Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On March 28, 2019, Pulver BidCo GmbH (“Pulver BidCo” or the “Bidder”), a holding company jointly controlled by funds advised by Hellman &amp; Friedman LLC (“Hellman &amp; Friedman” or “H&amp;F”) and affiliates of The Blackstone Group L.P. (“Blackstone”) announced the launch of their Offer for <a href="https://www.smartkarma.com/entities/21629" target="_blank" data-smartkarma-citation="entities:21629:1">Scout24 AG (G24 GR)</a> shares at €46.00/share. The Offer was designed to obtain 50% plus a share but leave the company listed afterward.This was the official launch of the deal which had been proposed in February 5.7% higher than January's foray which was rejected. This was discussed on <a href="https://www.smartkarma.com/home/?share=Quiddity1" target="_blank">Smartkarma</a> at the time in <a href="https://www.smartkarma.com/insights/scout24-tender-offer-launched-price-still-not-quite-full" target="_blank" data-smartkarma-citation="insights:28887">Scout24 Tender Offer Launched: Price Still Not Quite Full</a>. Since the original February announcement all the way through the official offer announcement and beyond, the shares have traded much of the time through the terms, and there have been market noises of approaches to the Bidders to raise the price.On April 10th, the Management Board and Supervisory Board of Scout24 AG, after conducting separate enquiries into the fairness and adequacy of the Offer, <a href="https://www.scout24.com/en/Press-Media/News-Archive/scout24-ag-management-board-and-supervisory-board-of-scout24-ag-recommend-accepting-takeover-offer-of-pulver-bidco-gmbh.aspx" target="_blank">announced</a> they recommended accepting takeover offer of Pulver BidCo GmbH in their "joint reasoned statement" (gemeinsame begründete Stellungnahme) pursuant to section 27 of the German Securities Acquisition and Takeover Act. As such, all members of the Management Board and the Supervisory Board who hold Scout24 shares will accept the takeover offer for all shares held and controlled by them.Yesterday, the bidder produced an <a href="https://scout24-offer.com/download/companies/ma1023/ma1023further/20190430_Scout24_PM_en.pdf" target="_blank">update</a> on the Offer prior to the market open saying, <blockquote>Since the publication of the Offer document, the Bidder has been approached by Scout24 AG shareholders to request an increase in the Offer price. The Bidder hereby confirms that it will not increase the Offer price. [my bold]</blockquote>I had thought the price slightly light in <a href="https://www.smartkarma.com/insights/scout24-tender-offer-launched-price-still-not-quite-full" target="_blank" data-smartkarma-citation="insights:28887">Scout24 Tender Offer Launched: Price Still Not Quite Full</a>. Several days before the announcement of the launch of the Offer, Scout24 had announced record results for 2018 and double-digit growth forecasts for 2019.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/518/original/Screenshot%202019-05-01%20at%206.30.21%20PM.png?1556706640" class="editor-image img-responsive" data-smartkarma-image-id="86518"></figure><div style="text-align: left;" class="content-caption">source: Scout24 announcement</div>This deal, at 24x TTM EBITDA, is at ~17x 2019e EV/EBITDA. Silver Lake bid 20x for ZPG. 17x EV/EBITDA for a company with double digit revenue growth and 50+ EBITDA margins is not an overwhelming price. In March I said that I would be a buyer at €46.01/share for the optionality. There isn't much optionality left.

On March 28, 2019, Pulver BidCo GmbH (“Pulver BidCo” or the “Bidder”), a holding company jointly controlled by funds advised by Hellman &amp; Friedman LLC (“Hellman &amp; Friedman” or “H&amp;F”) and affiliates of The Blackstone Group L.P. (“Blackstone”) announced the launch of their Offer for Scout24 AG (G24 GR) shares at €46.00/share. The Offer was designed to obtain 50% plus a share but leave the company listed afterward.This was the official launch of the deal which had been proposed in February 5.7% higher than January's foray which was rejected. This was discussed on Smartkarma at the time in Scout24 Tender Offer Launched: Price Still Not Quite Full. Since the original February announcement all the way through the official offer announcement and beyond, the shares have traded much of the time through the terms, and there have been market noises of approaches to the Bidders to raise the price.On April 10th, the Management Board and Supervisory Board of Scout24 AG, after conducting separate enquiries into the fairness and adequacy of the Offer, announced they recommended accepting takeover offer of Pulver BidCo GmbH in their "joint reasoned statement" (gemeinsame begründete Stellungnahme) pursuant to section 27 of the German Securities Acquisition and Takeover Act. As such, all members of the Management Board and the Supervisory Board who hold Scout24 shares will accept the takeover offer for all shares held and controlled by them.Yesterday, the bidder produced an update on the Offer prior to the market open saying, Since the publication of the Offer document, the Bidder has been approached by Scout24 AG shareholders to request an increase in the Offer price. The Bidder hereby confirms that it will not increase the Offer price. [my bold]I had thought the price slightly light in Scout24 Tender Offer Launched: Price Still Not Quite Full. Several days before the announcement of the launch of the Offer, Scout24 had announced record results for 2018 and double-digit growth forecasts for 2019.source: Scout24 announcementThis deal, at 24x TTM EBITDA, is at ~17x 2019e EV/EBITDA. Silver Lake bid 20x for ZPG. 17x EV/EBITDA for a company with double digit revenue growth and 50+ EBITDA margins is not an overwhelming price. In March I said that I would be a buyer at €46.01/share for the optionality. There isn't much optionality left.

