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.

Entra - SBB - Castellum: Bidding War Heats Up

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Event-Driven

On 24 November, <a href="https://www.smartkarma.com/entities/entra-asa" target="_blank" data-smartkarma-citation="entities:22229:1" rel="noopener">Entra ASA (ENTRA NO)</a> rejected Swedish property company Samhällsbyggnadsbolaget i Norden AB (SBB)'s intention to launch an offer to acquire all of Entra's outstanding shares for NOK30.01 bn.
<ul>
<li>SBB had offered to pay NOK165 per share, split in NOK115.5 in cash (70% of the consideration, NOK30 bn) and NOK49.5 (30% of the consideration) in new SBB class B (non-voting) shares.</li>
</ul>
On 25 November, informal discussions regarding a potential merger between Swedish real estate company <a href="https://www.smartkarma.com/entities/castellum-ab" target="_blank" data-smartkarma-citation="entities:22321:1" rel="noopener">Castellum AB (CAST SS)</a> and Entra ended after the parties were unable to reach an agreement.
On 26 November, Castellum announced its intention to launch a rival bid for the remaining 91.8% stake in Entra for a total of NOK30.8 bn  ($3.5 billion) cash (15%) and shares (85%), exceeding the offer from rival Swedish firm SBB.
<ul>
<li>13 newly issued Castellum shares for every 20 shares in Entra (0.65 exchange ratio) and NOK 25.68 in cash per share in Entra (base case consideration), valuing each Entra share at NOK170.86, 3.5% higher than SBB's offer.</li>
<li>5.5% premium to Entra’s Q3 2020 EPRA NRV.</li>
</ul>
On 27 November, SBB formally launched its offer.
While SBB's offer is lower, it has a higher cash component, 70%, vs 15% for Castellum's. Castellum's has the support of Norwegian government, whom has agreed to sell its 8.2% in Entra to Castellum, at NOK169, in cash.
<ul>
<li>There is execution risk to Castellum's offer. Given that SBB's offer looks less risky for Entra's shareholders.</li>
<li>Neither bid appears solicited either.</li>
</ul>
Investors expect more bids: on 27 November, Entra’s shares rose 0.4% to close at NOK176.2, above the current offer price, while Castellum’s shares rose 0.3%.
The move by both Swedish real estate companies looks like an opening gambit. An improved bid could come from SBB or others, now that Entra is in play. Moreover, there's interloper risk from private equity.
<ul>
<li>An improved bid could come up to a level of NOK194 per share, 20% premium to Entra’s Q3 2020 EPRA NRV. (Castellum is trading at 15% premium to spot NAV).</li>
</ul>
Recommendation is long Entra, TP NOK194.

On 24 November, Entra ASA (ENTRA NO) rejected Swedish property company Samhällsbyggnadsbolaget i Norden AB (SBB)'s intention to launch an offer to acquire all of Entra's outstanding shares for NOK30.01 bn.

SBB had offered to pay NOK165 per share, split in NOK115.5 in cash (70% of the consideration, NOK30 bn) and NOK49.5 (30% of the consideration) in new SBB class B (non-voting) shares.

On 25 November, informal discussions regarding a potential merger between Swedish real estate company Castellum AB (CAST SS) and Entra ended after the parties were unable to reach an agreement.
On 26 November, Castellum announced its intention to launch a rival bid for the remaining 91.8% stake in Entra for a total of NOK30.8 bn  ($3.5 billion) cash (15%) and shares (85%), exceeding the offer from rival Swedish firm SBB.

13 newly issued Castellum shares for every 20 shares in Entra (0.65 exchange ratio) and NOK 25.68 in cash per share in Entra (base case consideration), valuing each Entra share at NOK170.86, 3.5% higher than SBB's offer.
5.5% premium to Entra’s Q3 2020 EPRA NRV.

On 27 November, SBB formally launched its offer.
While SBB's offer is lower, it has a higher cash component, 70%, vs 15% for Castellum's. Castellum's has the support of Norwegian government, whom has agreed to sell its 8.2% in Entra to Castellum, at NOK169, in cash.

There is execution risk to Castellum's offer. Given that SBB's offer looks less risky for Entra's shareholders.
Neither bid appears solicited either.

Investors expect more bids: on 27 November, Entra’s shares rose 0.4% to close at NOK176.2, above the current offer price, while Castellum’s shares rose 0.3%.
The move by both Swedish real estate companies looks like an opening gambit. An improved bid could come from SBB or others, now that Entra is in play. Moreover, there's interloper risk from private equity.

An improved bid could come up to a level of NOK194 per share, 20% premium to Entra’s Q3 2020 EPRA NRV. (Castellum is trading at 15% premium to spot NAV).

Recommendation is long Entra, TP NOK194.

Entra ASA

Entra ASA: Competing Offers