Category Archives: Opportunities

Special situation Quickie: Axel Springer voluntary tender offer EUR 63/share

A few weeks ago, PE big weight KKR had announced to make a voluntary tender offer for German publisher Axel Springer at EUR 63 per share.

It is an interesting case as the offer is targeting only a minority stake. The threshold for the offer is set at only 20%.

The background seems to be that the biggest shareholder, Friede Springer and the CEO Döpfner, who own together ~45% want to make sure that they control the company together with KKR as they have entered into a shareholder agreement.

Looking at the stock price we can see that the offer has been made at a significant premium (~40%) but still below 2018 prices:

springer

There seem to have been other attempts to make sure that Friede and Döpfner control the company but they didn’t succeed.

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Special situation quickie: Osram take-over at EUR 35 /share

This will be a very short one:

Bain Capital and Carlyle want to take over Osram at 35 EUR per share. The offer is friendly as Managment and Supervisory board have agreed to the takeover.

The offer runs until beginning of September and minimum acceptance level is 70%.

There is no detailed offer document out now yet.

Nevertheless I established a 2,5% position at ~33.1 EUR, providing a 5,7% potential return.

Major risk is in my opinion politics (loss of jobs), chances to the upside could come form activists pushing for a higher price. In the meantime there could be clearly hick-ups (not reaching the 70% because of activist involvement) but Bain and Carlyle are pros.

The buyers are top tier PEs who execute this kind of offers well and have the money.

For those investors who remember: I looked at the Osram spin-off 6 years ago, but then failed to buy the stock because my limit was a few cents too low. So I know the company relatively well. This doesn’t of course guarantee any success ……

Metro take over – quick assesment

After reading “Merger Masters” I decided to practice my new found knowledge a little bit and apply it to Metro. My long time readers know that I bought Metro as a spin-off and exited with a pretty painful loss.

The Czech billionaire Daniel Kretinsky, who became Metro shareholder a year ago, made a voluntary offer of 16 EUR per Metro common share and 13,80 EUR per pref share. Little is known how Kretinsky actually became a bilionaire, as he is now only 45 years old. Maybe it helped that he married the daughter of another Czech billionaire, Petr Keller. Some call him a Czech “oligarch”. Up until now, he mostly invested in the energy space, most notably buying coal assets in Germany.

 

Metro Management has already rejected the offer as too low, so the deal is clearly a “hostile” one.

From the Merger Masters book, I use the initial checklist to quickly assess the opportunity:

  1. What is the srpead ? What is the annualized return ?
    –> 0%, stock price trades at offer price at the time of writingm the pref share even above the offer price
  2. What are the regulatory issues/hurdles
    –> Most likely no big hurdles. Acquirer is not active in this industryy
  3. What are the conditions of the agreement
    –> unlcear. Unspecified “Minimum acceptance” level
  4. What is the strategic rational of the deal
    –> unclear. Buyer has no experience in retail. Most likely “opportunistic” and/or real estate driven
  5. What is the downside if the deal breaks ?
    –> – 10 to -15% (my estimate)

So based on this first assesment, the situation doesn’t look very interesting. For a hostile deal one should expect some sort of premium which doesn’t exist. The major issue is clearly that there is little information about the acquirer and his motives.

On the other side, the market seems to expect clearly a higher bid, otherwise the current price makes no sense. However I cannot think of any other bidder for Metro but maybe I am wrong.

So my assesment here is clear: At this price the risk/return profile for Metro is not worth it and I’ll pass.

P.S.: Does any reader know how the current legal situation is for German Prefs ? WIll an acquirer need to pay the same price as for the common shares

 

 

Special situation: Innogy Tendered Shares (IGYB) -(very) Cheap Optionality ?

Background:
The guys from Paladin AM have outlined the Innogy case very nicely on their blog (in German): Intro & Update

I’ll try to summarize it in my own words:

Innogy, the renewable energy spin-off of RWE is in the process of being taken over by competitor E.ON. E.ON in 2018 had announced to purchase the 77% stake of RWE and has offered on a voluntary basis 36.74 EUR per share which, plus the upcoming dividend adds up to a total consideration of 38,14 EUR per share before tax. The closing of the transaction is subject to a relatively complex regulatory approval process which is already facing some delays. Most experts however think that the transaction will be ultimately approved.

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Position review: Van Lanschot (SELL) plus some thoughts on Unbundling /Rebundling in Banking

Background:

Having this blog is nice because I can look back at what my original ssumptions were. I bought Van Lanschot in 2013, almost 5 1/2 years ago.

This was how I “valued” Van Lanschot back then:

Valuation:

A simple, “Berkowitz style” valuation would be: Book value

With ~0.51 times book value, Van Lanschot is one of the cheapest banks in Europe. Even Greek Banks like Piraeus Bank trade higher. The current valuation is on a level with „quality banks“ like Unicredit, Espirito Santo and Credito Bergamesco.

Interestingly, the P/B multiple for listed Private banks is a lot higher. Swiss competitors Julius Baer, EFG and Banq Privee de Rothschild for instance trade on multiples between 1.1-2.0 times book, a clear premium to „normal“ banks.

So with a “normal” result, one could argue for a valuation somewhere at 1.5 x book value. Clearly, this will be a long way, one should not expect exploding profits in the next quarters. But in a time period of 3-5 years, I could imagine that the stock can triple if the turn-around is succesful. Also, when people finally realize that not every Dutch homeowner will go broke, there might be a re-rating of Dutch financial stocks in general. But this might also take time.

It would be easy to come up with a much more complicated valuation method, but I like to keep it simple. If there are no big holes in the balance sheet and costs are kept under control, equity is at a safe level, then book value should be achievable for any bank.

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Special Situation “quicky” – KAS Bank (ISIN: NL0000362648) take-over

DISCLAIMER: This is not investment advice. Please do you own research !!!!!

Background:

Some readers of my blog might remember KAS Bank. I bought the stock in August 2012 and then sold it with a decent profit in MArch 2015 because I had not paid attention to the pension liabilities.

Looking at the stock chart, the decision to sell in 2015 was a good (and lucky) one:

kas bank 5y

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April SA – Potential buyout offer from CVC: Interesting Special Situation ?

Disclaimer: This is not investment advice. Please do your own research. 

April SA is an “Old friend” on this blog. I owned the stock in the past and last time I looked at them when a rumour came up that the company is for sale in late October.

This is what I said back then:

April had shown actually pretty decent growth in Q3 and I actually considered buying some shares but maybe this is not so sustainable and the founder wants to sell before it is getting worse again ? Who knows…

My fundamental assessment of April is that they have a strong core business (French Broker) but have over extended themselves internationally and the founder, Bruno Rousset, who stepped down in 2014, does not have the energy anymore to turn this around himself.

Well, things have progressed. There had been a “beauty contest” with PE bidders and it looks now that PE shop CVC is highly interested in buying the stake of the founder and majority owner. This is from a piece of news released by April SA and  CVC end of December:

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