European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 24 April, <a href="https://www.smartkarma.com/entities/leonardo-spa" target="_blank" data-smartkarma-citation="entities:21190:1" rel="noopener">Leonardo SpA (LDO IM)</a> <a href="https://www.leonardocompany.com/en/press-release-detail/-/detail/24-04-2021-leonardo-acquista?f=%2Finvestors" target="_blank" rel="noopener">agreed to acquire</a> a 25.1% stake in <a href="https://www.smartkarma.com/entities/hensoldt-ag" target="_blank" data-smartkarma-citation="entities:33024:1" rel="noopener">Hensoldt AG (HAG GR)</a>  from KKR for €23 per share.<ul>
<li>For an implied equity value of €2,415 mn and an implied EV of €2,980 mn.</li>
<li>The consideration represents 1.6x EV/Fwd Revenue, 9.9x EV/Fwd EBITDA and 21.2x Fwd P/E.</li>
</ul>This follows conversations with other firms with interests in defence, which included <a href="https://www.smartkarma.com/entities/indra-sistemas-sa" target="_blank" data-smartkarma-citation="entities:21277:1" rel="noopener">Indra Sistemas Sa (IDR SM)</a>, Leonardo, <a href="https://www.smartkarma.com/entities/saab-ab" target="_blank" data-smartkarma-citation="entities:22469:1" rel="noopener">Saab AB (SAABB SS)</a> and <a href="https://www.smartkarma.com/entities/thales-sa" target="_blank" data-smartkarma-citation="entities:21483:1" rel="noopener">Thales SA (HO FP)</a>.Leonardo seeks to increase the defence electronics business and access new European defence programs. Both Hensoldt and Leonardo have co-operated on the Eurofighter and this tie-up will allow them to gain critical mass vs. other European champions such as Dassault and Thales.The German government has a golden share in the company, which allows the German government to block strategic decisions.KKR has succeeded in extracting value from its investment: from €12/share upon listing to €17.07/share in the 25.1% sale to KfW and now €23/share in this 25.1% sale to Leonardo. KKR retains c.18% of Hensoldt.On 23 April, Hensoldt closed at €15.58. Upon opening of the market on 26 April, expect Hensoldt to increase to levels c. €23 per share.Recommendation is long Hensoldt, TP €24.6 (implied EV/Fwd EBITDA valuation from comparables), c. 7% upside to the price agreed between KKR and Leonardo.

On 24 April, Leonardo SpA (LDO IM) agreed to acquire a 25.1% stake in Hensoldt AG (HAG GR)  from KKR for €23 per share.
For an implied equity value of €2,415 mn and an implied EV of €2,980 mn.
The consideration represents 1.6x EV/Fwd Revenue, 9.9x EV/Fwd EBITDA and 21.2x Fwd P/E.
This follows conversations with other firms with interests in defence, which included Indra Sistemas Sa (IDR SM), Leonardo, Saab AB (SAABB SS) and Thales SA (HO FP).Leonardo seeks to increase the defence electronics business and access new European defence programs. Both Hensoldt and Leonardo have co-operated on the Eurofighter and this tie-up will allow them to gain critical mass vs. other European champions such as Dassault and Thales.The German government has a golden share in the company, which allows the German government to block strategic decisions.KKR has succeeded in extracting value from its investment: from €12/share upon listing to €17.07/share in the 25.1% sale to KfW and now €23/share in this 25.1% sale to Leonardo. KKR retains c.18% of Hensoldt.On 23 April, Hensoldt closed at €15.58. Upon opening of the market on 26 April, expect Hensoldt to increase to levels c. €23 per share.Recommendation is long Hensoldt, TP €24.6 (implied EV/Fwd EBITDA valuation from comparables), c. 7% upside to the price agreed between KKR and Leonardo.

Leonardo/Hensoldt: Acquisition of Controlling Stake

Germany

HENSOLDT AG produces and distributes sensors. The Company offers sensor systems for protection, surveillance, and situational awareness in the fields of radar, optronics, electronic warfare, and avionics. HENSOLDT offers space radars, direction finders, electronic warfare systems, and night vision attachments worldwide.

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Leonardo/Hensoldt: Acquisition of Controlling Stake

On 23 April, Hensoldt closed at €15.58. Upon opening on 26 April, expect share price to increase to c. €23 per share. On an EV/Fwd EBITDA basis,...

Jesus Rodriguez Aguilar