European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>CPI, directly and indirectly, owns 42.6% in S Immo and seeks to launch a €23.5 mandatory offer if a 15% voting cap in S IMMO's by-laws is removed.</li>
<li>CPI has Board support. AGM will take place on 1 June. Although S IMMO trades at a large discount to NAV, interloper risk is low.</li>
<li>Gross spread is 1.3%. Assuming clearances are obtained, and offer settled by 1 August, estimated annual return would be 5.5%. Long SPI AV.</li>
</ul>


CPI, directly and indirectly, owns 42.6% in S Immo and seeks to launch a €23.5 mandatory offer if a 15% voting cap in S IMMO's by-laws is removed.
CPI has Board support. AGM will take place on 1 June. Although S IMMO trades at a large discount to NAV, interloper risk is low.
Gross spread is 1.3%. Assuming clearances are obtained, and offer settled by 1 August, estimated annual return would be 5.5%. Long SPI AV.


CPI/S IMMO: Agreement Regarding EGM and Offer

On the evening of 14 March, <a href="https://www.smartkarma.com/entities/immofinanz-ag" target="_blank" data-smartkarma-citation="entities:22547:1" rel="noopener">IMMOFINANZ AG (IIA AV)</a> announced its intention to launch a voluntary takeover offer to acquire the 72.5% stake in <a href="https://www.smartkarma.com/entities/s-immo-ag" target="_blank" data-smartkarma-citation="entities:22559:1" rel="noopener">S IMMO AG (SPI AV)</a> it does not already own for approximately €930 mn.
<ul>
<li>
Immofinanz currently holds approximately 26.49% of S Immo.
</li>
<li>
S Immo indirectly holds 10.86% of Immofinanz.
</li>
<li>
S Immo currently holds a 6% stake pct in <a href="https://www.smartkarma.com/entities/ca-immobilien-anlagen-ag" target="_blank" data-smartkarma-citation="entities:22540:1" rel="noopener">CA Immobilien Anlagen AG (CAI AV)</a>.
</li>
<li>
At the end of January 2021, Ronny Pecik (CEO of Immofinanz), was to step down upon the completion of the sale of his c. 10.7% stake in Immofinanz to Aggregate Holdings.
</li>
</ul>
<ul>
<li>
To make things more interesting, Aggregate Holdings is interested in CA Immo, which itself is the object of a bid by Starwood (see <a href="https://www.smartkarma.com/insights/ca-immo-starwood-mandatory-offer" target="_blank" data-smartkarma-citation="insights:46905" rel="noopener">CA Immo - Starwood: Mandatory Offer</a> and <a href="https://www.smartkarma.com/insights/ca-immo-raised-offer-aggregate-s-potential-competing-offer" target="_blank" data-smartkarma-citation="insights:48625" rel="noopener">CA Immo: Raised Offer, Aggregate's Potential Competing Offer</a>).
<ul>
<li>
Aggregate confirmed that it may be considering a takeover bid for CA Immo, which could jeopardize the current bid of Starwood (largest shareholder with a c. 30% stake). Immediately after its sweetened offer of €34.44 per share was placed, the share price rose above that level and has remained ever since.
</li>
<li>
In 2018, Pecik himself was instrumental in Starwoods's acquisition of its stake in CA Immo, which resulted in the failure of Immofinanz’s own takeover bid for CA Immo at the time, prompting it to acquire its 26.49% stake in S Immo instead. As mentioned, S Immo also owns an almost 12% stake in Immofinanz.
</li>
</ul>
</li>
<li>
Recent announcements, bid and shareholder changes are raising expectations of a three-way merger between CA Immo, Immofinanz and S Immo.
</li>
</ul>
The offer price seems low (closing price on the last trading session prior to the release), quite under the level at which S Immo was trading in December 2019, around €22.5 per share. Diluted EPRA NNNAV per share as of Q3 2020 was €20.02. The move by Immofinanz looks more like an opening gambit and shares are trading 8% higher vs. offer on exceptions of a sweetened offer and/or a move by Aggregate.
S Immo shares are currently trading at an FY20e P/NAV of 0.81x (based on Capital IQ consensus), around the same level as peers, equally with regards to FY21e and FY22e. The shares offer FFO yields of 2.9% and 4.0% based on FY20e and FY21e numbers, respectively.
Target price is €23.1 per share (around the same level as consensus ind NAVPS, supported by FFO/share yield), 18% higher than current levels.

