European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<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

Canada

Cascades Inc. produces paper and packaging products.  The Company manufactures, converts, and markets specialty products, including boxboard, fine papers, tissue paper, and containerboard.  Cascades and its subsidiaries operate in Canada, the United States, France, Sweden, Germany, and Great Britain.

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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