European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>The acceptance period runs until 2 September. HAL now controls 52.9% of Boskalis (Stichting Hyacinth will presumably keep buying at €32 or less). HAL will consolidate Boskalis from H2 2022.</li>
<li>The Boards of Boskalis have concluded that the offer price is not sufficiently convincing to recommend it to Boskalis' shareholders. Good try, but twisting HAL's arm seems difficult. Premium is 0.06%.</li>
<li>Considering the precedent of Orange/Orange Belgium, I would only open a position below the offer price. HAL will now consolidate Boskalis and does not need to sweeten the offer.</li>
</ul>


The acceptance period runs until 2 September. HAL now controls 52.9% of Boskalis (Stichting Hyacinth will presumably keep buying at €32 or less). HAL will consolidate Boskalis from H2 2022.
The Boards of Boskalis have concluded that the offer price is not sufficiently convincing to recommend it to Boskalis' shareholders. Good try, but twisting HAL's arm seems difficult. Premium is 0.06%.
Considering the precedent of Orange/Orange Belgium, I would only open a position below the offer price. HAL will now consolidate Boskalis and does not need to sweeten the offer.


HAL Holding/​Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium

On 27 April, <a href="https://www.smartkarma.com/entities/orange-sa" target="_blank" data-smartkarma-citation="entities:21522:1" rel="noopener">Orange SA (ORA FP)</a> published the results of its offer for <a href="https://www.smartkarma.com/entities/orange-belgium-sa" target="_blank" data-smartkarma-citation="entities:21340:1" rel="noopener">Orange Belgium SA (MOBB EU)</a>. It now holds a 74.68% stake.
Orange has decided to re-open the tender for five trading days (28 April to 4 May inclusive, offer price unchanged) with the aim of gaining more acceptances.
Orange Belgium closed at €22.25 on 27 April, a 1.8% higher vs. the prior trading session and 1.1% above Orange's re-opened offer. The shares are inexpensive, trading at 5.2x EV/Fwd EBITDA (vs. 5.96x for peers), and offer a 9.3% 21e EFCF yield.
Its seems difficult that Orange will gain any more offer acceptances and as per Polygon's statement, it is far from being able to squeeze-out and delist. In the absence of any negotiations about bumping the offer price, TP lowered to €26.6, in line with peers' median EV/Fwd EBITDA. Reiterate long.
Risks: lower liquidity for the shares (I estimate c. €1 mn daily), lower revenues from higher competition and/or rising wholesale cable costs, higher capex investments than expected (Orange has not made clear whether they will be with a FTTH partner or will seek to acquire a cable company), entrance of a fourth mobile operator.

On 27 April, Orange SA (ORA FP) published the results of its offer for Orange Belgium SA (MOBB EU). It now holds a 74.68% stake.
Orange has decided to re-open the tender for five trading days (28 April to 4 May inclusive, offer price unchanged) with the aim of gaining more acceptances.
Orange Belgium closed at €22.25 on 27 April, a 1.8% higher vs. the prior trading session and 1.1% above Orange's re-opened offer. The shares are inexpensive, trading at 5.2x EV/Fwd EBITDA (vs. 5.96x for peers), and offer a 9.3% 21e EFCF yield.
Its seems difficult that Orange will gain any more offer acceptances and as per Polygon's statement, it is far from being able to squeeze-out and delist. In the absence of any negotiations about bumping the offer price, TP lowered to €26.6, in line with peers' median EV/Fwd EBITDA. Reiterate long.
Risks: lower liquidity for the shares (I estimate c. €1 mn daily), lower revenues from higher competition and/or rising wholesale cable costs, higher capex investments than expected (Orange has not made clear whether they will be with a FTTH partner or will seek to acquire a cable company), entrance of a fourth mobile operator.

