In today’s briefing:
- SE600 Jun 23 Rebal: Past Trades Successful, DELs Could Underperform Index over the Next ~2 Weeks
- Seven & I: ValueAct’s Proposals Unlikely to Be Considered, Investor Activism Effectively Over
- FEMSA’s Exit from Heineken/Heineken Holding and Share Price Spread
- EQT/Dechra Pharmaceuticals: Recommended Offer
SE600 Jun 23 Rebal: Past Trades Successful, DELs Could Underperform Index over the Next ~2 Weeks
- The June 2023 regular rebalance index changes for the SE600 index and the EURSTX index were announced after the close yesterday.
- There are 8 ADDs/DELs for the SE600 index and 3 ADDs and 2 DELs for the EURSTX index.
- In this insight, we take a closer look at our final index flow expectations for June 2023.
Seven & I: ValueAct’s Proposals Unlikely to Be Considered, Investor Activism Effectively Over
- Last week, shareholders of Seven & I Holdings (3382 JP) rejected all four of the board nominees proposed by ValueAct.
- ValueAct, seeing their higher vote count as a modest success, sent a letter to Seven & I, requesting a resumption of discussions despite the failed attempt to remove senior leadership.
- We think the company is unlikely to seriously consider Value Act’s proposals any longer, indicating the end of the investor activism campaign.
FEMSA’s Exit from Heineken/Heineken Holding and Share Price Spread
- FEMSA has placed c.€3.3 billion of Heineken NV (HEIA NA) and Heineken Holding NV (HEIO NA) shares and tap €250 million of existing 2026 Exchangeable bonds. The placement removes a major overhang.
- The holding structure (equivalence 1 HEIO NA ~ 1 HEIA NO) allows the Heineken family to control the second largest brewer worldwide, with just a 27.3% economic interest (post-FEMSA’s placement).
- The discount has tightened to 15.8%, still above the 10.4% average of the last ten years, and rather large considering such a simple structure.
EQT/Dechra Pharmaceuticals: Recommended Offer
- At the end of PUSU deadline, EQT and Dechra have agreed a 3,875p/share offer (44% premium, 21.4x EV/Fwd EBITDA, 30.2x Fwd P/E, vs. market leader Zoetis at 20.5x and 28.9x respectively).
- Other private equity companies may not be able to match the deal’s disintermediation benefits. Considering the short-term issues, I believe investors will accept the offer.
- My base-case DCF fair-value estimate is 3,568p/share, 7.9% below the offer price. Therefore I set my TP at 3,875p. Spread is 5.8%/8.8% (gross/annualised), I feel the risk/reward is balanced. Long.
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