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.

Neles - Alfa Laval: Lowered Acceptance Threshold, Extended Period. Enter Valmet.

Event-Driven

On 2 November, <a href="https://tenderoffer.alfalaval.com/pdf/Alfa%20Laval%20-%20Preliminary%20Result%20of%20the%20Tender%20Offer%20Release%20-%20ENG.pdf" target="_blank" rel="noopener">Alfa Laval AB published the preliminary result</a> of the offer:
<ul>
<li>It has received acceptances representing approximately 33% of the shares in Neles.</li>
</ul>
Alfa Laval said that it "will confirm and announce the final result of the offer on or about 4 November". If Alfa Laval does not achieve &gt;50% of Neles' shares, which is the most likely case, this could leave Valmet in a better position to pursue its Neles merger ambitions, on its own terms.
Neles shares closed on 3 November at 10.49, c. 9% below Alfa Laval's bid.
Valmet shares have lost €3.54 (c. 15%) since <a href="https://www.valmet.com/media/news/stock-exchange-releases/2020/valmet-acquires-14.9-ownership-in-the-future-neles/" target="_blank" rel="noopener">announcing the acquisition</a> of a 14.9% stake in Neles on 17 June. If Alfa's bid fails this likely leaves Valmet as the only obvious buyer (with a 29.57% stake in Neles, it is unlikely that any other bidder enters the fray).
The implied equity valuation of Neles on a NTM EV/EBITDA median multiple is €13.72 per share and on a NTM EPS median multiple is €13.0 per share. Taking an average of both gives €13.36 per share. Valmet could better by 16% the almost failed bid by Alfa Laval (c. 28% upside to the current level where Neles shares are trading).
Valmet would likely issue shares for an amount of €1,413 mn (a 31% dilution). The Finnish state (11.2% of Valmet) supports Valmet's pursuit of Neles.
I believe that given Valmet's interest on Neles, there is upside to Neles' share price, and recommend LONG NELES. Once Alva Laval retires, further negotiations between Neles and Valmet will likely take place, followed by a bid from Valmet on terms clearer than the initial approach and with a more detailed account of synergies, in my view.

On 2 November, Alfa Laval AB published the preliminary result of the offer:

It has received acceptances representing approximately 33% of the shares in Neles.

Alfa Laval said that it "will confirm and announce the final result of the offer on or about 4 November". If Alfa Laval does not achieve &gt;50% of Neles' shares, which is the most likely case, this could leave Valmet in a better position to pursue its Neles merger ambitions, on its own terms.
Neles shares closed on 3 November at 10.49, c. 9% below Alfa Laval's bid.
Valmet shares have lost €3.54 (c. 15%) since announcing the acquisition of a 14.9% stake in Neles on 17 June. If Alfa's bid fails this likely leaves Valmet as the only obvious buyer (with a 29.57% stake in Neles, it is unlikely that any other bidder enters the fray).
The implied equity valuation of Neles on a NTM EV/EBITDA median multiple is €13.72 per share and on a NTM EPS median multiple is €13.0 per share. Taking an average of both gives €13.36 per share. Valmet could better by 16% the almost failed bid by Alfa Laval (c. 28% upside to the current level where Neles shares are trading).
Valmet would likely issue shares for an amount of €1,413 mn (a 31% dilution). The Finnish state (11.2% of Valmet) supports Valmet's pursuit of Neles.
I believe that given Valmet's interest on Neles, there is upside to Neles' share price, and recommend LONG NELES. Once Alva Laval retires, further negotiations between Neles and Valmet will likely take place, followed by a bid from Valmet on terms clearer than the initial approach and with a more detailed account of synergies, in my view.

Neles - Alfa Laval: Preliminary Results, Valmet

Neles Oyj

Neles - Alfa Laval: Preliminary Results, Valmet