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.

IFM/Naturgy: Board Opinion And Bid Scenarios

Naturgy - IFM: Consideration Adjustment, New TP, Attractive Spread

IFM's Partial Offer for Naturgy: Role of Spanish Government and Apportionment Scenarios

Event-Driven

<p>IFM gathers support from funds and large minority shareholders in its partial offer for Naturgy. According to daily Expansión, banking sources close to IFM have been working intensively in recent weeks in order to identify potential shareholders willing to attend the takeover bid. According to these sources, IFM is adding minority support and could reach its goal.</p>
<p>Although <strong>CriteriaCaixa</strong> continues to acquire shares in the market (<strong>25.534%,</strong> as of 1 July, according to the CNMV register), thus narrowing IFM's room for maneuver, IFM is receiving sufficient expressions of interest indications of adherence to its proposal.</p>
<p>According to daily Expansion, IFM has almost assured the success of its partial takeover of Naturgyy with the support of funds and some minority shareholders have already reached approximately 22% of the capital. IFM, whose objective was to obtain at least 17% of Naturgy, now hopes that the Government will approve the operation.</p>
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<p>Assuming institutional acceptances totaling 18% of the share capital and retail acceptances totaling 4% of the share capital, <strong>22%</strong>, the upper band of the offer <strong>would be reached</strong>, without the need for any apportionment. Paradoxically, while CriteriaCaixa acquisitions remove shares freely trading, also reduce the chances of apportionment. </p>
<p><strong>Gross spread is 3.9%</strong>, a level I find attractive. Recommendation is <strong>long NTGY SM</strong>.</p>
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<li>Upside risk: I do not rule out that as CriteriaCaixa keeps on buying (until a maximum of 29.99%), the share price keeps being pushed up.</li>
<li>Downside risk: more shareholders tender and there is apportionment; reduced free float (under 5%) with low liquidity. In this case, the share price would be partially supported by a c. 7% dividend yield.</li>
</ul>
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IFM gathers support from funds and large minority shareholders in its partial offer for Naturgy. According to daily Expansión, banking sources close to IFM have been working intensively in recent weeks in order to identify potential shareholders willing to attend the takeover bid. According to these sources, IFM is adding minority support and could reach its goal.
Although CriteriaCaixa continues to acquire shares in the market (25.534%, as of 1 July, according to the CNMV register), thus narrowing IFM's room for maneuver, IFM is receiving sufficient expressions of interest indications of adherence to its proposal.
According to daily Expansion, IFM has almost assured the success of its partial takeover of Naturgyy with the support of funds and some minority shareholders have already reached approximately 22% of the capital. IFM, whose objective was to obtain at least 17% of Naturgy, now hopes that the Government will approve the operation.

Assuming institutional acceptances totaling 18% of the share capital and retail acceptances totaling 4% of the share capital, 22%, the upper band of the offer would be reached, without the need for any apportionment. Paradoxically, while CriteriaCaixa acquisitions remove shares freely trading, also reduce the chances of apportionment. 
Gross spread is 3.9%, a level I find attractive. Recommendation is long NTGY SM.

Upside risk: I do not rule out that as CriteriaCaixa keeps on buying (until a maximum of 29.99%), the share price keeps being pushed up.
Downside risk: more shareholders tender and there is apportionment; reduced free float (under 5%) with low liquidity. In this case, the share price would be partially supported by a c. 7% dividend yield.






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