European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Discounts have generally widened across our liquid universe, in line with the recent market losses. </li>
<li>Recommendations long ords / short prefs: BMW, Fuchs Petrolub, Investor AB, SSAB.</li>
<li>Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.</li>
</ul>


Discounts have generally widened across our liquid universe, in line with the recent market losses. 
Recommendations long ords / short prefs: BMW, Fuchs Petrolub, Investor AB, SSAB.
Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.


Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report

<ul>
<li>Spreads have generally tightened across our liquid universe, in line with the recent market gains.</li>
<li>Recommendations long ords / short prefs: Fuchs Petrolub, Investor AB, SSAB.</li>
<li>Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.</li>
</ul>


Spreads have generally tightened across our liquid universe, in line with the recent market gains.
Recommendations long ords / short prefs: Fuchs Petrolub, Investor AB, SSAB.
Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.


Liquid Universe of European Ordinary and Preferred Shares: May '22 Report

Danieli & C. Officine Meccaniche / Event-Driven

<ul>
<li>Spreads have generally tightened across our liquid universe, in line with the recent market gains.</li>
<li>Recommendations Long ords / short prefs: Fuchs Petrolub, Svenska Handelsbanken, Ericsson.</li>
<li>Recommendations Long prefs / short ords: Danieli, Sixt, Atlas Copco, Grifols, Telecom Italia, Volvo AB, Volkswagen, Schroders.</li>
</ul>


Spreads have generally tightened across our liquid universe, in line with the recent market gains.
Recommendations Long ords / short prefs: Fuchs Petrolub, Svenska Handelsbanken, Ericsson.
Recommendations Long prefs / short ords: Danieli, Sixt, Atlas Copco, Grifols, Telecom Italia, Volvo AB, Volkswagen, Schroders.


Liquid Universe of European Ordinary and Preferred Shares: April ‘22 Report

<ul>
<li>Spreads have generally tightened across our liquid universe, 410 bps in the case of Volkswagen. Spreads in Sixt (45.7%) and Schroders (37%) are worth mentioning.</li>
<li>Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken.</li>
<li>Recommendations Long prefs / short ords: BMW, Grifols, Roche, Telecom Italia (takeover interest), Volkswagen.</li>
</ul>


Spreads have generally tightened across our liquid universe, 410 bps in the case of Volkswagen. Spreads in Sixt (45.7%) and Schroders (37%) are worth mentioning.
Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken.
Recommendations Long prefs / short ords: BMW, Grifols, Roche, Telecom Italia (takeover interest), Volkswagen.


Liquid Universe of European Ordinary and Preferred Shares: February ‘22 Report

<a href="https://www.smartkarma.com/entities/zardoya-otis-sa" target="_blank" data-smartkarma-citation="entities:21307:1" rel="noopener">Zardoya Otis SA (ZOT SM)</a> , a subsidiary of <a href="https://www.smartkarma.com/entities/otis-worldwide-corp" target="_blank" data-smartkarma-citation="entities:34334:1" rel="noopener">Otis Worldwide Corp (OTIS US)</a>, used to be a classic in the Spanish stock market for income investors. Investing in Zardoya has been synonymous with several dividend payments year after year without interruption for three decades. The lift company never failed in its quarterly dividend payments since 1973, with an average payout of 92% over the last 30 years.
This is about to change. OPAL Spanish Holdings, owned by Otis, made on 23 September an opportunistic €7/share cash offer to acquire the remaining 49.9% of Zardoya Otis it does not own for c. €1.6 bn. Its stated intention is to delist Zardoya Otis, of which Otis has been a shareholder since 1972. The share price gained over 31% to close at €7.03, just above the offer, the highest price hike since listing in 1974.
The offer price will be reduced to €6.93/share as a result of the €0.074 dividend announced by Zardoya Otis, whose payment is scheduled for 11 October. The implied equity value is €3,293 mn. The offer price represents a premium of 30.8% over the prior day's close and 28.9% to the 1-month VWAP, 14x EV/Fwd EBITDA and 22x Fwd P/E (vs. a 10-year average of 23.8x).
The deal makes sense, since, although Otis already consolidated Zardoya Otis globally, the latter, safe from any unsolicited bid, traded at multiples below the parent (16.6x EV/Fwd EBITDA, 27.8x Fwd P/E) and other competitors (<a href="https://www.smartkarma.com/entities/kone-oyj" target="_blank" data-smartkarma-citation="entities:21766:1" rel="noopener">Kone OYJ (KNEBV FH)</a> 18.3x EV/Fwd EBITDA, 30.1x Fwd P/E and <a href="https://www.smartkarma.com/entities/schindler-holding-ag-a63e9700-2075-4f83-952a-d3e71b14974b" target="_blank" data-smartkarma-citation="entities:25024:1" rel="noopener">Schindler Holding AG (SCHN SW)</a> 16x EV/Fwd EBITDA, 29.5x Fwd P/E) despite having higher operating margins. Cheaper financing may have helped Otis to decide launching the takeover.
<div id="cuerpo_noticia" aria-describedby="La opa de Otis a Zardoya borrará de la bolsa un dividendo clásico del 92% del beneficio">
Otis does not need Spanish government approval and will activate the delisting if it comes to own 75% of the share capital. The second largest shareholder is the Zardoya family (11.345% stake) that has not commented on the offer (they would cash over €372 mn at the current offer price). There is also a large number of minority shareholders.
The Zardoya family is in the driving seat, in my view, as Otis needs their shares tendered to initiate the squeeze-out procedure.
True that the offer is in cash and represents a premium of 25% over the average price of 2021 and 3.5% over that average of 2019; moreover, the shares of Zardoya Otis had not reached €7 since 2018. Nevertheless, despite the premium offered, it is a cheap offer, below the multiples of Otis Worldwide Corp, Kone and Schindler (median 16.6x EV/Fwd EBITDA and 29.5x Fwd P/E). Based on the comparables median EV/Fwd EBITDA, the implied equity value for Zardoya Otis would be €8.3/share.
Gross spread is -0.3%. Shares have been liquid since offer announcement. A sweetened offer is likely, as the founding family of Zardoya will ask for a better price (probably around €7.5) to give up on their yearly €15 mn paycheck. I recommend Long ZOT SM. 
The risk would be to stay in what has traditionally been an illiquid stock, in which Otis already has control and which could later be excluded.
</div>

