European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>My €1.45/share long recommendation was based on the possibility of a sweetened offer that did not finally happen. Apollo has cannily been buying shares in the market to ensure success.</li>
<li>Since the transaction announcement Apollo has been adamant in its intention to delist Reno de Medici. Upon publication of the final results, Apollo owns 95.780% of the voting rights. </li>
<li>The squeeze-out procedure will be carried out on 29 December and the shares delisted from Milan and the Spanish Stock Exchange. </li>
</ul>


My €1.45/share long recommendation was based on the possibility of a sweetened offer that did not finally happen. Apollo has cannily been buying shares in the market to ensure success.
Since the transaction announcement Apollo has been adamant in its intention to delist Reno de Medici. Upon publication of the final results, Apollo owns 95.780% of the voting rights. 
The squeeze-out procedure will be carried out on 29 December and the shares delisted from Milan and the Spanish Stock Exchange. 


Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>Ventia, an infrastructure services provider, aims to raise up to US$325m in its Australian IPO. Capital Group has signed up as a cornerstone.</li>
<li>Ventia is an essential infrastructure services provider in Australia and New Zealand. It is one of the largest providers of maintenance services for critical public and private infrastructure.</li>
<li>We have covered most aspects of the deal in our earlier notes see <a href="https://www.smartkarma.com/insights/ventia-ipo-at-your-service-everywhere" target="_blank" rel="noopener">here</a> and <a href="https://www.smartkarma.com/insights/ventia-ipo-strong-revenue-visibility-valuation-appears-reasonable" target="_blank" rel="noopener">here</a>. In this note, we will look at the revised valuations. </li>
</ul>


Ventia, an infrastructure services provider, aims to raise up to US$325m in its Australian IPO. Capital Group has signed up as a cornerstone.
Ventia is an essential infrastructure services provider in Australia and New Zealand. It is one of the largest providers of maintenance services for critical public and private infrastructure.
We have covered most aspects of the deal in our earlier notes see here and here. In this note, we will look at the revised valuations. 


Ventia IPO - Priced to Go on the Revised Terms

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Financial Select Sector SPDR F / Technical Analysis

We continue to see a steady flow of risk-on signals that have us moving toward an outright bullish outlook for the broad US equity market. Below we discuss several bullish developments that leads us to believe we are close to exiting the "mixed market environment" that we have referenced since late March.Charts highlighted: XLF, KBE, Copper, US Dollar, IWD, XLY, Bitcoin, S&amp;P 500, APO, LPLA, ARCC, JHG, KKR, ALLY, CACC, OMF, CIT, WD, GATX, LC, CODI, WRLD, ATLC, BCPC, TROX, ASPN, ASIX, LXU, HWKN, MOS, CF, ICL, SQM, UAN, IPI

We continue to see a steady flow of risk-on signals that have us moving toward an outright bullish outlook for the broad US equity market. Below we discuss several bullish developments that leads us to believe we are close to exiting the "mixed market environment" that we have referenced since late March.Charts highlighted: XLF, KBE, Copper, US Dollar, IWD, XLY, Bitcoin, S&amp;P 500, APO, LPLA, ARCC, JHG, KKR, ALLY, CACC, OMF, CIT, WD, GATX, LC, CODI, WRLD, ATLC, BCPC, TROX, ASPN, ASIX, LXU, HWKN, MOS, CF, ICL, SQM, UAN, IPI

Upgrading Financials To Overweight; Downgrading Communications To Market Weight

<a href="https://www.smartkarma.com/entities/apollo-global-management-inc" target="_blank" data-smartkarma-citation="entities:28770:1" rel="noopener">Apollo Global Management Inc (APO US)</a> has reached an agreement to acquire a 67% stake in the Italian paper company <a href="https://www.smartkarma.com/entities/reno-de-medici-spa" target="_blank" data-smartkarma-citation="entities:33529:1" rel="noopener">Reno De Medici (RM IM)</a> from the firm's two largest shareholders <a href="https://www.smartkarma.com/entities/cascades-inc" target="_blank" data-smartkarma-citation="entities:25714:1" rel="noopener">Cascades Inc (CAS CN)</a> and Caisse de depot et placement du Quebec. It is estimated that the operation will be completed during Q3 2021. The price of €1.45/share represents a premium of 21% over the 3-month VWAP.
<ul>
<li>This represents an implied equity value of €545.6 mn and implied EV of €533 mn.</li>
<li>
7.1x EV/Fwd EBITDA and 13.1x Fwd P/E. Last comparable transactions were carried out at a median 9.2x EV/LTM EBITDA (vs. 6.9x EV/LTM EBITDA in this transaction).</li>
</ul>
Afterwards, a takeover bid will be launched for the remaining shares, with the aim of delisting the company from the Milan stock exchange. 
The consideration looks a little on the cheap side, €1.45/share, for a majority stake vs. a median TP on Capital IQ consensus of €1.46. My TP is €1.575 (blended average of median implied EV/Fwd EBITDA and Fwd P/E), which represents an 8.6% upside to the offer price. 
Moreover, the last comparable transactions were carried out at a median 9.2x EV/LTM EBITDA (vs. 6.9x EV/LTM EBITDA in this one).
The interesting angle on this deal is the capacity of any shareholder who acquires a stake over 5% (at a cost of c. €27 mn) to block the delisting. Trading volumes have been much larger than usual over the last three trading sessions.
Recommendation is long RM IM. There are chances of a sweetened offer. Downside risk is limited to the €1.45/share offered by Apollo.