On 13 April, <a href="https://www.smartkarma.com/entities/orange-sa" target="_blank" data-smartkarma-citation="entities:21522:1" rel="noopener">Orange SA (ORA FP)</a> <a href="https://www.orange.com/en/newsroom/press-releases/2021/orange-offers-final-price-22-euros-orange-belgium-share-unique" target="_blank" rel="noopener">announced</a> that its €22/share offer for <a href="https://www.smartkarma.com/entities/orange-belgium-sa-e3621832-2a8d-468a-aa88-979a4b982dcd" target="_blank" data-smartkarma-citation="entities:31072:1" rel="noopener">Orange Belgium (OBEL BB)</a> was final.
<ul>
<li>Orange Belgium share price closed 5.1% lower vs. the previous trading session.</li>
<li>According to the proposed schedule, the takeover bid offer will be open from 8 April to 23 April inclusive, and the results will be published on 27 April.</li>
</ul>
Polygon (holder of 5.29%, enough to prevent de-listing) said the offer price "substantially undervalues" the company.
It is difficult to argue that the offer was well-timed, following a period of underperformance from Orange Belgium, as can be seen in the chart below. As mentioned, Orange has a 52.9% stake in Orange. The opportunistic (in my view) bid was launched after a period of underperforming and low valuation (see chart in the Insight).
Analysts have recently been revising upwards the top line and EBITDA estimates of Orange Belgium, as a result of operational momentum and market share gains, especially in broadband. FY2020 EBITDA was c.8% higher vs. FY2019 EBITDA, with c. 230 bps increase in EBITDA margin.
The offer price implies 5.1x EV/21E EBITDA (below the median of peers at 5.9x, see table above) and 9.7% 21E FCF yield (source Capital IQ consensus), and 2.2% dividend yield.
Market seems to think there are grounds for an improved offer, as the share price is still above the offer price.
It is difficult to think of Polygon tendering its stake, it has strategic value and tendering it would hurt Polygon's activist reputation. A new takeout offer could happen one year after the end of the offer period of the current bid.
Taking the mid point between what Orange Belgium is offering and what I believe would be the minimum acceptable valuation for Polygon, would be a palatable €6.5 raise, or €183 mn extra that Orange would have to spend. That would add to Orange's leverage (which already is 17% higher than its market cap).
Recommendation is:
<ul>
<li>Fundamental: speculative buy, the offer undervalues Orange Belgium, in my view. Unchanged TP, €35.13.</li>
<li>Risk arb: monitor and buy on any dip below the offer price.</li>
</ul>
Holdouts may end up with a share with lower liquidity, depending on the number of shares tendered.

On 13 April, Orange SA (ORA FP) announced that its €22/share offer for Orange Belgium (OBEL BB) was final.

Orange Belgium share price closed 5.1% lower vs. the previous trading session.
According to the proposed schedule, the takeover bid offer will be open from 8 April to 23 April inclusive, and the results will be published on 27 April.

Polygon (holder of 5.29%, enough to prevent de-listing) said the offer price "substantially undervalues" the company.
It is difficult to argue that the offer was well-timed, following a period of underperformance from Orange Belgium, as can be seen in the chart below. As mentioned, Orange has a 52.9% stake in Orange. The opportunistic (in my view) bid was launched after a period of underperforming and low valuation (see chart in the Insight).
Analysts have recently been revising upwards the top line and EBITDA estimates of Orange Belgium, as a result of operational momentum and market share gains, especially in broadband. FY2020 EBITDA was c.8% higher vs. FY2019 EBITDA, with c. 230 bps increase in EBITDA margin.
The offer price implies 5.1x EV/21E EBITDA (below the median of peers at 5.9x, see table above) and 9.7% 21E FCF yield (source Capital IQ consensus), and 2.2% dividend yield.
Market seems to think there are grounds for an improved offer, as the share price is still above the offer price.
It is difficult to think of Polygon tendering its stake, it has strategic value and tendering it would hurt Polygon's activist reputation. A new takeout offer could happen one year after the end of the offer period of the current bid.
Taking the mid point between what Orange Belgium is offering and what I believe would be the minimum acceptable valuation for Polygon, would be a palatable €6.5 raise, or €183 mn extra that Orange would have to spend. That would add to Orange's leverage (which already is 17% higher than its market cap).
Recommendation is:

Fundamental: speculative buy, the offer undervalues Orange Belgium, in my view. Unchanged TP, €35.13.
Risk arb: monitor and buy on any dip below the offer price.

