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.

Event-Driven

On October 8th, 2019, Acciona (ANA SM) <a href="https://accionacorp.blob.core.windows.net/media/3423388/282372.pdf" target="_blank" rel="noopener">communicated to the market</a> that it had accepted the invitation of Nordex SE (NDX1 GR) to subscribe a private placement of newly-issued Nordex shares: 9,698,244 new shares at EUR 10.21 per share, for a total amount of circa EUR 99 million. This represents a 10% capital increase.
The proposal to Acciona has the full support from both Management and Supervisory Boards of Nordex. With this capital increase, Acciona shall hold 38,695,996 shares of Nordex, therefore Acciona’s stake in Nordex increases from 29.90% to 36.27% post capital increase.
According to the German takeover regulation, a shareholder is deemed to have acquired control if it holds 30 % or more of the voting rights, including shares not held by the bidder but controlled by it. If a bidder gains control (over 30 %) of a listed company it must make a public offer. Within four weeks of the publication of its controlling interest, the shareholder must submit to the Federal Securities Supervisory Office (Bundesaufsichtsamt für den Wertpapierhandel – BAWe) and publish an offer document. The offer must cover all shares of the target, and must be unconditional.
The new percentage of ownership crosses the 30% mandatory takeover threshold under the German takeover law, and therefore Acciona is legally bound to launch a public tender offer at the VWAP of the last three months. Acciona has announced in the German market the submission of a public tender offer to all outstanding shareholders of Nordex for a cash consideration of EUR 10.32 per share. Upon announcement, the shares of Acciona dropped by 5.2%.
The offer represents a:
<ul>
<li>Premium of 1.7% over the closing price of EUR 10.14 per share on October 7th, 2019 (the day prior to the bid).</li>
<li>Premium of -3% over the three months average closing price of Nordex on the three months prior to the announcement, i.e. EUR 10.65 per share.</li>
<li>Valuation of the whole share capital of Nordex at EUR 1.1 billion.</li>
</ul>
Therefore, it appears to be an opportunistic bid that has taken advantage of the recent weakness in the share price of Nordex, in my view.
The average closing share price of the five days period since the bid announcement has been EUR 11.04 per share. The market reaction seems to anticipate a sweetened offer by Acciona to Nordex shareholders.
Putting Nordex on the average 2020E EV/EBITDA of the European industry leaders, Vestas (8.2x) and Siemens Gamesa (7.6x), i.e. a multiple of 7.9x, times the Nordex Capital IQ consensus EBITDA 2020 estimate for Nordex of 214.44 million, and subtracting the proforma net debt of 171.55 million, gives a blue-sky value for the equity of 14.26 per share, a nearly 28% upside versus October 14th, 2019 close, but as it can be seen on the graph, Nordex shares traded on that level last Spring. The median share price target by the 16 analysts that cover Nordex is EUR 12.5 per share (source: Nordex IR, own calculations). My recommendation is to be long Nordex.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/102/027/original/Nordex%20share%20price.jpg?1571132353" class="editor-image img-responsive" data-smartkarma-image-id="102027"></figure>
<div class="content-caption">Nordex closing share price vs. bid level (red line) Source: Market Intelligence</div>

On October 8th, 2019, Acciona (ANA SM) communicated to the market that it had accepted the invitation of Nordex SE (NDX1 GR) to subscribe a private placement of newly-issued Nordex shares: 9,698,244 new shares at EUR 10.21 per share, for a total amount of circa EUR 99 million. This represents a 10% capital increase.
The proposal to Acciona has the full support from both Management and Supervisory Boards of Nordex. With this capital increase, Acciona shall hold 38,695,996 shares of Nordex, therefore Acciona’s stake in Nordex increases from 29.90% to 36.27% post capital increase.
According to the German takeover regulation, a shareholder is deemed to have acquired control if it holds 30 % or more of the voting rights, including shares not held by the bidder but controlled by it. If a bidder gains control (over 30 %) of a listed company it must make a public offer. Within four weeks of the publication of its controlling interest, the shareholder must submit to the Federal Securities Supervisory Office (Bundesaufsichtsamt für den Wertpapierhandel – BAWe) and publish an offer document. The offer must cover all shares of the target, and must be unconditional.
The new percentage of ownership crosses the 30% mandatory takeover threshold under the German takeover law, and therefore Acciona is legally bound to launch a public tender offer at the VWAP of the last three months. Acciona has announced in the German market the submission of a public tender offer to all outstanding shareholders of Nordex for a cash consideration of EUR 10.32 per share. Upon announcement, the shares of Acciona dropped by 5.2%.
The offer represents a:

Premium of 1.7% over the closing price of EUR 10.14 per share on October 7th, 2019 (the day prior to the bid).
Premium of -3% over the three months average closing price of Nordex on the three months prior to the announcement, i.e. EUR 10.65 per share.
Valuation of the whole share capital of Nordex at EUR 1.1 billion.

Therefore, it appears to be an opportunistic bid that has taken advantage of the recent weakness in the share price of Nordex, in my view.
The average closing share price of the five days period since the bid announcement has been EUR 11.04 per share. The market reaction seems to anticipate a sweetened offer by Acciona to Nordex shareholders.
Putting Nordex on the average 2020E EV/EBITDA of the European industry leaders, Vestas (8.2x) and Siemens Gamesa (7.6x), i.e. a multiple of 7.9x, times the Nordex Capital IQ consensus EBITDA 2020 estimate for Nordex of 214.44 million, and subtracting the proforma net debt of 171.55 million, gives a blue-sky value for the equity of 14.26 per share, a nearly 28% upside versus October 14th, 2019 close, but as it can be seen on the graph, Nordex shares traded on that level last Spring. The median share price target by the 16 analysts that cover Nordex is EUR 12.5 per share (source: Nordex IR, own calculations). My recommendation is to be long Nordex.

Nordex closing share price vs. bid level (red line) Source: Market Intelligence

Nordex SE

Nordex (NDX1 GR): Winds of Change