Zardoya Otis SA (ZOT SM) , a subsidiary of Otis Worldwide Corp (OTIS US), used to be a classic in the Spanish stock market for income investors. Investing in Zardoya has been synonymous with several dividend payments year after year without interruption for three decades. The lift company never failed in its quarterly dividend payments since 1973, with an average payout of 92% over the last 30 years.
This is about to change. OPAL Spanish Holdings, owned by Otis, made on 23 September an opportunistic €7/share cash offer to acquire the remaining 49.9% of Zardoya Otis it does not own for c. €1.6 bn. Its stated intention is to delist Zardoya Otis, of which Otis has been a shareholder since 1972. The share price gained over 31% to close at €7.03, just above the offer, the highest price hike since listing in 1974.
The offer price will be reduced to €6.93/share as a result of the €0.074 dividend announced by Zardoya Otis, whose payment is scheduled for 11 October. The implied equity value is €3,293 mn. The offer price represents a premium of 30.8% over the prior day's close and 28.9% to the 1-month VWAP, 14x EV/Fwd EBITDA and 22x Fwd P/E (vs. a 10-year average of 23.8x).
The deal makes sense, since, although Otis already consolidated Zardoya Otis globally, the latter, safe from any unsolicited bid, traded at multiples below the parent (16.6x EV/Fwd EBITDA, 27.8x Fwd P/E) and other competitors (Kone OYJ (KNEBV FH) 18.3x EV/Fwd EBITDA, 30.1x Fwd P/E and Schindler Holding AG (SCHN SW) 16x EV/Fwd EBITDA, 29.5x Fwd P/E) despite having higher operating margins. Cheaper financing may have helped Otis to decide launching the takeover.

Otis does not need Spanish government approval and will activate the delisting if it comes to own 75% of the share capital. The second largest shareholder is the Zardoya family (11.345% stake) that has not commented on the offer (they would cash over €372 mn at the current offer price). There is also a large number of minority shareholders.
The Zardoya family is in the driving seat, in my view, as Otis needs their shares tendered to initiate the squeeze-out procedure.
True that the offer is in cash and represents a premium of 25% over the average price of 2021 and 3.5% over that average of 2019; moreover, the shares of Zardoya Otis had not reached €7 since 2018. Nevertheless, despite the premium offered, it is a cheap offer, below the multiples of Otis Worldwide Corp, Kone and Schindler (median 16.6x EV/Fwd EBITDA and 29.5x Fwd P/E). Based on the comparables median EV/Fwd EBITDA, the implied equity value for Zardoya Otis would be €8.3/share.
Gross spread is -0.3%. Shares have been liquid since offer announcement. A sweetened offer is likely, as the founding family of Zardoya will ask for a better price (probably around €7.5) to give up on their yearly €15 mn paycheck. I recommend Long ZOT SM. 
The risk would be to stay in what has traditionally been an illiquid stock, in which Otis already has control and which could later be excluded.


Otis/Zardoya Otis: Lifting the Minorities

Switzerland

Schindler Holding AG manufactures and installs elevators, escalators, and moving walkways internationally.  The Company's products are used in airports, subway stations, railroad terminals, shopping centers, cruise ships, hotels, and office buildings.  Schindler also offers maintenance services.

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Schindler Holding Ag (SCHP VX)

Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report

For the most part since mid-May, spreads were compressing, but inflation fears and rate rises have hit hard the stock markets in the last trading...

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares: May '22 Report

Spreads have generally tightened across our liquid universe, in line with the recent market gains. Schroders announced a share class unification.

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares: April ‘22 Report

Spreads have generally tightened across our liquid universe in line with the recent market gains. Danieli, Media for Europe, Schroders and Sixt...

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares: February ‘22 Report

Spreads have generally tightened across our liquid universe, 410 bps in the case of Volkswagen. Spreads in Sixt (45.7%) and Schroders (37%) are...

Jesus Rodriguez Aguilar

Otis/Zardoya Otis: Lifting the Minorities

A sweetened offer is in my view likely, as the founding family of Zardoya (11.34% stake) will ask for a better price (probably around €7.5) to give...

Jesus Rodriguez Aguilar

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