European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Rio Tinto Limited is an international mining company.  The Company has interests in mining for aluminum, borax, coal, copper, gold, iron ore, lead, silver, tin, uranium, zinc, titanium dioxide feedstock, diamonds, talc and zircon. Dually-listed company with RIO LN.

<ul>
<li>Discounts to NAV of covered holdcos didn't follow a clear trend during June. Discounts to NAV: C.F.Alba, 44.5% (vs. 46.8%); GBL, 43.6% (vs. 42.9%); Heineken Holding, 18.4% (vs. 18.3%); </li>
<li>Industrivärden C, 2.4% (vs. 2.5%); Investor B, 9.9% (vs. 12%); Porsche Automobile Holding, 35.8% (vs. 35.3%). Rio DLC spread tightened to 20.7% (vs. 23%).</li>
<li>What seems interesting: Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).</li>
</ul>


Discounts to NAV of covered holdcos didn't follow a clear trend during June. Discounts to NAV: C.F.Alba, 44.5% (vs. 46.8%); GBL, 43.6% (vs. 42.9%); Heineken Holding, 18.4% (vs. 18.3%); 
Industrivärden C, 2.4% (vs. 2.5%); Investor B, 9.9% (vs. 12%); Porsche Automobile Holding, 35.8% (vs. 35.3%). Rio DLC spread tightened to 20.7% (vs. 23%).
What seems interesting: Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).


Selected European HoldCos and DLC: June'24 Report

Spirit Aerosystems Holdings, Inc / Event-Driven

Spirit AeroSystems Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, designs and manufactures aerostructures including fuselages, propulsion systems, and wing systems for commercial and military aircrafts.

Spirit Aerosystems Holdings, Inc (SPR US)

<ul>
<li>On July 1, <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a> announced a definitive agreement to acquire <a href="https://www.smartkarma.com/entities/spirit-aerosystems-holdings-inc" target="_blank" data-smartkarma-citation="entities:19869:1" rel="noopener">Spirit Aerosystems Holdings, Inc (SPR US)</a> in an expected all-share deal valued at c.$4.7 billion, or $37.25/share.</li>
<li>Consideration is calculated using a floating exchange ratio ($37.25 divided by 15-day VWAP) with a collar. 0.20466 using Boeing's last closing share price, which implies 3.9% dilution for Boeing's shareholders.</li>
<li>The offer price is 6.4% above consensus price target median ($35), and reasonable, reflecting some control premium. The valuation represents 10.1x EV/2025 EBITDA based on IBES estimates. Long spread.</li>
</ul>


On July 1, Boeing Co (BA US) announced a definitive agreement to acquire Spirit Aerosystems Holdings, Inc (SPR US) in an expected all-share deal valued at c.$4.7 billion, or $37.25/share.
Consideration is calculated using a floating exchange ratio ($37.25 divided by 15-day VWAP) with a collar. 0.20466 using Boeing's last closing share price, which implies 3.9% dilution for Boeing's shareholders.
The offer price is 6.4% above consensus price target median ($35), and reasonable, reflecting some control premium. The valuation represents 10.1x EV/2025 EBITDA based on IBES estimates. Long spread.


Boeing/Spirit AeroSystems: All-Stock Deal

Equity Bottom-Up

Grifols S.A. develops, manufactures, and markets plasma derivatives, IV Therapy, enteral nutrition, diagnostic systems, and medical materials.

<ul>
<li>Moody's Ratings downgraded Grifols' corporate family rating to B3 from B2, with a stable outlook, due to high leverage, and complex, opaque corporate governance involving related-party transactions.</li>
<li>Moody's considers Grifols's liquidity to still be "fragile," noting that "while adequate for the next 12 months, beyond that, maintaining adequate liquidity will depend on returning to positive FCF generation.</li>
<li>For risk-tolerant investors, the current low share price could present a long-term buying opportunity if Grifols successfully executes its strategic initiatives.</li>
</ul>


Moody's Ratings downgraded Grifols' corporate family rating to B3 from B2, with a stable outlook, due to high leverage, and complex, opaque corporate governance involving related-party transactions.
Moody's considers Grifols's liquidity to still be "fragile," noting that "while adequate for the next 12 months, beyond that, maintaining adequate liquidity will depend on returning to positive FCF generation.
For risk-tolerant investors, the current low share price could present a long-term buying opportunity if Grifols successfully executes its strategic initiatives.


Ercros SA is an industrial company focused on the manufacture and sale of chemical and pharmaceutical products. It is listed on the Spanish Stock Exchange.  The company is divided  into three areas of activity: a business strategic unit, the intermediate chemicals division, and the pharmaceuticals division. Ecros serves clients worldwide.

