European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 21 December, Morgan Stanley Infrastructure Inc. offered to acquire <a href="https://www.smartkarma.com/entities/tele-columbus-ag" target="_blank" data-smartkarma-citation="entities:21727:1" rel="noopener">Tele Columbus Ag (TC1 GR)</a> from <a href="https://www.smartkarma.com/entities/united-internet-ag" target="_blank" data-smartkarma-citation="entities:21735:1" rel="noopener">United Internet Ag (UTDI GR)</a> United Internet Investments Holding AG &amp; Co. KG, <a href="https://www.smartkarma.com/entities/rocket-internet-se" target="_blank" data-smartkarma-citation="entities:20226:1" rel="noopener">Rocket Internet Se (RKET GR)</a>, Union Investment Privatfonds GmbH, 3d investors, and others for approximately €380 mn.
<div>
The deal will also strengthen the balance sheet of Tele Columbus.
<ul>
<li>Morgan Stanley is also backing a €475 million rights issue, and will make available a further €75 million in equity after completion to back the firm's fiber strategy.</li>
<li>Tele Columbus said the deal would significantly reduce its net debt, and thereby bring a “better risk assessment” for the remaining bonds and loans.</li>
<li>If the takeover offer is successful, United Internet will contribute its stake in Tele Columbus of around 29.9%. In return, United Internet will receive a minority shareholding in Kublai GmbH.</li>
</ul>
The offered consideration is €3.25 per share in cash.
<ul>
<li>For an implied equity value of €380.58 mn, and an implied EV of 1,925.28 mn (€1,544 mn net debt assumed).</li>
<li>The offer represents 4.1x EV/Fwd Revenue vs. 3.9x for the median of comparable companies and 8.5x EV/Fwd EBITDA vs. 7x for the median of comparable companies.</li>
<li>On this basis, the offer price seems fair. There's business plan execution risk, further down the road.</li>
</ul>
With commitments equivalent to 43.26% from the main shareholders, the offer looks almost certain to succeed.
<ul>
<li>Tele Columbus closed on 22 December at €3.22, a gross spread of 1%, equivalent to 2%-3% annual, depending on the closing.</li>
<li>Although not terribly exciting, it looks a fairly safe trade. Some patience may be needed to build a position.</li>
</ul>
Recommendation is LONG Tele Columbus.
</div>

On 21 December, Morgan Stanley Infrastructure Inc. offered to acquire Tele Columbus Ag (TC1 GR) from United Internet Ag (UTDI GR) United Internet Investments Holding AG &amp; Co. KG, Rocket Internet Se (RKET GR), Union Investment Privatfonds GmbH, 3d investors, and others for approximately €380 mn.

The deal will also strengthen the balance sheet of Tele Columbus.

Morgan Stanley is also backing a €475 million rights issue, and will make available a further €75 million in equity after completion to back the firm's fiber strategy.
Tele Columbus said the deal would significantly reduce its net debt, and thereby bring a “better risk assessment” for the remaining bonds and loans.
If the takeover offer is successful, United Internet will contribute its stake in Tele Columbus of around 29.9%. In return, United Internet will receive a minority shareholding in Kublai GmbH.

The offered consideration is €3.25 per share in cash.

For an implied equity value of €380.58 mn, and an implied EV of 1,925.28 mn (€1,544 mn net debt assumed).
The offer represents 4.1x EV/Fwd Revenue vs. 3.9x for the median of comparable companies and 8.5x EV/Fwd EBITDA vs. 7x for the median of comparable companies.
On this basis, the offer price seems fair. There's business plan execution risk, further down the road.

With commitments equivalent to 43.26% from the main shareholders, the offer looks almost certain to succeed.

Tele Columbus closed on 22 December at €3.22, a gross spread of 1%, equivalent to 2%-3% annual, depending on the closing.
Although not terribly exciting, it looks a fairly safe trade. Some patience may be needed to build a position.

Recommendation is LONG Tele Columbus.


Tele Columbus AG - Morgan Stanley Infrastructure Agreed Bid

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

Deterioration for ACWI ex-US, EAFE, and EM, continued bearish-leaning indicators, and the downward trajectory of bond yields leads us to remain cautious and concerned that global equities remain vulnerable and could be poised for additional weakness moving forward. Major indexes around the world continue to do next to nothing, making Sector, Group, and stock selection all the more important. We prefer to use a barbell strategy of growth and safety. Attractive and actionable themes highlighted in today’s report include IT Services/Tech Software, Communications, Precious Metals, and Utilities.

Deterioration for ACWI ex-US, EAFE, and EM, continued bearish-leaning indicators, and the downward trajectory of bond yields leads us to remain cautious and concerned that global equities remain vulnerable and could be poised for additional weakness moving forward. Major indexes around the world continue to do next to nothing, making Sector, Group, and stock selection all the more important. We prefer to use a barbell strategy of growth and safety. Attractive and actionable themes highlighted in today’s report include IT Services/Tech Software, Communications, Precious Metals, and Utilities.

