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.

Southern Europe Banks: Focus on Italian Banks M&A

Credit Agricole/CreVal: Purchase Obligation

Generali/Cattolica: Voluntary Tender Offer

Creval - Crédit Agricole: Playing Hard to Get

Event-Driven

In my previous Insight (<a href="https://www.smartkarma.com/insights/creval-credit-agricole-playing-hard-to-get" target="_blank" data-smartkarma-citation="insights:45742" rel="noopener">Creval - Crédit Agricole: Playing Hard to Get</a>) I mentioned that a sweetened bid could come around €12 per share. Whilst that has not yet happened, the Board of <a href="https://www.smartkarma.com/entities/credito-valtellinese-spa" target="_blank" data-smartkarma-citation="entities:21175:1" rel="noopener">Credito Valtellinese Sc (CVAL IM)</a> (CreVal) issued on 29 March a statement that followed the usual script to back the assertion that the offer is "inadequate" on both stand-alone and M&amp;A (developed in the Insight).
<ul>
<li>
Stand-alone: high capital surplus, risk profile improvement, operational efficiency, DTAs, and profitability.
</li>
<li>
M&amp;A: tax benefits from conversion of DTAs to tax credits, synergies higher than those reported on the offer document, lower cost of synergies, and Crédit Agricoles's capital buffer that could use the excess capital from CreVal.
</li>
</ul>
CreVal is trading at 0.47x P/21e TBV and 13.5x P/21e E, without considering any excess capital, which could be c. 64.5% of the market cap. If considered, those ratios would be lower (below 0.3x P/21e TBV).
It is interesting to draw a comparison with CaixaBank - Bankia, or Unicaja - Liberbank, both situations covered on SmartKarma, where the former are absorbing higher capitalized entities and using the negative goodwill.
Macroeconomic environment is more positive that at the time of the offer. TP increase (from the previous €12) to €12.4 (mean TP of Capital IQ consensus, vs. €10.45 at the time of the offer), 18% above the offer, supported by expectations of an improved offer by Crédit Agricole and dividend yield of 3.9% (Capital IQ consensus).
In my view, Crédit Agricole should be able to increase the offer price to €12.4, for a total cost of c. €117 mn.
CreVal closed on 7 April at €12.16, i.e. 15.8% above the offer price of €10.5 per share (cum dividend). Gross spread to TP is 2%.

In my previous Insight (Creval - Crédit Agricole: Playing Hard to Get) I mentioned that a sweetened bid could come around €12 per share. Whilst that has not yet happened, the Board of Credito Valtellinese Sc (CVAL IM) (CreVal) issued on 29 March a statement that followed the usual script to back the assertion that the offer is "inadequate" on both stand-alone and M&amp;A (developed in the Insight).


Stand-alone: high capital surplus, risk profile improvement, operational efficiency, DTAs, and profitability.


M&amp;A: tax benefits from conversion of DTAs to tax credits, synergies higher than those reported on the offer document, lower cost of synergies, and Crédit Agricoles's capital buffer that could use the excess capital from CreVal.


CreVal is trading at 0.47x P/21e TBV and 13.5x P/21e E, without considering any excess capital, which could be c. 64.5% of the market cap. If considered, those ratios would be lower (below 0.3x P/21e TBV).
It is interesting to draw a comparison with CaixaBank - Bankia, or Unicaja - Liberbank, both situations covered on SmartKarma, where the former are absorbing higher capitalized entities and using the negative goodwill.
Macroeconomic environment is more positive that at the time of the offer. TP increase (from the previous €12) to €12.4 (mean TP of Capital IQ consensus, vs. €10.45 at the time of the offer), 18% above the offer, supported by expectations of an improved offer by Crédit Agricole and dividend yield of 3.9% (Capital IQ consensus).
In my view, Crédit Agricole should be able to increase the offer price to €12.4, for a total cost of c. €117 mn.
CreVal closed on 7 April at €12.16, i.e. 15.8% above the offer price of €10.5 per share (cum dividend). Gross spread to TP is 2%.

CreVal - Crédit Agricole: Grounds for an Improved Offer

Credito Valtellinese SpA

CreVal - Crédit Agricole: Grounds for an Improved Offer