Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p><br/> The Europe HY Trade Book for May 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry.<br/></p>

  The Europe HY Trade Book for May 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry. 

Europe HY Trade Book - May 2022 - Lucror Analytics

<p><br/> The Europe HY Trade Book for April 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry.<br/></p>

  The Europe HY Trade Book for April 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry. 

Europe HY Trade Book - April 2022 - Lucror Analytics

<p><br/> The Europe HY Trade Book for February 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry.<br/></p>

  The Europe HY Trade Book for February 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry. 

Europe HY Trade Book - February 2022 - Lucror Analytics

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<p>Since the offer was first announced in March, I had been long <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>  (target prices of €10.00/share, raised to €11.04/share). At the time of publishing my last Insight (see <a href="https://www.smartkarma.com/insights/castor-raises-bid-for-cerved" target="_blank" data-smartkarma-citation="insights:56921" rel="noopener">Castor Raises Bid for Cerved</a>), gross spread to the increased consideration (€10.20/share) was 2.3%. In a last push, Castor (ION's bidco) offered a success premium of €0.30/share, taking the total consideration to €10.50/share, in case it reached over 90% acceptances.</p>
<p>Castor announced that at the end of the tender period, 78.9% of the shares were tendered, which together with a 1.1% stake acquired in the market by Castor over different purchases, represent in total 80% of the share capital of Cerved, thus fulfilling the minimum threshold condition. The <strong>offer is effective and the final price is €10.20/share.</strong></p>
<p>Since Castor did not reach the 90% threshold in its takeover bid, <strong>there's no obligation to buy the shares of minority shareholders</strong> (voluntary sell-out procedure). <strong>Still, a delisting could still happen</strong> through a merger between Cerved and one of ION’s subsidiaries.</p>
<p>ION has said owning more than two-thirds of Cerved would allow it to call an EGM at which it could seek approval for a merger between Cerved and one of its units. A candidate could be Cedacri, an Italian banking software provider acquired by ION in March 2021.</p>
<p>The shares are still liquid, between €6 mn and €9 mn over the last two sessions and trading at €10.21 (VWAP), a wee bit above the offer price. <strong>Time to offload</strong>.</p>

Since the offer was first announced in March, I had been long Cerved Group S.p.A. (CERV IM)  (target prices of €10.00/share, raised to €11.04/share). At the time of publishing my last Insight (see Castor Raises Bid for Cerved), gross spread to the increased consideration (€10.20/share) was 2.3%. In a last push, Castor (ION's bidco) offered a success premium of €0.30/share, taking the total consideration to €10.50/share, in case it reached over 90% acceptances.
Castor announced that at the end of the tender period, 78.9% of the shares were tendered, which together with a 1.1% stake acquired in the market by Castor over different purchases, represent in total 80% of the share capital of Cerved, thus fulfilling the minimum threshold condition. The offer is effective and the final price is €10.20/share.
Since Castor did not reach the 90% threshold in its takeover bid, there's no obligation to buy the shares of minority shareholders (voluntary sell-out procedure). Still, a delisting could still happen through a merger between Cerved and one of ION’s subsidiaries.
ION has said owning more than two-thirds of Cerved would allow it to call an EGM at which it could seek approval for a merger between Cerved and one of its units. A candidate could be Cedacri, an Italian banking software provider acquired by ION in March 2021.
The shares are still liquid, between €6 mn and €9 mn over the last two sessions and trading at €10.21 (VWAP), a wee bit above the offer price. Time to offload.

