European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

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<li>KKR is looking at alternatives ranging from raising its stake in Telecom Italia’s grid operations to pursuing a full takeover of the unit, as an alternative to the merger of FiberCop (the crown jewel) with Open Fiber, by which Telecom Italia would own a minority stake in the merged entity.</li>
<li>The merger seems designed to facilitate the generation of cash (by partial disposal and/or enhancing the share price by focusing analysts’ attention on its SOTP). Ongoing restructuring has created uncertainty in Telecom Italia’s intentions and potential actions, which in turn will introduce increased volatility into the pricing of Telecom Italia equity and debt. Vivendi, sitting on a 67% paper loss, is (rightly in my view) concerned.</li>
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<p>I would look to put on any the following strategies: short credit/buy protection, short TIT IM (my SOTP valuation is €0.29/ordinary share), and long savings/short ords.</p>
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KKR is looking at alternatives ranging from raising its stake in Telecom Italia’s grid operations to pursuing a full takeover of the unit, as an alternative to the merger of FiberCop (the crown jewel) with Open Fiber, by which Telecom Italia would own a minority stake in the merged entity.
The merger seems designed to facilitate the generation of cash (by partial disposal and/or enhancing the share price by focusing analysts’ attention on its SOTP). Ongoing restructuring has created uncertainty in Telecom Italia’s intentions and potential actions, which in turn will introduce increased volatility into the pricing of Telecom Italia equity and debt. Vivendi, sitting on a 67% paper loss, is (rightly in my view) concerned.






I would look to put on any the following strategies: short credit/buy protection, short TIT IM (my SOTP valuation is €0.29/ordinary share), and long savings/short ords.











KKR/Telecom Italia: Open Fiber Deal, Ongoing Restructuring, Strategies

<p><a href="https://www.smartkarma.com/entities/vivendi-sa" target="_blank" data-smartkarma-citation="entities:21076:1" rel="noopener">Vivendi SA (VIV FP)</a> will increase its stake in <a href="https://www.smartkarma.com/entities/lagardere-sca" target="_blank" data-smartkarma-citation="entities:21508:1" rel="noopener">Lagardere SCA (MMB FP)</a>, which implies the mandatory launch of a takeover bid for the whole share capital of Lagardere.</p>
<p>Vivendi has agreed to purchase a 17.9% stake from of Amber Holdings in Lagardere, thus raising its stake to 44.9%. Therefore Vivendi will exceed the 30% threshold that requires launching a full takeover bid.</p>
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<p>Both the 17.9% acquisition and the subsequent takeover bid are launched at a price of <strong>€24.10/share</strong>.</p>
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<p>The premium paid amounts to 23.6% (18.4% to the 3-month VWAP).</p>
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<p>The implied equity value is €3,401.3 mn.</p>
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<p>It was <strong>foreseeable that Vivendi would bet on inorganic growth after the UMG spin-off</strong>. However, the <strong>premium paid seems at first glance high</strong> for a business with a net loss forecast (Capital IQ consensus) for 2021 of c. €(22) mn and an estimated 2022e EBITDA and EPS of €515.2 mn and €1.0, still lower than the pre-pandemic levels (€610 mn and €1.46 respectively). This is mainly due to the performance of the travel retail division (4th largest travel retailer globally), which accounted for 59% of revenues and 40% of gross operating profit in 2019. In fact, the premium implies paying a <strong>2022e P/E of c. 24.1x vs. 20.5x for Vivendi</strong> (source: Capital IQ consensus).</p>
<p>The deal will need approval from the competition authorities and will not be fully executed until the end of FY 2022. However, <strong>some significant shareholders</strong>, such as the Qatar Investment Authority, with 11.5% of the company appear to be <strong>willing to sell</strong>. <strong>At this price they will not hesitate to do so</strong>, in my view. Completion is expected by 15 December 2022.</p>
<p><strong>Gross spread</strong> is <strong>3.5%</strong>, a bit on the low side considering the 15 months to complete. <strong>Long MMB FP</strong>, <strong>TP €24.1.</strong></p>

Vivendi SA (VIV FP) will increase its stake in Lagardere SCA (MMB FP), which implies the mandatory launch of a takeover bid for the whole share capital of Lagardere.
Vivendi has agreed to purchase a 17.9% stake from of Amber Holdings in Lagardere, thus raising its stake to 44.9%. Therefore Vivendi will exceed the 30% threshold that requires launching a full takeover bid.