Apollo Global Management Inc (APO US) has reached an agreement to acquire a 67% stake in the Italian paper company Reno De Medici (RM IM) from the firm's two largest shareholders Cascades Inc (CAS CN) and Caisse de depot et placement du Quebec. It is estimated that the operation will be completed during Q3 2021. The price of €1.45/share represents a premium of 21% over the 3-month VWAP.

This represents an implied equity value of €545.6 mn and implied EV of €533 mn.

7.1x EV/Fwd EBITDA and 13.1x Fwd P/E. Last comparable transactions were carried out at a median 9.2x EV/LTM EBITDA (vs. 6.9x EV/LTM EBITDA in this transaction).

Afterwards, a takeover bid will be launched for the remaining shares, with the aim of delisting the company from the Milan stock exchange. 
The consideration looks a little on the cheap side, €1.45/share, for a majority stake vs. a median TP on Capital IQ consensus of €1.46. My TP is €1.575 (blended average of median implied EV/Fwd EBITDA and Fwd P/E), which represents an 8.6% upside to the offer price. 
Moreover, the last comparable transactions were carried out at a median 9.2x EV/LTM EBITDA (vs. 6.9x EV/LTM EBITDA in this one).
The interesting angle on this deal is the capacity of any shareholder who acquires a stake over 5% (at a cost of c. €27 mn) to block the delisting. Trading volumes have been much larger than usual over the last three trading sessions.
Recommendation is long RM IM. There are chances of a sweetened offer. Downside risk is limited to the €1.45/share offered by Apollo.

Apollo/Cascades/Reno De Medici: First Step to a Delisting Offer

<a href="https://www.smartkarma.com/entities/apollo-global-management-inc" target="_blank" data-smartkarma-citation="entities:28770:1" rel="noopener">Apollo Global Management Inc (APO US)</a> has agreed to acquire <a href="https://www.smartkarma.com/entities/athene-holding-ltd" target="_blank" data-smartkarma-citation="entities:26507:1" rel="noopener">Athene Holding (ATH US)</a>, the life insurance company it created at the height of the financial crisis, in an all-share deal worth $11 bn.
Consideration. 1.149 APO US x 1 ATH US.
<ul>
<li>
The implied value is $56.94 per share for Athene (based on 5 March closing prices and using 191.6 mn of Athene Class A shares), for a total consideration to Athene shareholders of $11,018.6 mn.
</li>
<li>
For an implied transaction value/assets of 5.45%, and 6.9x Fwd P/E.
</li>
<li>16.5% premium to the closing price on the day prior to the deal announcement.</li>
</ul>
Apollo created Athene because it saw the insurance business as an opportunity to put clients' capital to work. The idea was to buy corporate debt and other stressed credit assets at discounted prices. Athene quickly became Apollo's largest client, paying huge fees to the private equity firm, which was in turn managing most of its balance sheet. To date, Apollo manages 100% of Athene's assets.
An FT investigation found that Apollo executives themselves had concluded that they were charging hundreds of millions of dollars more than an independent asset manager would charge for the same services.
In spite of opportunities arising from the restructuring of the life &amp; retirement, Athene's stock market valuation has declined from 10.0x forward P/E in March 2018 to an average of 5.1x over the last twelve months.
The merged company will scale asset and liability origination, broaden distribution channels and act as a leading global solutions provider (investment returns and retirement income). There is low execution risk on the back of their complementary businesses and management teams.
<div>
The rationale for the deal is to take advantage of Apollo's returns for Athene's insurance and asset management clients. Apollo's shareholders would benefit from Athene, which has become its largest client and a significant portion of Apollo's assets under management (c. 40%) and fee revenues (c. 30%). The merged company will have a simpler corporate structure, greater float and share liquidity and may qualify for index eligibility (S&amp;P 500).
The deal is highly accretive for Apollo's shareholders (Apollo is consolidating 100% of Athene’s earnings for 73% increase in ownership) and pro forma, more than doubles its 2021e net income (using Capital IQ consensus). On the other hand, Apollo will reabsorb a business trading at a lower multiple (6.0x Fwd P/E vs. 17x for Apollo) and that operates in a regulated capital intensive insurance industry.
</div>
<div>
6.0x P/E multiple (comparables) applied to Capital IQ consensus EPS, plus $7 (50% of deployable excess capital per share), gives a TP of $56.68. On this basis, the implied valuation of Athene is fair, considering rising interest rates.
<ul>
<li>
Valuation is roughly similar to when interest rates rose above 3% in 2018 (see chart: ATH Fwd P/E vs. 10-year US Treasury Yields).
</li>
<li>
It also almost equals adjusted BV per share less AOCI (accumulated other comprehensive income) and other adjustments, i.e. $56.95.
</li>
</ul>
</div>
<div>
The current implied premium of Athene is 5.3%. I recommend setting up the spread in the usual way.
</div>

