Search Results for: rhoen

Short cuts: Sky Deutschland, Rhoen Klinikum, Bilfinger, Vossloh

Sky Deutschland

A short quiz: Can you spot the day when the 6,75 EUR offer expired ?

My initial strategy obviously didn’t work out. Now however I am wondering why I didn’t short Sky Deutschland instead before the offer expired. It seems to be clear now that the price didn’t move above 6,75 EUR during the offer period, because most people attach a fundamental value of less than 6,75 EUR to the shares. That would have been second level thinking, but I missed it.

I read somewhere that you should only sell a stock from a portfolio if you are ready to short it. That would have been the best approach here.

Rhoen Klinikum

Looking at the chart, my decision to take a profit at 23,15 EUR looks stupid:

The mechanics of the current “listed transferable tender rights” are the following: The less people who want to actually sell there shares, the lower the price of the tender rights and the higher the share price. As for now, it seems that not so many people want to sell. I have to confess that I got nervous when the price of Rhoen dropped after I bought on the first day ex rights.

In the future, I think it makes sense to wait longer and see how these special situation plays out. I think I waisted some “intrinsic optionality” by taking the small profit much too early.


In August I looked at Bilfinger for the first time. My arguments against an investment back then were the following:

– some of the many acquisitions could lead to further write downs, especially if a new CEO comes in and goes for the “kitchen sink” approach
– especially the energy business has some structural problems
– fundamentally the company is cheap but not super cheap
– often, when the bad news start to hit, the really bad news only comes out later like for instance Royal Imtech, which was in a very similar business. I don’t think that we will see actual fraud issues at Bilfinger, but who knows ?

Yesterday, Bilfinger released Q3 numbers.

For me, it was therefore no big surprise that they had to write down in total of ~230 mn EUR. The market however seems to have been expecting other things as the extreme drop in the share price shows:

I think Bilfinger is now approaching the “very cheap” area and I will look at them a little closer in the next weeks.


Vossloh, another potential “turn around” story also released Q3 numbers a few days ago. Similar to Bilfinger, investors seemed to have been spooked by the numbers.

In my opinion, two issues might have irritated investors:

– new orders in Q3 were very weak (new orders in the first 6 months were very strong)
– management basically said that a “full” recovery can only be expected for 2017

Interestingly, the whole press release had a very negative tone, they make no attempt to strip out the one offs etc. etc. Maybe it is coincidence, but if I would want to talk the stock down in order to maybe buy the company cheaply, I would do it exactly that way…..

This is what I said in September:

Looking at the chart, this might not be unrealistic as the stock price is still in free fall and any “technical” support levels would be somewhere around 39 EUR per share if one would be into chart analysis. In any of those “falling knife” cases, patience is essential anyway.

Vossloh will therefore be “only” on my watch list with a limit of 42 EUR where I would start to buy if no adverse developments arise.

So we are now very close to my potential entry point. I will watch this as closely as Bilfinger. Both for Bilfinger and Vossloh, Iit will be interesting to see if there will be some year end tax loss selling.

Special situation quick check: Rhoen Klinikum (ISIN DE0007042301) – “Listed transferable tender rights”

Yesterday, Rhoen Klinikum released the details how they will buy back shares following the sale of most of their business to Fresenius (Rhoen was a very successful “busted M&A” special situation, previous posts can be found here)

They way they do it looks interesting and seems to be like a “reverse rights issue”. The instrument is called “Listed transferable tender right” and seems to work as follows:

– as of tomorrow, October 16th, each shareholder gets automatically one “tender right” per share
– those “tender rights” are traded separately at the stock exchange
– you need to have 21 tender rights in order to sell 10 shares
– the tender price is 25,18 per share
– the exercise period runs until November 12th, until then, the tender rights are traded
– already tendered shares will trade under a separate ISIN until November 14th
– the cash for tendered shares will be paid out on November 19th

As of today, the shares are trading at around 23,85 EUR. Following the logic of the subscription rights, one right should be worth

Edit: in the first version, I had the wrong formula. Thanks to a friendly reader, this is the correct formula:

(25,18-23,85)/((21/10)-1)= 1,21 EUR.