<p>On 27 August, Castor (the acquisition vehicle of Ion) raised the offer price to <strong>€10.20/share</strong>, a c. 7.4% increase, for a total consideration of €1,976 mn. The minimum threshold condition was raised to a stake of 80% from 50% plus one share and the <strong>tender period</strong> was extended <strong>until 9 September</strong>.</p>
<p>Ion has been pursuing Cerved since Cerved said it was negotiating with PE funds the sale of its credit management division. Ion had snapped Italian banking software provider Cedacri just prior to presenting the first offer for Cerved. The market considers that a combination of the two groups would make industrial sense, although Ion stated it supports Cerved's business plan. Nevertheless, Ion is know for aggressive cost-cutting. In this brinkmanship game between Ion and Cerved, the Board of the latter considers the increased offer insufficient.</p>
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<p>Ion has grown largely via acquisitions and therefore has acted as a consolidator, looking for complementary businesses with which to integrate its services. Ion aims to disrupt the current market by fostering automation in the financial markets and featuring high potential complementarities.</p>
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<p>Cerved is the third-largest collector of NPLs in Italy, a business that is expected to grow due to  rising bad debts resulting from the aftermath of Covid-19. Ion has been pursuing Cerved since the latter said it was negotiating with PE funds the sale of its credit management division. </p>
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<p>My fair value estimate on a standalone-basis is €11.04/share (DCF based, see <a href="https://www.smartkarma.com/insights/trading-above-terms-at-the-start-of-the-tender-offer-period" target="_blank" data-smartkarma-citation="insights:54546" rel="noopener">Trading Above Terms at the Start of the Tender Offer Period</a>), 8% above the current offer price. Median TP on Capital IQ consensus is €10.4. Gross spread to the increased consideration is 2.3%. Upside could come from an increased offer from Ion. The share is supported by solid fundamentals, although risk could come from business plan execution. Reiterate <strong>long CERV IM</strong>.</p>
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On 27 August, Castor (the acquisition vehicle of Ion) raised the offer price to €10.20/share, a c. 7.4% increase, for a total consideration of €1,976 mn. The minimum threshold condition was raised to a stake of 80% from 50% plus one share and the tender period was extended until 9 September.
Ion has been pursuing Cerved since Cerved said it was negotiating with PE funds the sale of its credit management division. Ion had snapped Italian banking software provider Cedacri just prior to presenting the first offer for Cerved. The market considers that a combination of the two groups would make industrial sense, although Ion stated it supports Cerved's business plan. Nevertheless, Ion is know for aggressive cost-cutting. In this brinkmanship game between Ion and Cerved, the Board of the latter considers the increased offer insufficient.

Ion has grown largely via acquisitions and therefore has acted as a consolidator, looking for complementary businesses with which to integrate its services. Ion aims to disrupt the current market by fostering automation in the financial markets and featuring high potential complementarities.


Cerved is the third-largest collector of NPLs in Italy, a business that is expected to grow due to  rising bad debts resulting from the aftermath of Covid-19. Ion has been pursuing Cerved since the latter said it was negotiating with PE funds the sale of its credit management division. 

My fair value estimate on a standalone-basis is €11.04/share (DCF based, see Trading Above Terms at the Start of the Tender Offer Period), 8% above the current offer price. Median TP on Capital IQ consensus is €10.4. Gross spread to the increased consideration is 2.3%. Upside could come from an increased offer from Ion. The share is supported by solid fundamentals, although risk could come from business plan execution. Reiterate long CERV IM.
















Italy

Cerved Group S.p.A. offers research solutions to assess the economic and financial structure and reliability of businesses.

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Cerved Group S.p.A. (CERV IM)

Europe HY Trade Book - May 2022 - Lucror Analytics

The Europe HY Trade Book for May 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with...

Lucror Analytics

Europe HY Trade Book - April 2022 - Lucror Analytics

The Europe HY Trade Book for April 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with...

Lucror Analytics

Europe HY Trade Book - February 2022 - Lucror Analytics

The Europe HY Trade Book for February 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with...

Lucror Analytics

ION/Cerved: Offer Results, What Next?

Since Castor did not reach 90%, there's no obligation to buy the shares of minority holders. Still, a delisting could still happen. Shares are...

Jesus Rodriguez Aguilar

Castor Raises Bid for Cerved

My fair value estimate on a standalone-basis is €11.04/share. Gross spread to the increased consideration is 2.3%. Upside could come from an...

Jesus Rodriguez Aguilar

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