On the evening of 14 March, IMMOFINANZ AG (IIA AV) announced its intention to launch a voluntary takeover offer to acquire the 72.5% stake in S IMMO AG (SPI AV) it does not already own for approximately €930 mn.


Immofinanz currently holds approximately 26.49% of S Immo.


S Immo indirectly holds 10.86% of Immofinanz.


S Immo currently holds a 6% stake pct in CA Immobilien Anlagen AG (CAI AV).


At the end of January 2021, Ronny Pecik (CEO of Immofinanz), was to step down upon the completion of the sale of his c. 10.7% stake in Immofinanz to Aggregate Holdings.




To make things more interesting, Aggregate Holdings is interested in CA Immo, which itself is the object of a bid by Starwood (see CA Immo - Starwood: Mandatory Offer and CA Immo: Raised Offer, Aggregate's Potential Competing Offer).


Aggregate confirmed that it may be considering a takeover bid for CA Immo, which could jeopardize the current bid of Starwood (largest shareholder with a c. 30% stake). Immediately after its sweetened offer of €34.44 per share was placed, the share price rose above that level and has remained ever since.


In 2018, Pecik himself was instrumental in Starwoods's acquisition of its stake in CA Immo, which resulted in the failure of Immofinanz’s own takeover bid for CA Immo at the time, prompting it to acquire its 26.49% stake in S Immo instead. As mentioned, S Immo also owns an almost 12% stake in Immofinanz.




Recent announcements, bid and shareholder changes are raising expectations of a three-way merger between CA Immo, Immofinanz and S Immo.


The offer price seems low (closing price on the last trading session prior to the release), quite under the level at which S Immo was trading in December 2019, around €22.5 per share. Diluted EPRA NNNAV per share as of Q3 2020 was €20.02. The move by Immofinanz looks more like an opening gambit and shares are trading 8% higher vs. offer on exceptions of a sweetened offer and/or a move by Aggregate.
S Immo shares are currently trading at an FY20e P/NAV of 0.81x (based on Capital IQ consensus), around the same level as peers, equally with regards to FY21e and FY22e. The shares offer FFO yields of 2.9% and 4.0% based on FY20e and FY21e numbers, respectively.
Target price is €23.1 per share (around the same level as consensus ind NAVPS, supported by FFO/share yield), 18% higher than current levels.

On 20 February, Bloomberg reported that real estate investor Aggregate Holdings is in conversations with CA Immo for a potential offer for the company, which could be partial, at a price of €36 per share.
On 26 February, SOF-11 Klimt CAI S.à r.l. <a href="https://www.prnewswire.co.uk/news-releases/sof-11-klimt-cai-s-a-r-l-bidco-a-controlled-affiliate-of-starwood-capital-group-announces-an-increase-of-the-offer-price-for-the-public-takeover-offer-of-ca-immobilien-anlagen-ag-ca-immo--851722416.html" target="_blank" rel="noopener">announced an increase in the offer price</a>, from €34.44 to €36.00 (cum dividend).
<ul>
<li>4.5% higher than its initial offer.</li>
<li>The offer price for each CA Immo convertible bond with nominal value of EUR 100,000 will be increased from approx. €132,621.35 to approx. €138,628.59</li>
</ul>
Now Starwood has outmaneuvered before Aggregate presents any offer, which will put some pressure on Aggregate for a significant improvement.
The improved offer of  €36.0 represents:
<div>
<ul style="list-style-type: disc;">
<li>1.13x P/ 2021e BV</li>
<li>95.3% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).</li>
<li>c. 6.1% discount to diluted EPRA NAV (Q3 20).</li>
</ul>
</div>
Gross spread to the new offer price is 1.26%. Further upside could come from a competing offer. Reiterate LONG.