Apollo Global Management Inc (APO US) has agreed to acquire Athene Holding (ATH US), the life insurance company it created at the height of the financial crisis, in an all-share deal worth $11 bn.
Consideration. 1.149 APO US x 1 ATH US.


The implied value is $56.94 per share for Athene (based on 5 March closing prices and using 191.6 mn of Athene Class A shares), for a total consideration to Athene shareholders of $11,018.6 mn.


For an implied transaction value/assets of 5.45%, and 6.9x Fwd P/E.

16.5% premium to the closing price on the day prior to the deal announcement.

Apollo created Athene because it saw the insurance business as an opportunity to put clients' capital to work. The idea was to buy corporate debt and other stressed credit assets at discounted prices. Athene quickly became Apollo's largest client, paying huge fees to the private equity firm, which was in turn managing most of its balance sheet. To date, Apollo manages 100% of Athene's assets.
An FT investigation found that Apollo executives themselves had concluded that they were charging hundreds of millions of dollars more than an independent asset manager would charge for the same services.
In spite of opportunities arising from the restructuring of the life &amp; retirement, Athene's stock market valuation has declined from 10.0x forward P/E in March 2018 to an average of 5.1x over the last twelve months.
The merged company will scale asset and liability origination, broaden distribution channels and act as a leading global solutions provider (investment returns and retirement income). There is low execution risk on the back of their complementary businesses and management teams.

The rationale for the deal is to take advantage of Apollo's returns for Athene's insurance and asset management clients. Apollo's shareholders would benefit from Athene, which has become its largest client and a significant portion of Apollo's assets under management (c. 40%) and fee revenues (c. 30%). The merged company will have a simpler corporate structure, greater float and share liquidity and may qualify for index eligibility (S&amp;P 500).
The deal is highly accretive for Apollo's shareholders (Apollo is consolidating 100% of Athene’s earnings for 73% increase in ownership) and pro forma, more than doubles its 2021e net income (using Capital IQ consensus). On the other hand, Apollo will reabsorb a business trading at a lower multiple (6.0x Fwd P/E vs. 17x for Apollo) and that operates in a regulated capital intensive insurance industry.


6.0x P/E multiple (comparables) applied to Capital IQ consensus EPS, plus $7 (50% of deployable excess capital per share), gives a TP of $56.68. On this basis, the implied valuation of Athene is fair, considering rising interest rates.


Valuation is roughly similar to when interest rates rose above 3% in 2018 (see chart: ATH Fwd P/E vs. 10-year US Treasury Yields).


It also almost equals adjusted BV per share less AOCI (accumulated other comprehensive income) and other adjustments, i.e. $56.95.




The current implied premium of Athene is 5.3%. I recommend setting up the spread in the usual way.


United States

Apollo Global Management, Inc. operates as an alternative investment management company. The Company focuses on investing in yield, hybrid, and equity markets to generate retirement and investment income for clients. Apollo Global Management serves businesses and individuals worldwide.

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Apollo Global Management (APO US)

Apollo/Reno De Medici: Squeeze-Out

Since the transaction announcement Apollo has been adamant in its intention to delist Reno de Medici. Apollo owns 95.780% of the voting rights and...

Jesus Rodriguez Aguilar

Ventia IPO - Priced to Go on the Revised Terms

Ventia, an infrastructure services provider, aims to raise up to US$325m in its Australian IPO. Capital Group has signed up as a cornerstone.

Sumeet Singh

Upgrading Financials To Overweight; Downgrading Communications To Market Weight

We are upgrading Financials to overweight; Financial Sector ETFs (XLF, RYF), banks (KBE, KRE), and insurance stocks (KIE) are all breaking out to...

Vermilion Research

Apollo/Cascades/Reno De Medici: First Step to a Delisting Offer

The consideration looks a little on the cheap side. My TP is €1.575, which represents an 8.6% upside. Any shareholder over 5% could block the...

Jesus Rodriguez Aguilar

Apollo Integrates Athene

Implied valuation of Athene (deal announcement) was fair, considering rising interest rates. Low deal failure risk. Current implied premium of...

Jesus Rodriguez Aguilar

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