Global Equity Strategy: Stay on the Defensive

Adding to last week’s concerns reiterated above, additional developments which have further dampened our overall outlook include a breakdown in the global Discretionary vs. Staples ratio, price and RS deterioration for mainland China, Germany, and European Technology, and new lows in the NASDAQ Global Automobile index. Aside from Germany, other major indexes remain above support in Europe/UK and Japan.  We highlight a number of attractive opportunities in “defensive” Financials including electronic exchanges/markets, insurance, commercial/consumer financing, and select asset managers.

Adding to last week’s concerns reiterated above, additional developments which have further dampened our overall outlook include a breakdown in the global Discretionary vs. Staples ratio, price and RS deterioration for mainland China, Germany, and European Technology, and new lows in the NASDAQ Global Automobile index. Aside from Germany, other major indexes remain above support in Europe/UK and Japan.  We highlight a number of attractive opportunities in “defensive” Financials including electronic exchanges/markets, insurance, commercial/consumer financing, and select asset managers.

Global Equity Strategy: More Cracks Begin to Show

Equity Analyst, LightStream Research

Farha Sabri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

Global Fashion Group SA / Equity Capital Markets

Global Fashion Group (GFG) is an online fashion retailer mainly targeting sales in emerging markets. The company is registered in Luxemburg with Headquarters in both Singapore and London. The company was expected to list in the Frankfurt Stock Exchange on the 27th of June. The company, which had set an IPO price between the range of EUR6-EUR8 per share ended up postponing the listing date to July 2nd while reducing the IPO price per share to EUR4.5 per share. While the delay may have weakened investor confidence on the company, we remain optimistic on the company’s future prospects. The company aims to invest the proceeds from the IPO to further develop its technology platform and improve customer acquisition rates, improve fulfilment and distribution infrastructure, and invest in general corporate purposes.

Global Fashion Group (GFG) is an online fashion retailer mainly targeting sales in emerging markets. The company is registered in Luxemburg with Headquarters in both Singapore and London. The company was expected to list in the Frankfurt Stock Exchange on the 27th of June. The company, which had set an IPO price between the range of EUR6-EUR8 per share ended up postponing the listing date to July 2nd while reducing the IPO price per share to EUR4.5 per share. While the delay may have weakened investor confidence on the company, we remain optimistic on the company’s future prospects. The company aims to invest the proceeds from the IPO to further develop its technology platform and improve customer acquisition rates, improve fulfilment and distribution infrastructure, and invest in general corporate purposes.

Global Fashion Group IPO: We Remain Bullish on the Company Despite Problems Surrounding Listing

Developed international equities (MSCI EAFE) have been underperforming relative to global equities (MSCI ACWI). However, within EAFE, SMID-caps tell a different story and are a great source of investment ideas within the EAFE region. In today’s report we use a bottom-up approach to highlight actionable charts, sorted by market cap (all buys at current levels).

Developed international equities (MSCI EAFE) have been underperforming relative to global equities (MSCI ACWI). However, within EAFE, SMID-caps tell a different story and are a great source of investment ideas within the EAFE region. In today’s report we use a bottom-up approach to highlight actionable charts, sorted by market cap (all buys at current levels).

Germany

Rocket Internet SE invests in the development of companies related to internet industry. The Company provides resources to support corporate concept, set-up, and optimization and assistance to young companies for market analysis, strategy information, product development, human resources, web design, online marketing, internationalization, and web analysis.

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Rocket Internet Se (RKET GR)

Tele Columbus AG - Morgan Stanley Infrastructure Agreed Bid

With commitments of 43.26%, the offer is almost certain to succeed. TC1 closed at a gross spread of 1% (2%-3% annual depending on the closing). It...

Jesus Rodriguez Aguilar

Global Equity Strategy: Stay on the Defensive

Deterioration for ACWI ex-US, EAFE, and EM, continued bearish-leaning indicators, and the downward trajectory of bond yields leads us to remain...

Vermilion Research

Global Equity Strategy: More Cracks Begin to Show

Adding to last week’s concerns reiterated above, additional developments which have further dampened our overall outlook include a breakdown in the...

Vermilion Research

Global Fashion Group IPO: We Remain Bullish on the Company Despite Problems Surrounding Listing

Global Fashion Group (GFG) is an online fashion retailer mainly targeting sales in emerging markets. The company is registered in Luxemburg with...

Farha Sabri

Focus on Outperforming EAFE SMID-Caps

Developed international equities (MSCI EAFE) have been underperforming relative to global equities (MSCI ACWI). However, within EAFE, SMID-caps...

Vermilion Research

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