On 20 February, Bloomberg reported that real estate investor Aggregate Holdings is in conversations with CA Immo for a potential offer for the company, which could be partial, at a price of €36 per share.
On 26 February, SOF-11 Klimt CAI S.à r.l. announced an increase in the offer price, from €34.44 to €36.00 (cum dividend).

4.5% higher than its initial offer.
The offer price for each CA Immo convertible bond with nominal value of EUR 100,000 will be increased from approx. €132,621.35 to approx. €138,628.59

Now Starwood has outmaneuvered before Aggregate presents any offer, which will put some pressure on Aggregate for a significant improvement.
The improved offer of  €36.0 represents:


1.13x P/ 2021e BV
95.3% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).
c. 6.1% discount to diluted EPRA NAV (Q3 20).


Gross spread to the new offer price is 1.26%. Further upside could come from a competing offer. Reiterate LONG.

CA Immo: Raised Offer, Aggregate's Potential Competing Offer

On 8 January, SOF-11 Klimt CAI S.à r.l., an affiliate of Starwood Capital, announced its intention to launch a takeover offer to acquire the remaining 70% of <a href="https://www.smartkarma.com/entities/ca-immobilien-anlagen-ag" target="_blank" data-smartkarma-citation="entities:22540:1" rel="noopener">Ca Immobilien Anlagen Ag (CAI AV)</a> it does not already own.
Consideration is €34.44, in cash, equivalent to CA Immo's undiluted EPRA NNNAV, with no minimum acceptance condition.
<ul>
<li>1.1x P/ 2021e BV, 25.8x deal value/est. FFO and 91.14% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).</li>
<li>
10.2% discount to EPRA NAV.</li>
</ul>
Starwood is a bargain hunter and distressed investor, so it must see value at the offer price.
<ul>
<li>The offer price is 17.7% below the closing price of 14 February 2020, when the pandemic started to hit the markets.</li>
<li>Therefore Starwood is betting on the recovery of the German office market. CA Immo has prime buildings in Berlin, Munich, Frankfurt and other German cities, and a big land bank in Berlin.</li>
<li>CA Immo is planning to invest €710 million that should add c. 45 mn to FFO if all is occupied at a 6% gross yield on cost.</li>
</ul>
The shares have shot up by c. 14.6% vs last close and are trading at €35.30,
<ul>
<li>
c. 2.5% above the offer price.</li>
<li>Volume negotiated on 11 January is close to €40 mn.</li>
</ul>
The market is thinking of either a sweetened bid or that the company is now in play (again) and there could be another bidder.
<ul>
<li>I believe that the Board of CA Immo will press for a better offer, considering that the current offer from Starwood is below where the shares were trading in February (€41.85).</li>
<li>The 30% stake held by Starwood represents a barrier to any other bidder, plus there will be no minimum acceptance condition.</li>
</ul>
Considering the resilience of the German prime office sector, and the pipeline of CA Immo, an improved offer representing a 10% premium to current EPRA NNNAV could be justified, or €38.34 per share, 11% premium to the current bid, and c. 4% 21e FFO yield (Capital IQ).
<ul>
<li>On this basis, recommendation is LONG CA Immo, TP €38.34.</li>
<li>The downside is that Starwood does not improve its bid, but the share price should be supported by  FFO yield, in the absence of a worsening pandemic scenario.</li>
</ul>

On 8 January, SOF-11 Klimt CAI S.à r.l., an affiliate of Starwood Capital, announced its intention to launch a takeover offer to acquire the remaining 70% of Ca Immobilien Anlagen Ag (CAI AV) it does not already own.
Consideration is €34.44, in cash, equivalent to CA Immo's undiluted EPRA NNNAV, with no minimum acceptance condition.