In December (13 Dec after trading hours), the FT had an <a href="https://www.ft.com/content/f5205604-ff0f-11e8-ac00-57a2a826423e" target="_blank">article</a> noting that Germany's leading property classifieds firm <a href="https://www.smartkarma.com/entities/21629" target="_blank" data-smartkarma-citation="entities:21629:1">Scout24 AG (G24 GR)</a> (also known for auto classifieds across Europe) was possibly looking to sell itself and that PE firms were lining up to bid. Silver Lake, which had bought British player ZPG (which operates property portals Zoopla and PrimeLocation) for $2.8bn in July 2018, was mentioned as a bidder. Once owned by Deutsche Telekom, control of Scout24 was sold to Blackstone and Hellman &amp; Friedman LLC in 2013-14 (H&amp;F spent €1.5 billion to take a 70% stake in 2013, and Blackstone bought a stake of undisclosed size in 2014), and they listed the company in 2015 with an initial market cap of €3.2 billion. The IPO was €1.16 billion and both sold down, with H&amp;F fully exiting in a placement in 2016.
The share price had been doing well until Q3 last year when German lawmakers, anxious with skyrocketing property prices, started looking at revamping the structure of real estate transaction costs so that they were borne by sellers rather than loaded onto buyers. The shares fell.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/533/original/Screenshot%202019-03-29%20at%202.45.25%20AM.png?1553798952" class="editor-image img-responsive" data-smartkarma-image-id="83533"></figure>
<div style="text-align: left;" class="content-caption">source: investing.com</div>
A combination of Blackstone and Hellman &amp; Friedman LLC launched an non-LBO LBO for <a href="https://www.smartkarma.com/entities/21629" target="_blank" data-smartkarma-citation="entities:21629:1">Scout24 AG (G24 GR)</a> in mid-January at €43.50/share (€4.7 billion) which was about an 8% premium to the then-current market price, which had already been juiced because of speculation starting after the FT article in late December. The company rejected the Offer saying it was too low. 
The two buyers came back in mid-February with a <a href="https://scout24-offer.com/download/companies/ma1023/ma1023pflicht/Section10Announcement_en.pdf" target="_blank">Takeover Offer</a> priced at €46.00/share, 5.7% higher than January's foray and 27% higher than the level pre-FT article; that was about 25x earnings and 28x 2019e cashflow, which is a bit lower than Silver Lake's ZPG buy multiple. Both Scout24’s Management Board and Supervisory Board agreed to support the offer and said they believed that the transaction is in the best interest of the Company, and an Investment Agreement was signed between the three companies.
The unusual thing about this deal is that the two PE firms are looking to buy a minimum of 50% plus one share, and leave the company listed. The shares jumped to €46 and have been trading at just below to slightly through, leaving many to think that this was a setup for a strategic buyer or possibly Silver Lake to come in over the top. 
<h2>The New News</h2>
Yesterday, the BidCo officially launched its <a href="https://scout24-offer.com/download/companies/ma1023/ma1023/20190328_OfferDocumentPulverBidCoGmbH_en.pdf" target="_blank">Tender Offer</a> at €46, due to run through 9th May.
More discussion below.

In December (13 Dec after trading hours), the FT had an article noting that Germany's leading property classifieds firm Scout24 AG (G24 GR) (also known for auto classifieds across Europe) was possibly looking to sell itself and that PE firms were lining up to bid. Silver Lake, which had bought British player ZPG (which operates property portals Zoopla and PrimeLocation) for $2.8bn in July 2018, was mentioned as a bidder. Once owned by Deutsche Telekom, control of Scout24 was sold to Blackstone and Hellman &amp; Friedman LLC in 2013-14 (H&amp;F spent €1.5 billion to take a 70% stake in 2013, and Blackstone bought a stake of undisclosed size in 2014), and they listed the company in 2015 with an initial market cap of €3.2 billion. The IPO was €1.16 billion and both sold down, with H&amp;F fully exiting in a placement in 2016.
The share price had been doing well until Q3 last year when German lawmakers, anxious with skyrocketing property prices, started looking at revamping the structure of real estate transaction costs so that they were borne by sellers rather than loaded onto buyers. The shares fell.

source: investing.com
A combination of Blackstone and Hellman &amp; Friedman LLC launched an non-LBO LBO for Scout24 AG (G24 GR) in mid-January at €43.50/share (€4.7 billion) which was about an 8% premium to the then-current market price, which had already been juiced because of speculation starting after the FT article in late December. The company rejected the Offer saying it was too low. 
The two buyers came back in mid-February with a Takeover Offer priced at €46.00/share, 5.7% higher than January's foray and 27% higher than the level pre-FT article; that was about 25x earnings and 28x 2019e cashflow, which is a bit lower than Silver Lake's ZPG buy multiple. Both Scout24’s Management Board and Supervisory Board agreed to support the offer and said they believed that the transaction is in the best interest of the Company, and an Investment Agreement was signed between the three companies.
The unusual thing about this deal is that the two PE firms are looking to buy a minimum of 50% plus one share, and leave the company listed. The shares jumped to €46 and have been trading at just below to slightly through, leaving many to think that this was a setup for a strategic buyer or possibly Silver Lake to come in over the top. 
The New News
Yesterday, the BidCo officially launched its Tender Offer at €46, due to run through 9th May.
More discussion below.

Scout24 Tender Offer Launched: Price Still Not Quite Full

Germany

Scout24 AG is an operator of digital classifieds platforms. The Company specializes in the real estate and automotive sectors in Germany and other selected European countries.

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Scout24 AG (G24 GR)

Scout24 Offer Final: Time To Unwind

On March 28, 2019, Pulver BidCo GmbH (“Pulver BidCo” or the “Bidder”), a holding company jointly controlled by funds advised by Hellman &...

Travis Lundy

Scout24 Tender Offer Launched: Price Still Not Quite Full

In December (13 Dec after trading hours), the FT had an article noting that Germany's leading property classifieds firm Scout24 AG (G24 GR) (also...

Travis Lundy

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