again), I might even add to the position.

Learning Experience:

Looking back, I think I have been somehow too optimistic. However as the price was cheap enough (134 EUR), the expected value was still high enough and I would have bought the stock back then even if I had known everything that I know now.

But also If I would have known earlier what I know now, I would have sold at 170 EUR….


Edit: I apologize for the time delay for this post. But reader of my blog should consider that I mean “slow value investing” seriously and that I am not able and don’t want to do “real-time” updates. Sometimes that hurts, but more often it helps a lot with regard to the ultimate outcome.


  • I’m waiting for almost 14 months for my Sapec tax refund now, and they told me it can take up to 20 months nowadays.
    Does anybody know if they at least pay interests on refunds of >12 months – I didn’t find anything (and highly doubt it).

    This whole process tells a lot about the state of European integration, so disillusioning.

  • Can somebody please help me??? Just spent two hours trying to fill out the Form 276 to reclaim the SAPEC taxes from Belgium.
    – What did you fill in at 4b (Date of issue) and 4d (Coupon number)?
    – Is “Net dividend” what I received on my German account (after Belgium AND German taxes), or does it refer to dividend minus Belgium taxes only?
    – As for additional documents to include: Did you just copy account statements from your broker to prove dividend payments. On the internet I wrote you have to obtain a SIGNED (!) statement from your broker specifying when you bought and sold your shares. Did you do that?
    Thanks for any advice!

    • I can tell you what I put into the form, but without knowing if it‘s right. 😉 At least the form was not sent back to me immediately as the first time.
      4b) left this one empty
      4d) SAP(BE0003625366)
      Dividend) put in the my number of shares times 150 EUR
      Documents) I use Lynx as a broker and I printed the details to the transactions out and a cash flow statement. As far as I know Lynx says that this should be sufficient.
      Good luck!

    • I think I have put coupon No 54, which can be found here:

      Issue Date should be in my opinion the payment date (June 23rd)

      Obviously no guarantee, I still haven‘t heard anything since July

  • hi all, were you able to find the tax id for SAPEC SA for tax filings? I could not seem to find it on SAPEC website. Thank you all!

  • I fought through the crappy form 276 and enchanted the local tax inspector with it to collect the stamp. First try failed big time and I got the form back today from the belgian tax authorities with a letter which said “not valid”. At least they attached a more detailed document how to fill it correctly. If the purpose of the form is to discourage any investor in claiming the tax back it’s a pretty good effort. But I won’t give up that fast…

    • Hi VP007,
      In which country are you based?
      Is the detailed document from the Belgian authorities also available online?

      • I’m based in Germany. There is something like a manual available online but not the detailed one which I received as a copy per post. Here are the things which l missed at least in my understanding atm:
        1) The part almost at the end of the first side where you fill in your account number etc. -> field 5 e communication field is mandatory (has to be filled out with something)
        2) Further required documents besides form 276 are a) a credit advice with gross amount of dividend, rate of withholding tax, date and withheld withholding tax and b) a bank statement of the beneficiary of the income which mentions the net amount of dividends received (cash movements). I will try to get the documents from my broker (LYNX).

        • Interesting. Very helpful. Quite „interesting“ how many hurdles are built in order to complicate the process.

        • Hi VP007,

          when did you send the form 276 to the Belgian authorities? I have sent mine out in the middle of July as soon as I have received the necessary stamp from my local German tax inspector, but haven’t heard anything since. No confirmation of receipt, no further inquiry, nothing.

          Field 5e seemed to me more or less like a service for myself, e.g. for me to distinguish the inflow of two separate claims – amazing, that they feel unable to transfer the reclaim with a standard reference.

        • Hi Liza,
          first try was beginning of february and got the answer within a week. Second try with additional informations was mid of february. I didn’t receive a confirmation either but at least the form did not come back like a boomerang as in the first try. Should be evaluated as a first success, or? 😉

        • I also sent it mid of last year and never received any information or note back until now.

  • Will you give us an update the day you get your taxes back from the Belgian Tax Authority? It would be interesting to learn how did it go. 😉

  • For the German tax payers I have found this interesting page on how to claim the withheld tax on the dividends from foreign stocks.
    .. or shall we ask for a refund directly to our broker?
    Is there anybody who has ever done it before in Germany?
    Thanks for helping!

  • Is it easy to claim tax from Belgium? My broker withheld 30% as well and I might need to claim the 20% difference between withheld tax rate and treaty tax rate myself. I have never done this before…

  • The infos are now available in English language on the Sapec homepage.

    Thx for the good research and comments all together!

  • At Consorsbank I already got the “Dividend paid”.
    30% Tax from Belgium
    10 % Tax from Germany (and further 5.5% Soli to this)

    So in total: (0.3+0.1+0.0055)*150 was kept as taxation

    I think one has to sell now to play the capital tax reimbursement
    Then one would get additional around 0.3*(150-60) with the tax trick.

