European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

In my Insight <a href="https://www.smartkarma.com/insights/entra-asa-competing-offers" target="_blank" data-smartkarma-citation="insights:45673" rel="noopener">Entra ASA: Competing Offers</a>, I highlighted that investors expected increased bids for <a href="https://www.smartkarma.com/entities/entra-asa" target="_blank" data-smartkarma-citation="entities:22229:1" rel="noopener">Entra ASA (ENTRA NO)</a>, from SBB or others, now that Entra was in play. I recommended long Entra, TP NOK194 (20% premium to Entra’s Q3 2020 EPRA NRV).
The bidding war has since heated up:
<ul>
<li>On 18 December, <a href="https://www.smartkarma.com/entities/castellum-ab" target="_blank" data-smartkarma-citation="entities:22321:1" rel="noopener">Castellum AB (CAST SS)</a> increased its bid for Entra by 13.9% to NOK 185 a piece in cash and shares, and signed SEK18.1 bn property deals with Blackstone.
<ul>
<li>The Norwegian government had agreed to sell its 8.24% stake in Entra to Castellum (15 million shares at NOK169 per share in cash). The price will be adjusted at the new offer price.</li>
</ul>
</li>
<li>On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share (for a total of NOK34.6 bn), exceeding the last offer made by rival Castellum.</li>
</ul>
Entra has said it is prepared to engage with potential buyers and to discuss alternatives to the company’s independence strategy. It also hinted it was expecting other bids, as it recommended shareholders to "keep their options open for the time being".
<ul>
<li>It also appreciated the improved bid by SBB “The board appreciates the continued interest in Entra shown by SBB, and notes the improvement in the financial terms proposed relative to SBB’s earlier proposal”</li>
</ul>
SBB's bid is superior, not only is higher, but also offers a larger cash component.
<ul>
<li>32.2% premium to Entra's closing price on 23 November.</li>
<li>This represents 28.4x EV/Fwd EBITDA, 28.4x P/Fwd E, 26.7x, 26.7x deal value/est. FFO NSD, and 18.8% premium to EPRA's NAV as of 30 September.</li>
</ul>
Entra’s shares jumped 3.5% on the news and closed at NOK 195.5, indicating investors see potential for a higher bid.
To further complicate matters, there are now two shareholders, Folketrygdfondet (12%), which so far has refused to sell, and <a href="https://www.smartkarma.com/entities/fastighets-ab-balder" target="_blank" data-smartkarma-citation="entities:22289:1" rel="noopener">Fastighets Ab Balder (BALDB SS)</a> (15%) that can prevent any bidder from exceeding the 90% needed, and are, then in a powerful bargaining position.
Recommendation is LONG Entra.
<ul>
<li>Shares are trading 2.9% above SBB's offer (and c. 0.8% above my 28 November TP recommendation, NOK 194).</li>
<li>Downside limited by SBB's bid.</li>
<li>Bids for Entra could reach NOK200 per share.</li>
</ul>

In my Insight Entra ASA: Competing Offers, I highlighted that investors expected increased bids for Entra ASA (ENTRA NO), from SBB or others, now that Entra was in play. I recommended long Entra, TP NOK194 (20% premium to Entra’s Q3 2020 EPRA NRV).
The bidding war has since heated up:

On 18 December, Castellum AB (CAST SS) increased its bid for Entra by 13.9% to NOK 185 a piece in cash and shares, and signed SEK18.1 bn property deals with Blackstone.

The Norwegian government had agreed to sell its 8.24% stake in Entra to Castellum (15 million shares at NOK169 per share in cash). The price will be adjusted at the new offer price.


On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share (for a total of NOK34.6 bn), exceeding the last offer made by rival Castellum.

Entra has said it is prepared to engage with potential buyers and to discuss alternatives to the company’s independence strategy. It also hinted it was expecting other bids, as it recommended shareholders to "keep their options open for the time being".

It also appreciated the improved bid by SBB “The board appreciates the continued interest in Entra shown by SBB, and notes the improvement in the financial terms proposed relative to SBB’s earlier proposal”

SBB's bid is superior, not only is higher, but also offers a larger cash component.

32.2% premium to Entra's closing price on 23 November.
This represents 28.4x EV/Fwd EBITDA, 28.4x P/Fwd E, 26.7x, 26.7x deal value/est. FFO NSD, and 18.8% premium to EPRA's NAV as of 30 September.

Entra’s shares jumped 3.5% on the news and closed at NOK 195.5, indicating investors see potential for a higher bid.
To further complicate matters, there are now two shareholders, Folketrygdfondet (12%), which so far has refused to sell, and Fastighets Ab Balder (BALDB SS) (15%) that can prevent any bidder from exceeding the 90% needed, and are, then in a powerful bargaining position.
Recommendation is LONG Entra.

Shares are trading 2.9% above SBB's offer (and c. 0.8% above my 28 November TP recommendation, NOK 194).
Downside limited by SBB's bid.
Bids for Entra could reach NOK200 per share.