Both the 17.9% acquisition and the subsequent takeover bid are launched at a price of €24.10/share.


The premium paid amounts to 23.6% (18.4% to the 3-month VWAP).


The implied equity value is €3,401.3 mn.


It was foreseeable that Vivendi would bet on inorganic growth after the UMG spin-off. However, the premium paid seems at first glance high for a business with a net loss forecast (Capital IQ consensus) for 2021 of c. €(22) mn and an estimated 2022e EBITDA and EPS of €515.2 mn and €1.0, still lower than the pre-pandemic levels (€610 mn and €1.46 respectively). This is mainly due to the performance of the travel retail division (4th largest travel retailer globally), which accounted for 59% of revenues and 40% of gross operating profit in 2019. In fact, the premium implies paying a 2022e P/E of c. 24.1x vs. 20.5x for Vivendi (source: Capital IQ consensus).
The deal will need approval from the competition authorities and will not be fully executed until the end of FY 2022. However, some significant shareholders, such as the Qatar Investment Authority, with 11.5% of the company appear to be willing to sell. At this price they will not hesitate to do so, in my view. Completion is expected by 15 December 2022.
Gross spread is 3.5%, a bit on the low side considering the 15 months to complete. Long MMB FP, TP €24.1.

Vivendi/Lagardere: Mandatory Friendly Offer

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

<p>In last week's <em>Int'l Compass</em> (Sept. 2), we highlighted emerging markets (EEM-US, Shanghai Comp) and Japan (TOPIX, TOPIX Small) as areas of bullish interest, with short-term bullish inflections suggesting the tide was turning in favor of these markets. This remains the focus in today's report, and especially on Japan; bullish price inflections and breakouts have started to proliferate, which suggests this could be the start of a broad-based rally for Japan in the weeks and months ahead.</p>

In last week's Int'l Compass (Sept. 2), we highlighted emerging markets (EEM-US, Shanghai Comp) and Japan (TOPIX, TOPIX Small) as areas of bullish interest, with short-term bullish inflections suggesting the tide was turning in favor of these markets. This remains the focus in today's report, and especially on Japan; bullish price inflections and breakouts have started to proliferate, which suggests this could be the start of a broad-based rally for Japan in the weeks and months ahead.

Buy Japan On This Breakout ; TOPIX Breaking Out To 21-Year Highs; Actionable Theme: Growth Sectors

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

<p>Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.</p><p>As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. </p><p>CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.</p><p>We covered various aspects of the deal in our previous note, <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-was-in-the-slow-stream-playing-catch-up" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up</a>.</p><p>In this note, we compare CVI with its main peer Tencent Music Entertainment (TME) and comment on the recent regulatory announcement with respect to TME.</p>

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.We covered various aspects of the deal in our previous note, Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up.In this note, we compare CVI with its main peer Tencent Music Entertainment (TME) and comment on the recent regulatory announcement with respect to TME.

Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

<p>Headline Developments Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin.  In the paper (excerpts below), Taleb claims the theoretical value of bitcoin is zero, saying it is not a currency, can be neither a short or long term store of value, cannot operate as a reliable inflation hedge and, “worst of all”, does not constitute “not even remotely” a tail protection vehicle for catastrophic episodes (i.</p>

Headline Developments Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin.  In the paper (excerpts below), Taleb claims the theoretical value of bitcoin is zero, saying it is not a currency, can be neither a short or long term store of value, cannot operate as a reliable inflation hedge and, “worst of all”, does not constitute “not even remotely” a tail protection vehicle for catastrophic episodes (i.

France

Vivendi, through its subsidiaries, conducts operations ranging from music, games and television to film and telecommunications.  The Company provides digital and pay television services, sells music compact discs (CDs), develops and distributes interactive entertainment, and operates mobile and fixed-line telecommunications.

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Vivendi SA (VIV FP)

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I would look to put on any the following strategies: short credit/buy protection, short TIT IM (my SOTP valuation is €0.29/ordinary share), and...

Jesus Rodriguez Aguilar

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Some significant shareholders appear willing to cash out and at this price they will not hesitate to do so. Gross spread is 3.5%, a bit low...

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Granite Bay Capital

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