Category Archives: Opportunities

Travel stocks revisited – building up a watch list

My long term readers know that I did a lot of research on travel stocks in the past, however with little result other than a only slightly profitable investment into Expedia.

With the current situation, I decided to have a quick look at the travel sector again.

Up until now, the tourism industry has been seen as a secular growth industry, mainly due to 2 mega trends: Emerging market middle class tourists and older, more wealthy first world tourists were driving tourist numbers and subsectors such as cruises or AirBnB rooms. Just last year, “overtourism” became a major trend in social media, I guess this problem will not be a big issue in 2020.

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Special situation update: Innogy, Osram, PNE AG, AGROB & Comdirect

Innogy Tendered Shares

A quick update on this “cheap option play”:  To a small extent this has developed better than I intitially thought as I had mentioned in the comments. My initial expectation would have been a small loss. However, E.On now has increaesd the price for the tendered Innogy shares voluntarily to 37.59 EUR which, inclding the dividend of 1,40 will lead to a small profit (before taxes and cost) . However the ultimate upside, if there is a lawsuit, will be smaller as the E.On shares dropped to 9 EUR and the theoretical value of the tendered shares is now 4.371*9= 39,34 EUR.

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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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