Holdouts may end up with a share with lower liquidity, depending on the number of shares tendered.

Orange Belgium - Orange: Final Offer and Holdouts

On 2 December <a href="https://www.smartkarma.com/entities/orange-sa" target="_blank" data-smartkarma-citation="entities:21522:1" rel="noopener">Orange SA (ORA FP)</a> announced that it plans to launch a conditional voluntary public takeover bid on all the shares of Orange Belgium (in SK: <a href="https://www.smartkarma.com/entities/orange-belgium-sa" target="_blank" data-smartkarma-citation="entities:21340:1" rel="noopener">Mobistar SA (MOBB BB)</a> , BBG: OBEL BB) that it does not yet own.
<ul>
<li>Orange S.A. currently owns a 52.91% stake in Orange Belgium S.A.</li>
<li>Orange has stated the offer is conditional, but it has not disclosed what those conditions are.</li>
<li>
Consideration. €22 per share in cash.
<ul>
<li>For the remaining 28.3 million shares, representing a stake of 47.1%.</li>
<li>The offer represents 22.9x P/20E EPS, 5.4x EV/20E EBITDA and 10.9% EFCF yield for 2020E.</li>
</ul>
</li>
<li>There is no minimum acceptance threshold.</li>
<li>Should Orange acquire 95% of the total share capital and 90% of the outstanding minorities, it will initiate a squeeze out (under the same offer terms).</li>
<li>Orange has underlined that its announcement is the expression of an intention and does not constitute a formal notification of a voluntary public takeover bid.</li>
</ul>
On 3 December, shares of Orange Belgium shot up 35.3% and closed at €21.95. On 7 December, the shares closed at €21.80.
This announcement follows recent minority buyout attempts at Altice (see <a href="https://www.smartkarma.com/insights/altice-next-private-takeover-announcement" target="_blank" data-smartkarma-citation="insights:43240" rel="noopener">Altice - Next Private Takeover Announcement</a>), Iliad (see <a href="https://www.smartkarma.com/insights/play-communications-iliad-offer-announcement" target="_blank" data-smartkarma-citation="insights:43457" rel="noopener">Play Communications - Iliad: Offer Announcement</a>) and maybe TalkTalk (see <a href="https://www.smartkarma.com/insights/talktalk-toscafund-preliminary-non-binding-proposal" target="_blank" data-smartkarma-citation="insights:44016" rel="noopener">TalkTalk - Toscafund: Preliminary &amp; Non-Binding Proposal)</a>. Read across: the news could also be supportive for other names in the sector where there is a minority free float.
The offer also represents c. 5.2x EV/NTM EBITDA and c. 20.1x P/NTM EPS vs. the median of comparable companies of 6.0x and 14.6x respectively.
Polygon has build a 5.05% blocking position (through 1,060,032 shares and 1,972,181 CFD).
<ul>
<li>"valuing the company on a range of 6 to 7.5 times EV/EBITDA (which is in line with the trading multiples of Orange Belgium's peers) would result in a price per share of 39.5 to 47.25 euros per share".</li>
<li>Taking the mid-point, that would be €43.375, 97.1% higher that Orange's offer.</li>
</ul>
The gross spread as of 7 December is 1%, which reflects the high probability of the transaction going ahead. For obvious reasons, it is difficult to think of interloper risk, so the cunning move by Polygon will catch some unaware.
Recommendation: LONG Orange Belgium, TP €35.13 per share (implied equity value across median multiple of comparable companies). Risk is that Orange gets cold feet.

On 2 December Orange SA (ORA FP) announced that it plans to launch a conditional voluntary public takeover bid on all the shares of Orange Belgium (in SK: Mobistar SA (MOBB BB) , BBG: OBEL BB) that it does not yet own.

Orange S.A. currently owns a 52.91% stake in Orange Belgium S.A.
Orange has stated the offer is conditional, but it has not disclosed what those conditions are.

