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.

Cerved Group - Castor Srl: Sweet Opportunity in Loans Gone Sour

Event-Driven

The tender offer period for <a href="https://www.smartkarma.com/entities/cerved-group-s-p-a" target="_blank" data-smartkarma-citation="entities:21171:1" rel="noopener">Cerved Group S.p.A. (CERV IM)</a> has started, and will end on 5 August. On 16 July, the first day, the shares closed at €10.04, 5.7% above the offer price and in line with my prior TP of €10/share (see <a href="https://www.smartkarma.com/insights/cerved-group-castor-srl-sweet-opportunity-in-loans-gone-sour" target="_blank" data-smartkarma-citation="insights:48990" rel="noopener">Cerved Group - Castor Srl: Sweet Opportunity in Loans Gone Sour</a>).
The Board of Cerved says that the offer from Castor Bidco is inadequate and does not take into account the growth prospects of Cerved, sale of Cerved Management Group, synergies, the premium is low and the bid opportunistic.
Activist investor Berry Street has said it will not tender its 3% stake at the current bid price. Berry Street previously held 1% of <a href="https://www.smartkarma.com/entities/kaz-minerals-plc" target="_blank" data-smartkarma-citation="entities:21999:1" rel="noopener">KAZ Minerals (KAZ LN)</a>, whose takeover offer was increased by c. 36%.
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Castor stated in the announcement that in the event that, following the offer, the offeror comes to hold a total stake greater than 90%, but lower than 95%, the offeror will not restore a free float sufficient to ensure regular trading.
If as a result of the offer, the offeror holds at least 95% of the shares, it will exercise its right to purchase the remaining Cerved Shares. If the right to purchase is exercised, Borsa Italiana will order the suspension from listing and/or the delisting of Cerved Shares. If several shareholders collectively own above 5% of the share capital, they may block a hypothetical squeeze-out.
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I revise upwards my initial €10.0/share valuation of Cerved on a standalone basis. By using inputs from Capital IQ consensus (revenue, EBITDA, Capex), WACC of 8%, 11.5x EV/EBITDA exit multiple and g=2%, my new estimate of fair value on a standalone-basis is €11.04/share, this is a c.10% upside to the current market price and c. 16% above the current offer price. For comparison, mean TP on Capital IQ consensus is €10.23/share.
The market awaits a sweetened offer, which is highly likely in my view. An increase would be justified by better prospects and synergies, which equally split could be worth up to €0.455/share and there is some PE interloper risk. Long CERV IM.
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The tender offer period for Cerved Group S.p.A. (CERV IM) has started, and will end on 5 August. On 16 July, the first day, the shares closed at €10.04, 5.7% above the offer price and in line with my prior TP of €10/share (see Cerved Group - Castor Srl: Sweet Opportunity in Loans Gone Sour).
The Board of Cerved says that the offer from Castor Bidco is inadequate and does not take into account the growth prospects of Cerved, sale of Cerved Management Group, synergies, the premium is low and the bid opportunistic.
Activist investor Berry Street has said it will not tender its 3% stake at the current bid price. Berry Street previously held 1% of KAZ Minerals (KAZ LN), whose takeover offer was increased by c. 36%.

Castor stated in the announcement that in the event that, following the offer, the offeror comes to hold a total stake greater than 90%, but lower than 95%, the offeror will not restore a free float sufficient to ensure regular trading.
If as a result of the offer, the offeror holds at least 95% of the shares, it will exercise its right to purchase the remaining Cerved Shares. If the right to purchase is exercised, Borsa Italiana will order the suspension from listing and/or the delisting of Cerved Shares. If several shareholders collectively own above 5% of the share capital, they may block a hypothetical squeeze-out.


I revise upwards my initial €10.0/share valuation of Cerved on a standalone basis. By using inputs from Capital IQ consensus (revenue, EBITDA, Capex), WACC of 8%, 11.5x EV/EBITDA exit multiple and g=2%, my new estimate of fair value on a standalone-basis is €11.04/share, this is a c.10% upside to the current market price and c. 16% above the current offer price. For comparison, mean TP on Capital IQ consensus is €10.23/share.
The market awaits a sweetened offer, which is highly likely in my view. An increase would be justified by better prospects and synergies, which equally split could be worth up to €0.455/share and there is some PE interloper risk. Long CERV IM.


Trading Above Terms at the Start of the Tender Offer Period