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.

Balder/Entra ASA: Game of Thrones in Scandinavian Real Estate

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Event-Driven

In my Insight <a href="https://www.smartkarma.com/insights/entra-asa-competing-offers" target="_blank" data-smartkarma-citation="insights:45673" rel="noopener">Entra ASA: Competing Offers</a>, I highlighted that investors expected increased bids for <a href="https://www.smartkarma.com/entities/entra-asa" target="_blank" data-smartkarma-citation="entities:22229:1" rel="noopener">Entra ASA (ENTRA NO)</a>, from SBB or others, now that Entra was in play. I recommended long Entra, TP NOK194 (20% premium to Entra’s Q3 2020 EPRA NRV).
The bidding war has since heated up:
<ul>
<li>On 18 December, <a href="https://www.smartkarma.com/entities/castellum-ab" target="_blank" data-smartkarma-citation="entities:22321:1" rel="noopener">Castellum AB (CAST SS)</a> increased its bid for Entra by 13.9% to NOK 185 a piece in cash and shares, and signed SEK18.1 bn property deals with Blackstone.
<ul>
<li>The Norwegian government had agreed to sell its 8.24% stake in Entra to Castellum (15 million shares at NOK169 per share in cash). The price will be adjusted at the new offer price.</li>
</ul>
</li>
<li>On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share (for a total of NOK34.6 bn), exceeding the last offer made by rival Castellum.</li>
</ul>
Entra has said it is prepared to engage with potential buyers and to discuss alternatives to the company’s independence strategy. It also hinted it was expecting other bids, as it recommended shareholders to "keep their options open for the time being".
<ul>
<li>It also appreciated the improved bid by SBB “The board appreciates the continued interest in Entra shown by SBB, and notes the improvement in the financial terms proposed relative to SBB’s earlier proposal”</li>
</ul>
SBB's bid is superior, not only is higher, but also offers a larger cash component.
<ul>
<li>32.2% premium to Entra's closing price on 23 November.</li>
<li>This represents 28.4x EV/Fwd EBITDA, 28.4x P/Fwd E, 26.7x, 26.7x deal value/est. FFO NSD, and 18.8% premium to EPRA's NAV as of 30 September.</li>
</ul>
Entra’s shares jumped 3.5% on the news and closed at NOK 195.5, indicating investors see potential for a higher bid.
To further complicate matters, there are now two shareholders, Folketrygdfondet (12%), which so far has refused to sell, and <a href="https://www.smartkarma.com/entities/fastighets-ab-balder" target="_blank" data-smartkarma-citation="entities:22289:1" rel="noopener">Fastighets Ab Balder (BALDB SS)</a> (15%) that can prevent any bidder from exceeding the 90% needed, and are, then in a powerful bargaining position.
Recommendation is LONG Entra.
<ul>
<li>Shares are trading 2.9% above SBB's offer (and c. 0.8% above my 28 November TP recommendation, NOK 194).</li>
<li>Downside limited by SBB's bid.</li>
<li>Bids for Entra could reach NOK200 per share.</li>
</ul>

In my Insight Entra ASA: Competing Offers, I highlighted that investors expected increased bids for Entra ASA (ENTRA NO), from SBB or others, now that Entra was in play. I recommended long Entra, TP NOK194 (20% premium to Entra’s Q3 2020 EPRA NRV).
The bidding war has since heated up:

On 18 December, Castellum AB (CAST SS) increased its bid for Entra by 13.9% to NOK 185 a piece in cash and shares, and signed SEK18.1 bn property deals with Blackstone.

The Norwegian government had agreed to sell its 8.24% stake in Entra to Castellum (15 million shares at NOK169 per share in cash). The price will be adjusted at the new offer price.


On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share (for a total of NOK34.6 bn), exceeding the last offer made by rival Castellum.

Entra has said it is prepared to engage with potential buyers and to discuss alternatives to the company’s independence strategy. It also hinted it was expecting other bids, as it recommended shareholders to "keep their options open for the time being".

It also appreciated the improved bid by SBB “The board appreciates the continued interest in Entra shown by SBB, and notes the improvement in the financial terms proposed relative to SBB’s earlier proposal”

SBB's bid is superior, not only is higher, but also offers a larger cash component.

32.2% premium to Entra's closing price on 23 November.
This represents 28.4x EV/Fwd EBITDA, 28.4x P/Fwd E, 26.7x, 26.7x deal value/est. FFO NSD, and 18.8% premium to EPRA's NAV as of 30 September.

Entra’s shares jumped 3.5% on the news and closed at NOK 195.5, indicating investors see potential for a higher bid.
To further complicate matters, there are now two shareholders, Folketrygdfondet (12%), which so far has refused to sell, and Fastighets Ab Balder (BALDB SS) (15%) that can prevent any bidder from exceeding the 90% needed, and are, then in a powerful bargaining position.
Recommendation is LONG Entra.

Shares are trading 2.9% above SBB's offer (and c. 0.8% above my 28 November TP recommendation, NOK 194).
Downside limited by SBB's bid.
Bids for Entra could reach NOK200 per share.


Entra - SBB - Castellum: Bidding War Heats Up