<ul>
<li>Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals,  has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of <a href="https://www.smartkarma.com/entities/ercros-sa" target="_blank" data-smartkarma-citation="entities:40951:1" rel="noopener">Ercros (ECR SM)</a>  at €351 million.</li>
<li>Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies. </li>
<li>The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.</li>
</ul>


Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals,  has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of Ercros (ECR SM)  at €351 million.
Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies. 
The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.


Keywords Studios plc provides technical services to the video game industry in Ireland, Japan, Italy, Canada, the United States, India, Singapore, the United Kingdom, Brazil, and Spain. It offers localization services related to translation and cultural adaptation of in-game text and audio scripts in various game platforms and genres; and localization testing services consisting of testing the linguistic correctness and cultural acceptability of computer games. The company also provides audio/voiceover services, including script translation, actor selection, and talent management through pre-production, audio direction, recording, and post-production, such as native language quality assurance of the recordings. In addition, it offers functional testing services related to quality assurance services provided to game producers to ensure game functions; and art creation services relate to the production of graphical art assets for inclusion in the video game, including concept art creation, as well as 2D and 3D art asset production and animation. Further, the company provides customer support services related to the live operations support, such as community management, player support, and associated services to producers of games. It serves video game developers and publishers. The company was founded in 1998 and is headquartered in Dublin, Ireland.

<ul>
<li>On June 27, <a href="https://www.smartkarma.com/entities/keywords-studios-plc" target="_blank" data-smartkarma-citation="entities:23476:1" rel="noopener">Keywords Studios (KWS LN)</a> received an updated cash offer of 2,450p/share from EQT (3.9% lower than initial 2,550p), 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM EBITDA,</li>
<li>22.4x Fwd P/E. The likelihood of a strategic buyer making an offer is low, while the offer from EQT is opportunistic, which will seek to merge Keywords with Virtuos.</li>
<li>The revised lower offer and the small extension to the PUSU deadline do not inspire optimism. Nevertheless, EQT remains a credible bidde. Gross spread stands at 5.9%. Maintain long.</li>
</ul>


On June 27, Keywords Studios (KWS LN) received an updated cash offer of 2,450p/share from EQT (3.9% lower than initial 2,550p), 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM EBITDA,
22.4x Fwd P/E. The likelihood of a strategic buyer making an offer is low, while the offer from EQT is opportunistic, which will seek to merge Keywords with Virtuos.
The revised lower offer and the small extension to the PUSU deadline do not inspire optimism. Nevertheless, EQT remains a credible bidde. Gross spread stands at 5.9%. Maintain long.


EQT/Keywords Studios: Lower Revised Offer

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.

Jesus Rodriguez Aguilar
European Event-Driven Analyst

Selected European HoldCos and DLC: June'24 Report

Discounts to NAV of covered holdcos didn't follow a clear trend during June. What seems interesting: Porsche SE vs. listed assets and the Rio DLC...

Jesus Rodriguez Aguilar

Boeing/Spirit AeroSystems: All-Stock Deal

Boeing announces $4.7 billion acquisition of Spirit Aerosystems, offering $37.25/share in all-share deal with 3.9% dilution for Boeing...

Jesus Rodriguez Aguilar

Another Debt Downgrade

Moody's downgrades Grifols' rating due to high leverage and opaque governance. For risk-tolerant investors, the current low share price could...

Jesus Rodriguez Aguilar

Esseco/Ercros: Bidding War

Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing...

Jesus Rodriguez Aguilar

EQT/Keywords Studios: Lower Revised Offer

On June 27, Keywords received an updated (lower) cash offer of 2,450p/share from EQT, 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM...

Jesus Rodriguez Aguilar

Selected European HoldCos and DLC: June'24 Report

Discounts to NAV of covered holdcos didn't follow a clear trend during June. What seems interesting: Porsche SE vs. listed assets and the Rio DLC...

Jesus Rodriguez Aguilar

Boeing/Spirit AeroSystems: All-Stock Deal

​Boeing announces $4.7 billion acquisition of Spirit Aerosystems, offering $37.25/share in all-share deal with 3.9% dilution for Boeing...

Jesus Rodriguez Aguilar

Another Debt Downgrade

​Moody's downgrades Grifols' rating due to high leverage and opaque governance. For risk-tolerant investors, the current low share price could...

Jesus Rodriguez Aguilar

Esseco/Ercros: Bidding War

Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing...

Jesus Rodriguez Aguilar

EQT/Keywords Studios: Lower Revised Offer

On June 27, Keywords received an updated (lower) cash offer of 2,450p/share from EQT, 66.7% premium, implied EV €2,405 million, 13.2x EV/fwd NTM...

Jesus Rodriguez Aguilar

Boeing announces $4.7 billion acquisition of Spirit Aerosystems, offering $37.25/share in all-share deal with 3.9% dilution for Boeing...

Moody's downgrades Grifols' rating due to high leverage and opaque governance. For risk-tolerant investors, the current low share price could...