1.1x P/ 2021e BV, 25.8x deal value/est. FFO and 91.14% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).

10.2% discount to EPRA NAV.

Starwood is a bargain hunter and distressed investor, so it must see value at the offer price.

The offer price is 17.7% below the closing price of 14 February 2020, when the pandemic started to hit the markets.
Therefore Starwood is betting on the recovery of the German office market. CA Immo has prime buildings in Berlin, Munich, Frankfurt and other German cities, and a big land bank in Berlin.
CA Immo is planning to invest €710 million that should add c. 45 mn to FFO if all is occupied at a 6% gross yield on cost.

The shares have shot up by c. 14.6% vs last close and are trading at €35.30,


c. 2.5% above the offer price.
Volume negotiated on 11 January is close to €40 mn.

The market is thinking of either a sweetened bid or that the company is now in play (again) and there could be another bidder.

I believe that the Board of CA Immo will press for a better offer, considering that the current offer from Starwood is below where the shares were trading in February (€41.85).
The 30% stake held by Starwood represents a barrier to any other bidder, plus there will be no minimum acceptance condition.

Considering the resilience of the German prime office sector, and the pipeline of CA Immo, an improved offer representing a 10% premium to current EPRA NNNAV could be justified, or €38.34 per share, 11% premium to the current bid, and c. 4% 21e FFO yield (Capital IQ).

On this basis, recommendation is LONG CA Immo, TP €38.34.
The downside is that Starwood does not improve its bid, but the share price should be supported by  FFO yield, in the absence of a worsening pandemic scenario.


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Most major indexes are currently trading at the lower end of their May trading ranges. Barring improving headlines regarding tariffs &amp; trade or comments from the Fed suggesting a potential rate cut on the horizon we believe global markets are vulnerable to further weakness. We review all major markets and highlight attractive opportunities within Japan, and global real estate developers, and consumer staples stocks.

Most major indexes are currently trading at the lower end of their May trading ranges. Barring improving headlines regarding tariffs &amp; trade or comments from the Fed suggesting a potential rate cut on the horizon we believe global markets are vulnerable to further weakness. We review all major markets and highlight attractive opportunities within Japan, and global real estate developers, and consumer staples stocks.

Major Indexes Testing Support & Vulnerable to Further Weakness

Austria

CA Immobilien Anlagen AG acquires, manages and develops real estate properties. The Company owns properties in Vienna and other Austrian cities.  CA invests in housing, office space, shopping centers, and other commercial properties.

CA Immobilien Anlagen AG (CAI AV)

CPI/S IMMO: Agreement Regarding EGM and Offer

The ned of the Austrian real estate takeover saga seems closer to an end. CPI may succeed where others have failed and may be able to merge CPI...

Jesus Rodriguez Aguilar

Game of Thrones in Austrian Real Estate

Immofinanz's move looks like an opening gambit, shares are trading 8% higher on exceptions of a sweetened offer and/or a move by Aggregate. SPI...

Jesus Rodriguez Aguilar

CA Immo: Raised Offer, Aggregate's Potential Competing Offer

Starwood has outmaneuvered before Aggregate presents any offer, which could result in further upside. Gross spread to the new offer price is 1.26%...

Jesus Rodriguez Aguilar

CA Immo - Starwood: Mandatory Offer

The Board should fight for a better offer given the resilience of German prime offices. A 10% premium to current EPRA NNNAV could be justified....

Jesus Rodriguez Aguilar

Major Indexes Testing Support & Vulnerable to Further Weakness

Most major indexes are currently trading at the lower end of their May trading ranges. Barring improving headlines regarding tariffs & trade or...

Vermilion Research