Entra - SBB - Castellum: Bidding War Heats Up

On 24 November, <a href="https://www.smartkarma.com/entities/entra-asa" target="_blank" data-smartkarma-citation="entities:22229:1" rel="noopener">Entra ASA (ENTRA NO)</a> rejected Swedish property company Samhällsbyggnadsbolaget i Norden AB (SBB)'s intention to launch an offer to acquire all of Entra's outstanding shares for NOK30.01 bn.
<ul>
<li>SBB had offered to pay NOK165 per share, split in NOK115.5 in cash (70% of the consideration, NOK30 bn) and NOK49.5 (30% of the consideration) in new SBB class B (non-voting) shares.</li>
</ul>
On 25 November, informal discussions regarding a potential merger between Swedish real estate company <a href="https://www.smartkarma.com/entities/castellum-ab" target="_blank" data-smartkarma-citation="entities:22321:1" rel="noopener">Castellum AB (CAST SS)</a> and Entra ended after the parties were unable to reach an agreement.
On 26 November, Castellum announced its intention to launch a rival bid for the remaining 91.8% stake in Entra for a total of NOK30.8 bn  ($3.5 billion) cash (15%) and shares (85%), exceeding the offer from rival Swedish firm SBB.
<ul>
<li>13 newly issued Castellum shares for every 20 shares in Entra (0.65 exchange ratio) and NOK 25.68 in cash per share in Entra (base case consideration), valuing each Entra share at NOK170.86, 3.5% higher than SBB's offer.</li>
<li>5.5% premium to Entra’s Q3 2020 EPRA NRV.</li>
</ul>
On 27 November, SBB formally launched its offer.
While SBB's offer is lower, it has a higher cash component, 70%, vs 15% for Castellum's. Castellum's has the support of Norwegian government, whom has agreed to sell its 8.2% in Entra to Castellum, at NOK169, in cash.
<ul>
<li>There is execution risk to Castellum's offer. Given that SBB's offer looks less risky for Entra's shareholders.</li>
<li>Neither bid appears solicited either.</li>
</ul>
Investors expect more bids: on 27 November, Entra’s shares rose 0.4% to close at NOK176.2, above the current offer price, while Castellum’s shares rose 0.3%.
The move by both Swedish real estate companies looks like an opening gambit. An improved bid could come from SBB or others, now that Entra is in play. Moreover, there's interloper risk from private equity.
<ul>
<li>An improved bid could come up to a level of NOK194 per share, 20% premium to Entra’s Q3 2020 EPRA NRV. (Castellum is trading at 15% premium to spot NAV).</li>
</ul>
Recommendation is long Entra, TP NOK194.

On 24 November, Entra ASA (ENTRA NO) rejected Swedish property company Samhällsbyggnadsbolaget i Norden AB (SBB)'s intention to launch an offer to acquire all of Entra's outstanding shares for NOK30.01 bn.

SBB had offered to pay NOK165 per share, split in NOK115.5 in cash (70% of the consideration, NOK30 bn) and NOK49.5 (30% of the consideration) in new SBB class B (non-voting) shares.

On 25 November, informal discussions regarding a potential merger between Swedish real estate company Castellum AB (CAST SS) and Entra ended after the parties were unable to reach an agreement.
On 26 November, Castellum announced its intention to launch a rival bid for the remaining 91.8% stake in Entra for a total of NOK30.8 bn  ($3.5 billion) cash (15%) and shares (85%), exceeding the offer from rival Swedish firm SBB.

13 newly issued Castellum shares for every 20 shares in Entra (0.65 exchange ratio) and NOK 25.68 in cash per share in Entra (base case consideration), valuing each Entra share at NOK170.86, 3.5% higher than SBB's offer.
5.5% premium to Entra’s Q3 2020 EPRA NRV.

On 27 November, SBB formally launched its offer.
While SBB's offer is lower, it has a higher cash component, 70%, vs 15% for Castellum's. Castellum's has the support of Norwegian government, whom has agreed to sell its 8.2% in Entra to Castellum, at NOK169, in cash.

There is execution risk to Castellum's offer. Given that SBB's offer looks less risky for Entra's shareholders.
Neither bid appears solicited either.

Investors expect more bids: on 27 November, Entra’s shares rose 0.4% to close at NOK176.2, above the current offer price, while Castellum’s shares rose 0.3%.
The move by both Swedish real estate companies looks like an opening gambit. An improved bid could come from SBB or others, now that Entra is in play. Moreover, there's interloper risk from private equity.

An improved bid could come up to a level of NOK194 per share, 20% premium to Entra’s Q3 2020 EPRA NRV. (Castellum is trading at 15% premium to spot NAV).

Recommendation is long Entra, TP NOK194.

Norway

Entra ASA is a real estate company. The Company owns, develops, and manages properties in Norway. Entra focuses on office properties, centralizing around main Norwegian cities.

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Entra ASA (ENTRA NO)

Entra - SBB - Castellum: Bidding War Heats Up

SBB's offer superior to Castellum's. Entra hints other bids expected. is LONG Entra (trading 2.9% above SBB's, c. 0.8% above my 28 Nov TP...

Jesus Rodriguez Aguilar

Entra ASA: Competing Offers

Investors expect more bids. The move for Entra by both Swedish real estate companies looks like an opening gambit. An improved bid could come from...

Jesus Rodriguez Aguilar

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