Consideration. €22 per share in cash.

For the remaining 28.3 million shares, representing a stake of 47.1%.
The offer represents 22.9x P/20E EPS, 5.4x EV/20E EBITDA and 10.9% EFCF yield for 2020E.


There is no minimum acceptance threshold.
Should Orange acquire 95% of the total share capital and 90% of the outstanding minorities, it will initiate a squeeze out (under the same offer terms).
Orange has underlined that its announcement is the expression of an intention and does not constitute a formal notification of a voluntary public takeover bid.

On 3 December, shares of Orange Belgium shot up 35.3% and closed at €21.95. On 7 December, the shares closed at €21.80.
This announcement follows recent minority buyout attempts at Altice (see Altice - Next Private Takeover Announcement), Iliad (see Play Communications - Iliad: Offer Announcement) and maybe TalkTalk (see TalkTalk - Toscafund: Preliminary &amp; Non-Binding Proposal). Read across: the news could also be supportive for other names in the sector where there is a minority free float.
The offer also represents c. 5.2x EV/NTM EBITDA and c. 20.1x P/NTM EPS vs. the median of comparable companies of 6.0x and 14.6x respectively.
Polygon has build a 5.05% blocking position (through 1,060,032 shares and 1,972,181 CFD).

"valuing the company on a range of 6 to 7.5 times EV/EBITDA (which is in line with the trading multiples of Orange Belgium's peers) would result in a price per share of 39.5 to 47.25 euros per share".
Taking the mid-point, that would be €43.375, 97.1% higher that Orange's offer.

The gross spread as of 7 December is 1%, which reflects the high probability of the transaction going ahead. For obvious reasons, it is difficult to think of interloper risk, so the cunning move by Polygon will catch some unaware.
Recommendation: LONG Orange Belgium, TP €35.13 per share (implied equity value across median multiple of comparable companies). Risk is that Orange gets cold feet.

Contested Orange Plans to Takeout Orange Belgium

Belgium

Orange Belgium offers mobile telephone services in Belgium through a GSM network, as well as fixed-line services for international calls. The Company offers services such as pre-paid calling cards, text messaging, mobile office access for business customers, and games.

Orange Belgium (OBEL BB)

HAL Holding/Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium

This situation is similar to that of Orange/Orange Belgium, and there are grounds to believe that HAL will not sweeten the offer price. I would...

Jesus Rodriguez Aguilar

Orange/Orange Belgium: Offer Re-Opening

The shares are inexpensive (5.2x EV/Fwd EBITDA), and offer a 9.3% 21e EFCF yield. In the absence of further negotiations about offer price, TP...

Jesus Rodriguez Aguilar

Orange Belgium - Orange: Final Offer and Holdouts

Market seems to think there are grounds for an improved offer. It is difficult to think of Polygon tendering its stake as it would hurt its...

Jesus Rodriguez Aguilar

Contested Orange Plans to Takeout Orange Belgium

Activist investor Polygon has build a blocking position. LONG Orange Belgium, TP €35.13 (implied equity value across median multiple of comparable...

Jesus Rodriguez Aguilar

HAL Holding/​Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium

This situation is similar to that of Orange/Orange Belgium, and there are grounds to believe that HAL will not sweeten the offer price. I would...

Jesus Rodriguez Aguilar

Orange/Orange Belgium: Offer Re-Opening

The shares are inexpensive (5.2x EV/Fwd EBITDA), and offer a 9.3% 21e EFCF yield. In the absence of further negotiations about offer price, TP...

Jesus Rodriguez Aguilar

Orange Belgium - Orange: Final Offer and Holdouts

Market seems to think there are grounds for an improved offer. It is difficult to think of Polygon tendering its stake as it would hurt its...

Jesus Rodriguez Aguilar

Contested Orange Plans to Takeout Orange Belgium

Activist investor Polygon has build a blocking position. LONG Orange Belgium, TP €35.13 (implied equity value across median multiple of comparable...

Jesus Rodriguez Aguilar

HAL Holding/Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium