European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Ercros SA is an industrial company focused on the manufacture and sale of chemical and pharmaceutical products. It is listed on the Spanish Stock Exchange.  The company is divided  into three areas of activity: a business strategic unit, the intermediate chemicals division, and the pharmaceuticals division. Ecros serves clients worldwide.

<ul>
<li>Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals,  has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of <a href="https://www.smartkarma.com/entities/ercros-sa" target="_blank" data-smartkarma-citation="entities:40951:1" rel="noopener">Ercros (ECR SM)</a>  at €351 million.</li>
<li>Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies. </li>
<li>The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.</li>
</ul>


Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals,  has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of Ercros (ECR SM)  at €351 million.
Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies. 
The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.


Keywords Studios plc provides technical services to the video game industry in Ireland, Japan, Italy, Canada, the United States, India, Singapore, the United Kingdom, Brazil, and Spain. It offers localization services related to translation and cultural adaptation of in-game text and audio scripts in various game platforms and genres; and localization testing services consisting of testing the linguistic correctness and cultural acceptability of computer games. The company also provides audio/voiceover services, including script translation, actor selection, and talent management through pre-production, audio direction, recording, and post-production, such as native language quality assurance of the recordings. In addition, it offers functional testing services related to quality assurance services provided to game producers to ensure game functions; and art creation services relate to the production of graphical art assets for inclusion in the video game, including concept art creation, as well as 2D and 3D art asset production and animation. Further, the company provides customer support services related to the live operations support, such as community management, player support, and associated services to producers of games. It serves video game developers and publishers. The company was founded in 1998 and is headquartered in Dublin, Ireland.

<ul>
<li>On June 27, <a href="https://www.smartkarma.com/entities/keywords-studios-plc" target="_blank" data-smartkarma-citation="entities:23476:1" rel="noopener">Keywords Studios (KWS LN)</a> received an updated cash offer of 2,450p/share from EQT (3.9% lower than initial 2,550p), 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM EBITDA,</li>
<li>22.4x Fwd P/E. The likelihood of a strategic buyer making an offer is low, while the offer from EQT is opportunistic, which will seek to merge Keywords with Virtuos.</li>
<li>The revised lower offer and the small extension to the PUSU deadline do not inspire optimism. Nevertheless, EQT remains a credible bidde. Gross spread stands at 5.9%. Maintain long.</li>
</ul>


On June 27, Keywords Studios (KWS LN) received an updated cash offer of 2,450p/share from EQT (3.9% lower than initial 2,550p), 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM EBITDA,
22.4x Fwd P/E. The likelihood of a strategic buyer making an offer is low, while the offer from EQT is opportunistic, which will seek to merge Keywords with Virtuos.
The revised lower offer and the small extension to the PUSU deadline do not inspire optimism. Nevertheless, EQT remains a credible bidde. Gross spread stands at 5.9%. Maintain long.


EQT/Keywords Studios: Lower Revised Offer

Neoen operates as an independent energy company. The Company develops, finances, builds, and manages renewable energy power plants such as solar, wind, and biomass. Neoen serves customers worldwide.

<ul>
<li>On June 24, a share purchase agreement was signed between Brookfield and several shareholders, to acquire 53.12% of Neoen's outstanding shares at €39.85/share. Brookfield has also received irrevocables for 4.36%.</li>
<li>The offer price is generous and this looks a done deal. Spread 5.19%/7.29% (gross/annualised) seems interesting in spite of the longer approval process in energy deals.</li>
<li>The convertible NEOEN 2.875 14-SEP-2027 has a balanced profile. It is trading at (mid) 100.75 (vs. €37.82), vs. a fair price estimate of 113.773.</li>
</ul>


On June 24, a share purchase agreement was signed between Brookfield and several shareholders, to acquire 53.12% of Neoen's outstanding shares at €39.85/share. Brookfield has also received irrevocables for 4.36%.
The offer price is generous and this looks a done deal. Spread 5.19%/7.29% (gross/annualised) seems interesting in spite of the longer approval process in energy deals.
The convertible NEOEN 2.875 14-SEP-2027 has a balanced profile. It is trading at (mid) 100.75 (vs. €37.82), vs. a fair price estimate of 113.773.


Brookfield/Neoen: Share Purchase Agreement, Spread and Convertibles

Covestro AG manufactures polymers and high performance plastics.  The Company  manufactures, markets, and distributes coatings, adhesives, insulating materials, sealants,  polycarbonates, and polyurethanes. Covestro markets its products to industries including  automotive, construction, health, electronics, and medical engineering.

<ul>
<li>On 24 June, <a href="https://www.smartkarma.com/entities/covestro-ag" target="_blank" data-smartkarma-citation="entities:21574:1" rel="noopener">Covestro AG (1COV GR)</a> confirmed it has decided to enter into concrete negotiations with ADNOC regarding a potential transaction at an indicative €62/share (9.6x EV/fwd NTM EBITDA).</li>
<li>Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and market are somehow skeptical about that.</li>
<li>Considering a takeout price of €62, gross spread is 12.1% and the shares are pricing a 32.5% probability of deal completion.</li>
</ul>


On 24 June, Covestro AG (1COV GR) confirmed it has decided to enter into concrete negotiations with ADNOC regarding a potential transaction at an indicative €62/share (9.6x EV/fwd NTM EBITDA).
Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and market are somehow skeptical about that.
Considering a takeout price of €62, gross spread is 12.1% and the shares are pricing a 32.5% probability of deal completion.


Adnoc/Covestro: Fresh Takeover Negotiations and Valuation Scenarios

Britvic Plc supplies a wide range of soft drinks. The Company manufactures and markets its own brand of soft drinks as well as supplies drinks manufactured by other companies.

<ul>
<li>On June 24, Carlsberg announced that Pepsico had agreed to waive a change of control clause in its bottling deals with Britvic. The current proposal is 1250p (+9.5p interim).</li>
<li>The offer represents an undemanding 12x EV/fwd NTM EBITDA. My standalone base case fair-value estimate is 1,056p/share. An improved offer could come &gt;1,300p, although 1,420p (13.3x wouldn't  be unreasonable).</li>
<li>Gross spread to the revised offer is 6.2% (6.9% including interim). Shares are pricing a 72% probability of deal success. I believe Carlsberg will come with an improved offer. Long.</li>
</ul>


On June 24, Carlsberg announced that Pepsico had agreed to waive a change of control clause in its bottling deals with Britvic. The current proposal is 1250p (+9.5p interim).
The offer represents an undemanding 12x EV/fwd NTM EBITDA. My standalone base case fair-value estimate is 1,056p/share. An improved offer could come &gt;1,300p, although 1,420p (13.3x wouldn't  be unreasonable).
Gross spread to the revised offer is 6.2% (6.9% including interim). Shares are pricing a 72% probability of deal success. I believe Carlsberg will come with an improved offer. Long.


Carlsberg/Britvic: Awaiting a Third Proposal

European event-driven, risk-arb & special-sits

Europe Event-Driven
European event-driven, risk-arb & special-sits

Esseco/Ercros: Bidding War

Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing...

Jesus Rodriguez Aguilar

EQT/Keywords Studios: Lower Revised Offer

On June 27, Keywords received an updated (lower) cash offer of 2,450p/share from EQT, 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM...

Jesus Rodriguez Aguilar

Adnoc/Covestro: Fresh Takeover Negotiations and Valuation Scenarios

Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and...

Jesus Rodriguez Aguilar

Carlsberg/Britvic: Awaiting a Third Proposal

On June 24, Carlsberg announced that Pepsico had agreed to waive a change of control clause in its bottling deals with Britvic. The current...

Jesus Rodriguez Aguilar

Esseco/Ercros: Bidding War

Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing...

Jesus Rodriguez Aguilar

EQT/Keywords Studios: Lower Revised Offer

On June 27, Keywords received an updated (lower) cash offer of 2,450p/share from EQT, 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM...

Jesus Rodriguez Aguilar

Brookfield/Neoen: Share Purchase Agreement, Spread and Convertibles

On June 24, a share purchase agreement was signed between Brookfield and several shareholders, to acquire 53.12% of Neoen's outstanding shares at...

Jesus Rodriguez Aguilar

Adnoc/Covestro: Fresh Takeover Negotiations and Valuation Scenarios

Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and...

Jesus Rodriguez Aguilar

Carlsberg/Britvic: Awaiting a Third Proposal

On June 24, Carlsberg announced that Pepsico had agreed to waive a change of control clause in its bottling deals with Britvic. The current...

Jesus Rodriguez Aguilar