    So in total:
    Now: (1-0.3-0.1-0.0055)*150 = 0.5945 * 150 Euro = 89,17
    Selling now: 59 Euro
    After requesting to Belgium: 0.15*150 Euro= 22.5 Euro
    Tax reimbursement in Germany: 0.3 * (150-60) = 27 Euro

    Total around: 197.67 Euro for an investment of around 152 in my case in less then 1 month. Great!

    Thank you for highlighting this opportunity.

    • Additional remark: I think not selling now then the tax reimbursement does not work as the stocks will disappear.

  • The owner Family Velghe wants to take Sapec of the market and does an offer for 60 euro/share.
    This is after the dividend is distributed


    Source: (Dutch + registration required)

    • Would this be related to the upcoming General meeting tomorrow? Perhaps trading will only resume after the General Meeting? They also suspended trading before the annual report for a couple of days, but at least that was announced in advance.

      Does anyone know what time the AGM will be?

      • To answer my own question: 11 AM

      • On Euronext they state that they are awaiting a press release, so there must be some news in my opinion

        • Not so sure: They also halted before the publishing of the annual report this year, only to resume trading the first trading day after publication of this report. They did not seem to halt trading for previous annual report publications, but perhaps they did this year due to the information about the dividend that was incorporated in the annual report news publication.

        • And in that case, they also stated that they were awaiting a press release

    • In all likelihood this will remain suspended until Wednesday (by then the stock will be ex-div).

  • “The dividend will be distributed as from 23 June 2017. ”


    Click to access 20170519_SAPEC%20SA_Procuration%20AGO_ENG.pdf

    Ex-dividend date probably 20/06

  • Concerning fund Manager: I have no Information about the shareholder structure of Sapec and the part owned by public funds.
    What will happen after the dividend payment if the remaining Company has a market value of 25 to 40 MEUR.
    Will funds stay on board for such a tiny Group or will we see a lot of sales?
    Looking forward to what will happen…..

    No position.

  • Is there any UK or European fund manager here who is kind enough to give us his/her take on how they play the dividend? I have observed a number of stocks in their ex-dividend date recently: the stocks did not fall by the gross amount of the dividend but by something closer to the net of local tax dividend.

  • Keep in mind that the stub will most probably trade at a steep holding discount.

  • Again, many thanks for providing this analysis.

    If I could come up with a very simple assumption of how much the stub is worth. Sapec traded around 168 Euro before suspension, so my guess would be at least 18 Euro for the stub (=168 Euro minus 150 Euro pay out). The maximum value per share would be 45 Euro, i.e. the current share price of around 150 Euro minus the worst-case net dividend of 105.

    Sapec have provisioned for the 36mn Euro guarantee. However, I would also expect them to claim it back from ELI. Not sure to what extent this claim can enforced but it should clearly be treated preferential to any equity of ELI.

    The biggest risk to me is that the majority shareholders will make a low ball offer for the remaining shares after the dividend payment and enjoy the fruits of the divestments over the coming years. They have to do anything with their cash.

  • Hi memyselfandi007, thank you for this great blog and the great analysis.
    I have one question to this case: Would you really try to sell immediately after the dividend payment to realize the loss or is it better to wait for the stub value to raise? Why would you buy directly again the stub as probably you will not be able to buy and sell at same value.
    Does anybody know when the dividend payment will take place or where to get informed about it in advance?
    Thank you!


    In this is correct, it’s easy to understand why belgium shareholders could be selling.

    depending on the country of residence, the investment thesis changes dramatically. Europe is has gone mad about taxes.

    • I don’t think that the Tax system is particulry mad in Europe. It is just not harmonzed. However in order for a harmonization, local countires would need to cede control. And at the moment, rather the opposite seems to be the case.

      • In USA, for non residents you fill W8-BEN and they charged you with a 15% withholding tax . In UK is 0%.

        It’s simplier than harmonizating tax systems. Governments are just intending to tax twice the Dividends by making the reimbursement as complicated as posible.¿How much of the double taxation is not reimbursed?

        If I understood well (it’s hard to believe), for a belgium citizen if the shares are sold 1 day before ex-dividend there is no taxes but 1 day after a 30% dividend tax is applied. Sounds crazy to me, economically no-sense.

        And if tax system makes no sense, no wonder Sapec’s share price doesn’t make it either.

        • It’s true that claiming withholding tax is easier in some countries than in others. However the difference between pre dividend treatment and ex dividend should be the same in the US: That applies for all countries where capital gains tax is different from dividend tax. That’s why Buffett prefers share buy backs to dividends by the way….

  • Purely out of curiosity – why not wait for the stock to trade ex-div and buy it then?

    I was also wondering what would happen if the stock trades <150 and goes ex-div then … 🙂

    • good question. I would assume however that at the current price of 150 (or slightly below) I get a better deal as the stock will not drop to zero after the ex date. But we will see. i bough some today at 149.

  • Interesting post and an interesting situation. I enjoy reading your stuff.