So tomorrow, the Rhoen shares should open (all other things equal) -1,21 EUR lower and the rights should trade at 1,21 EUR. Let’s see if there is a chance to find a little arbitrage here and there.

One strategy could be to buy the stock at the open, hoping that the “discount” will be eliminated quickly. A second one could be an arbitrage between the rights and the stocks. Finally, it could be worthwhile to look at the tendered shares as well.

Don’t ask me why they are doing it that way. I think it most likely optimizes the tax position of the large shareholders, especially for the founder Eugen Muench, who wanted to cash in his remaining 10%.

A final comment for clarification: No, this does not mean that Rhoen shares should trade at 25,18. The price chosen by Rhoen is relatively “arbitrary”, they could have used any other price as well.

Portfolio Management: EMAK, Sol SpA, Rhoen & Concentrating ideas

As many other investors, I think it is currently much more difficult to find new convincing ideas. On the other hand, many of my portfolio stocks performed very well and are now near or past my inititial target. Let’s look first at some of the portfolio stocks:

Rhoen Klinikum

As I have said before, once the share price of Rhoen approaches the initial bid price of 22,50 EUR, I will sell this “special situation” investment which I did last week with an overall return of +32%. Clearly, it would be tempting to “ride” the current momentum, but honestly, I do not know why investors are suddenly so “hot” about the stock.

Fundemantally, at least in my opinion, Rhoen is now fairly valued. Compared to the initial deal, the “rest Rhoen” has to prove if they are a valid company. Sure, it looks like that the party is just getting started but still, the risk/return profile was a lot better at 15 EUR ……


I also sold out the remaining EMAK stake. Unfortunately, EMAK did not profit so much from the “January effect” as much as I hoped. As with Rhoen, the “special situation” status has now expired somewhat and long term, EMAK is for me only an “average” company at an “average” price, so no reason to hold it further. I sold yesterday at around 0.85 EUR per share with a total profit of +89% for the whole position.

Sol Spa

Finally, I sold out of Sol Spa last week at well at a price of ~6,10 EUR per share, netting a 55% gain over a holding period of around 14 months. Sol Spa was a hard stock for me to hold. Although I really like the company, the stock price advanced much qicker than the business. Since I looked at them back in April 2012, clealry the health care business continued to grow, but the traditional gas business has to struggle much harder than i thought. The profit declined both, in 2012 and 9m 2013, but the share price still increased by 50%.

At a current P/E of 19, P/B of 1.5 and EV/EBIT of 14, I think the risk/return relationship is not exciting any more. Again, I will most likely regret this in the short term, but mid- to longterm, I cannot justify the investment.

What now ?

The above mentioned transactions generate ~9% additional cash. As I do not have any investible new ideas available, should I just let the cash lie around until I find something better ? Well, thankfully I still have room in my already existing portfolio positions. For two of the stocks I do have a very positive opinion:

TGS Nopec

TGS Nopex has issued surprisingly good Q4 numbers plus they announced a new stock buy back. So a good opportunity to upgrade this to a full (5%) position which I did at around 177,5 NOK per share


As I have written before, I expect MIKO to significantly improve profitability for 2013. Therefore I increased the stake in February at a price of around 68,20 EUR per share to increase the stake from around 3.5% to 4.2% of the portfolio. Unfortunetly, there is not enough trading to make it a full position yet.

That still leaves me, even after the new Energiedienst position, with around 19% in cash which suspicously looks like market timing but is not or only indirectly. It is just hard these days to find good stocks at cheap prices. But I am working hard on new (or old) ideas. Further candidates for a potential postion increases are Van Lanschott and Trilogiq.

Short cuts: Rhoen, EGIS, Krka, Pharmstandard

A quick “healthcare round up” :

Servier was succesful with its offer and secured more than 95% of shares. Just a few days later, they then called for the remaining shares. Lesson learned: Holding out does not make money in Hungary…

One remark: I hold the EGIS stock via the German direct broker DAB Bank. The service here is really really bad. I called them with regard to the squeeze out proceedings and they said the cannot do anything because they did not officially receive the information. They refused to look at the web site with the offer and help me in any regard. They already disappointed me more than once with trading European shares, especially French small caps.


Krka, the Slovenian version of EGIS reported very good Q3 results. Interestingly enough, all the growth and profit increase came from Russia. All the other areas are not doing that well.


Clearly, I was lucky to sell early after I detected my research mistake in September. Since then, the stock lost a further -16%.

Since then, there was quite some news flow from the company. The company reported Q3 numbers, which overall were not very good. The reason given was that the Government delayed auctions into Q4.

For the mentioned buy out offer, twice as many shares were tendered as were available. So the “acceptance” was only around 50%. So even if I would have qualified, I would have been only able to tender half of the shares.

Finally there is some news on the spin-off. For me the situation is still not clear, but on their website they mention that even GDR holders might get spin-off shares, although the might not be listed:


If the spin-off is approved and once NewCo has been formed, NewCo is expected to consider establishing a separate GDR program in which new GDRs would be issued representing the shares of NewCo distributed to Depositary on behalf of the Company’s existing GDR holders.

If decided on, the GDR program will be set by the time of the registration of the NewCo; GDRs will be unlisted.

The reason that I still follow the stock is that in my opnion this is a very good way to learn more about Russian stocks and how things work there. I am not sure if this will be rewarded but I find it highly interesting (and entertaining….).

Rhoen Klinikum

The entertainment factor at Rhoen Klinikum is hard to beat. Founder Eugen Muench gave an interview yesterday, where among other stuff, he suddenly wants to use the sale proceeds from Fresenius for a share buy back at 28 EUR per share. Suprisingly, he also mentioned not to sell any shares personally.

Clearly, one should be careful with everything Münch is saying. I will stick to my strategy and sell out if the “old” purchase price from the first deal is reached (22,50 EUR).

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.

Read more

A few more thoughts on Rhoen Klinikum

In my recent post, I had made a very quick analysis how I looked at the news that Rhoen now sells 2/3 of their business to Fresenius in order to sidestep the blocking shareholders.

That was my conclusion:

So for the time being I will not sell the shares and watch what is going to happen. At some point in time, the stub itself coul dbe an interesting situation in itself, as it will most likely drop out of the index etc. Sow I guess I will sell before the extra dividend is actually paid.

Let’s move a step back before that:

Before we knew that Rhoen wanted to sell and Fresenius wanted to buy at around 22,50 EUR (old offer). Initially, before the Fresenius offer, the shares traded at ~15 EUR, which I would define the “undisturbed price” without any control premium. Until last week, the market seems to have valued a rather low probability for the deal going through.

Very simply, the implied probability was around (17,50-15)/(22,50-15) = 1/3 or 33%.

Now a deal seems to be much more likely, but it is unfortunately not as “clean” as the old deal. Instead of getting only cash, one now expects a certain amount of cash plus a remaining “stub”. On the other hand,”all in” the price seems to be even slightly better as the old 22,50 EUR.

So why is the share now trading only at ~19 EUR ?

There are three explanations for this in my opinion:

A) uncertainty the deal is NOT going to happen
B) what will the remaining company (“stub”) be worth ?
C) the effect of the withholding tax on the special dividend

In my opinion, the withholding tax is not very relevant. If I buy now at 19,15 and I pay the withholding tax next year, I can make a “wash sale” (sell at a loss and buy again) to set off the tax. For institutional investors this is no issue anyway.

I am also pretty sure that the likelihood of the deal happening is very high. After the fiasco two years ago, Fresenius and RHoen will have put a lot of effort into this deal. So I would think that there is at least a 90% probability that the deal is happening.

This leaves us with c): People don’t seem to like being stuck with the “stub”. If we look into the Rhoen 6 month report, we can see that on an annual basis, Rhoen earns around 300-310 mn EUR EBITDA. The part which was sold to Fresenius is clearly the currently more profitable part with EBITDA of 250 mn EUR according to the filing.

This leaves the stub with EBITDA of around 50 mn EUR. The “implied” valuation of the stub is around 340 mn EUR EV at the moment, so we are talking about an implied valuation of 6-7x EV/EBITDA which is not much. Rhoen announced that they intend to earn 150 mn EUR EBITDA in 2015 in the remaining company. Even if this is too optimistic, I still think the “stub” is implicitly very attractive as RHoen has a very long history in turning around hospitals.

So all in all, at the current price, the stub looks like a very interesting investment.. The only problem is that I need to invest the full 19 EUR now in order to get expsure to the 5,20 EUR implied valuation of the stub.

In theory, as a professional investor, I could borrow up to 13,80 EUR against the Rhoen shares to lower the amuont of capital I need to commit and increase my Return on Investment. At the moment, as I have a lot of cash anyway, I do not need to borrow.

Expectation management:

Just to make sure, I do not expect that the shares will jump 5 or 6 Euros until the dividend will be paid. One has to think about the stock rather as a 13,80 cash deposit plus a 5,30 EUR stock. There will be very poor “visibility” about the stub in the next few months until the deal is finally settled. So I do expect some price appreciation on the “deposit part” but not that much, rather like an implicit attractive deposit rate as off set for the execution risk or so. My return expectation until mid next year is rather something like +1 EUR with a very limited downside.

Qualitative aspect

What I do like is the fact, that funder, Mastermind and 12% shareholder Eugen Münch has to a large extent the same interests as the “Normal” shareholders. This is different from similar situations where the CEO just wants to get a big golden handshake. I think the adversaries (Braun and especially Asklepios) might even be tempted to take over the “stub” at some point in time before someone else thinks about buying this (then unlevered) turn around case.


So instead of waiting and selling, which was my first reaction, I will actually increase my RHoen position to a full position (5%) as I think that the current risk/return relation is not spectacular but still very good and not correlated much to the overall market.

This translates into around 3.6% exposure on a portfolio basis to the cash payament (Risky deposit) and only 1.4% “true” equity exposure to the stub. I will watch this carefully and potentially increase the position up to 2.5% “stub exposure” if prices gow below 19 EUR. For me the “stub” is one of the most interesting special situations at the moment.

Short cuts: Rhoen Klinikum, Hornbach, Vivendi

Rhoen Klinikum

KABOOM !! After a lot of corporate boardroom chess, Rhoen Klinikum and Fresenius today cam out swinging and announced that Rhoen will sell the mAjority of its business for 3.07 bn EUR to Fresenius.

Among other (and subject to regulatory approvals), Rhoen plan s to:

– pay a 13.80 EUR special dividend (this translates into ~1.9 bn EUR)
– and/or repurchase shares
– they will keep hospitals (mostly university hospitals) with an annual turnover of 1 bn where they expect an EBIDTA margin of ~15% in 2015
– the purchase price is cash, but Rhoen will use part of it to pay back debt
– the purchase price is priced at 12x EV/EBITDA

The stock price jumped initially today to 22 EUR and something but came back to ~ 19.50, giving Rhoen a current EV of around 3.5 bn (Net debt 800 mn)

The “stub” (remaining business) is currently then priced at around 500 mn EV but expected to earn 150 EBITDA in 2015. If we assume a Forward EV/EBITDA of around 6-8x, then a fair value of the current Rhoen shares (pre tax etc.) would be the current 19,50 plus 3,50 to 5 EUR per share or so. Slightly higher than the 22,50 Fresenius was ready to pay two years ago.

So for the time being I will not sell the shares and watch what is going to happen. At some point in time, the stub itself coul dbe an interesting situation in itself, as it will most likely drop out of the index etc. Sow I guess I will sell before the extra dividend is actually paid.


Quite a surprise: Kingfisher representatives, which owns 25% of the holding votes and 5% of the Baumarkt shares are actually leaving the supervisory board and planning to enter the German market.

They seem to target the “professional” market, not the retail sector. Clearly this is also the sector where Hornbach is strongest.

I am not sure how to interpret this. Clearly, it would be better if Praktiker (and MAx Bahr) would just disappear. I do not really understand why Kingfisher wants to enter the German market. Kingfisher is a great company, but in their major markets, UK and France they are number 1 with a clear size advantage. In Germany, they are a small fish and I would claim that the German retail market in general is one of the most brutal markets in teh world. Even WalMart didn’t have a chance here.

I am wondering if somehow now Hornbach enters the French market ? As far as I know, they so far operate some shops along the border which draw a lot of French people because prices are a lot lower in Germany.


Some 18 months ago, I had a quick look at Vivendi because Seth Klarman bought a stake.

Subsequently, he sold out again a large part at a loss. Now however, there seems to come some actual change. French “raider” Bolloré became vice chairman and the company announced the following:

Bowing to investor pressure to overhaul its structure, Vivendi will begin a formal study to separate its French phone unit SFR and assemble the rest of its businesses into a new international media group based in France, it said yesterday. Billionaire shareholder Vincent Bollore will become deputy chairman, as Vivendi ends its search for a new chief executive.

This is quite interesting. Thinking loud, Vodafone with all its Verizon Cash might be interested in the telephone part (after cashing out their minority participation to Vivendi some years ago….).

Nevertheless, I still hesitate to buy Vivendi. 2012 was a very bad year for them. Under my metric the made a loss, increased the share count and have 1 EUR per share more debt despite showing positive free cashflow.

Note to myself: Put Bolloré on my watch list. This guy seems to know what he is doing in France.

Short cuts: Kabel Deutschland, Rhoen Klinikum, Greek GDP linker, Royal Imtech

Kabel Deutschland

Man, this looks like I got it really wrong. According to some press articles, now Liberty wants to buy Kabel as well for 85 EUR a share. So there seems to be a bidding war before even the first official bid has been announced.

The interesting point of this “red-hot” news is that Liberty has already once tried to buy the former Telekom Cable network in 2002 but this was not approved by the German Kartellamt.

How realistic is this ? I am not sure. Just in February, the German Kartellamt blocked the takeover of the smaller rival Telecolumbus by Kabel Deutschland itself because even the combination of KAbel Deutschland and the smaller rival was a problem for them.

So what is going on here ? I have no idea, but to a certain extent it looks like one of the best “stock promotions” ever. What kind of M&A process is this when everything “leaks” to the market ?

For some market participants, this doesn’t matter anyway. My “favourite bad research provider” Makor (yes, those guys who use the wrong formula to calculate fair prices after right issues) has the following recommendation viea Bloomberg:

We recommend initiating positions in Kabel shares, as we consider the shares trading about fair value in the context of a possible offer. However, given the strategic interests for the potential buyers (Vodafone, Liberty Media), a premium is probably justified and notwithstanding regulatory issues, a price above Eur 90/sh could easily be justified.

Wow, sometimes the stock market is so simple.

Rhoen Klinikum

Unfortunately, the “Rhoen surprise” did not last very long. Some more details were emerging . It looks like that the boss of the supervisory board (and the guy who wants to sell to Fresenius) decided, that the 5% votes of one of the blocking shareholders were not valid. The result will most likely be a court battle over up to 18 months. So lets wait and see what happens.

Greek GDP linkers

The most recent jump in the GDP linker seems to come from a “research piece” of Deutsche bank which several readers forwarded to me (thank you guys !!!).

