European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

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