    I noticed this additional potential liability in the note 26:

    Le contrat de vente de l’Agrobusiness signé en janvier de 2017 inclut des certaines clauses contractuelles (Rep’s and warranties), jusqu’à un maximum de 27M€.

  • fyi – The annual report is available on the Company’s website ( in French and will be available in English on May 26th

  • First of all, thank you for bringing to our attention this interesting and analytically challenging case.

    The fact that Sapec did not find a more efficient way to distribute 203 M to its shareholders is a negative for some investors. My preference was for a tender offer. It is not happening.

    The positive (which we could not take for granted when AB was sold) is that Sapec is indeed distributing a very large amount of cash. And in one month’s time.
    They might have concluded that it was better to keep it for future investments etc. But this is not happening and it is good.

    Is the current market price of Sapec rational?

    1. The tax issue

    In some countries and with some investment vehicles even if you pay the tax on dividends you can use the capital loss to offset capital gains in your portfolio. If you buy Sapec at 150 and you receive a gross dividend of 150 you (may) have to pay a 30% withholding tax, ie EUR45. Let us suppose that in the worst hypothesis, the share ex-dividend falls to EUR 0.
    If you sell your Sapec at zero you now have a capital loss of 150 which can offset capital gains of the same amount.

    So for investors who need to pay a capital gain tax, this situation is not so bad and may actually turn positive.

    2. The value of the remaining Sapec

    I have read the AR twice and it does not deserve an award for the clarity of the accounting.
    However, I do not have the slightest impression that the management are hidding or manipulating something.
    It is pretty clear to me that they have entered a new phase in the history of the company and they are trying to maximize shareholder value fixing issues and selling all the assets which it makes sense to sell.

    2.1 The operating assets produce some earnings and are certainly not worth zero. The management wants to improve the cost structure, ie increase the earnings, and they sound determined to succeed.

    2.2 The 2016-17 accounts contain exceptional items (which some times are not accounted as exceptionals) and cannot be projected in the future. For ex., “la remuneration variable” of the Board (page 75) is 9M vs 1.4M in 2015. I don’t see this as a recurring expense.

    2.3 After accounting for the 36M Novo Banco loan, the payment of 21.6M in connection with the sale of AB and the cash inflow of 7M from the sale of the terminal of Cadiz, net cash will be 20M. Plus there is land and other fixed assets.

    2.4 After years of disputing, Naturener US (which own very important projects) has reached an agreement with SDG&E last year and this is a positive, although the Sapec’s share of the North American activities is probably not big. But there is also the Spanish side of Naturener which is supposed to be OK. After the sale of the land in Huerta and assuming the repayment of the loan to Banco Novo, the debt of Eli goes down to less than 60M. It is very likely that there is some value here. The accounts stress more the lliabilities side of ELI/GNaturener than the value of the underlying assets.

    Summing up, I would think that the value of the remaining assets of Sapec is no less than 40M (at least 30EUR per share) plus an option on ELI/Naturener.

    For the investor who can offset CGT with capital losses, I believe that the current price is interesting.

    • So if you are a 0 tax investor (i.e. someone investing from a tax-free vehicle):
      Pay 150 today
      Get 150 back shortly in divs
      Retain free optionality for another 30.

      is that another way of reading you post?

        • Wrong/
          You have to wait 11 months to collect the WHT tax and the process is not very enjoyable.

          So pay 150 today
          Get 105 soon
          Go work to collect the 30% WHT of 45. Good luck to you if you are with an unsupporting broker and/or you reside in a country that does not have double taxation treaties with Brussels

        • #Alex, nope. I only have to wait for 15% of the dividend for 12 months (22,5 EUR/share). The rest I will get directly from my German broker by off-setting already paid capital gains tax. And depending how the stub develops, I can exit the stub maybe a few weeks later.

          Despite the fact that there is some work involved, i think the upside justifies the effort.

          For me this is one of the best risk adjusted opportunities I have seen for a while and below 150 I will buy relatively aggresively.

          And by the way, for my 11-12 months is a relatively short period of time, but other investors have clearly other invetsment horizons.

    • Where did you find the information on the debt of ELI?

  • Pingback: Sapec SA offering attractive tax arbitrage opportunity | Alpha Vulture

  • Thank you very much for your analysis! Thats much more detailed than I was able to understand it by my own – my french is to worse for such deep unterstanding.
    I do not think you were overly optimistic, as the change of value was within your “safety belt” – you will still close this position with a gain.

    I am very curious about the following comments. Your blog seems to have earned a high prestige among investors around the world that very often offer very informed input. I do not know many (not even any other) blogs that regularly see such high quality of following discussions.

  • You wrote: “I am not sure what would have happened if I would have received 150 EUR non taxable dividend with my cost base of 133.”
    I have such a case in my portfolio. Basically, if I sell, a negative purchase price (in your case, -17 EUR) would be used for calculating the capital gains tax.

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