Let’s look how the look at the nominal hurdle:

Based on the latest IMF forecasts, the 2011 level of GDP is expected to be re-attained in 2017. By fixing this point, we can then solve for the nominal growth rate required in order to exceed the nominal GDP threshold in a given year. We find that in order to exceed the threshold in 2022 (for warrant payment in 2023) would require a YoY nominal growth rate of 5.0%. A growth rate of 3.6% would be required to meet the threshold in 2024. If recovery to the 2011 level is achieved a year earlier than expected (in 2016) then the required growth rate for the first payment to be in 2023 falls to 4.2%, or rises to 6.3% assuming a year delay. These sensitivities are illustrated in the chart to the right.
Although it is far from certain, it seems reasonable to assume 2023 to be the year when payments commence on the warrants.

Ok, so the basic assumption is that the new IMF forecast from 2012 is now correct, after the initial forecast was completely wrong. Hmm, one might call this “positive thinking” if one wants to be nice.

Their final conclusion (after some “nonsense funky doodle” modeling) is as follows:

The combination of more stable macro-economic assumptions, and reduced default probability now mean that we find the current valuation of the warrants as being broadly justified (relative to the GGBs). Considering our constructive view, the additional beta of the warrants and also the additional ‘yield’, we now find the GDP warrants to be more attractive than the GGBs themselves as a means to take exposure to an eventual Greek recovery. We caveat that such a recovery remains uncertain and will likely be lengthy; implying that any anticipated outperformance of the warrants should be seen as a medium to long-term expectation.

So this conforms my view, that the GDP linker is more like a short-term “beta” play than an intrinsic value” investment as the Deutsche Bank “analysts” only take the IMF projection as fundamental basis and do not add anything new here.

Royal Imtech

Royal Imtech has released a quite bad Q1 report. It looks more and more that larger parts of the company are in real trouble and that the fraud might have been just the “top of the iceberg”. Time to take them of the “rights issue watch list”. As I am not a “fraud-turn around” investor, this seems to be the not the situations I am looking for.

Rhoen Klinikum special situation – Nice suprise

Rhoen Kliniikum was a special situation, where I took a half position last year. The simple idea was that the failed take over attempt by Fresenius would “revive” at some point in time plus the stock was solid and relatively cheap.

Now it seems that this is paying of sooner than expected. In today’s shareholder meeting, the existing poison pill which killed the take over was effectivly removed according to this article:

The existing requirement that 90% of shareholders have to approve a merger was changed into 75% requirement. This means that the current players which tried to block the take over by Fresenius (Braun and Asklepius, 5% each) either will have to give up or buy some more shares.

Both should e very positive for the shareprice.

AFter hour, the shareprice jumped already ~20%:

If the price gets near the old offer (22,50 EUR), I would sell the position.

Note to myself: Check TNT Express again…..

Short updates: Rhoen, KPN, HT1 Funding

A few short updates which i think are worth mentioning in a post:

Rhoen Klinikum

One of my “special situations”. My original thesis behind this was that it is a solid company with a lot of interested suitors. Just today, the Fresenius CEO stated in WSJ Germany that they are still interested.

So this is still a solid, uncorrelated speculation that something could happen any time.

As one part of their capital raising effort, KPN issued two Hybrid bonds last week, 1.1 bn EUR at 6.125% and 400 mn GBP at 6.875%. According to Bloomberg, both bonds seem to have a “change of control” clause, meaning the bonds have to be paid back if someone becomes majority shareholder of KPN. This is quite uncommon for hybrids and looks a little bit like a “poison pill” against Carlos Slim.

Additionally, I found that rating review from Fitch (via Reuters) quite interesting.

KPN is facing some headwinds in the Netherlands. A fourth entrant plans to set up a 4G network (Tele2) and there seems to be a potential 2 bn liability from a subsidiary called Reggefiber, where KPN currently seems to have a 41% share but will soon have the majority.

Commerzbank HT1 Bond

Commerzbank just released news that they plan to increase share capital by 2.5 bn EUR and paying back their silent participations. This is not so nice for shareholders, but very good for HT1 holders as more equity is now “below” the subordinated capital, reducing downside risk.

So not surprisingly, the price of the HT1 bonds increased significantly.

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