European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.</li>
<li>At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors' approach.</li>
<li>I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).</li>
</ul>


Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.
At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors' approach.
I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).


Kinetic & Globalvia/Go-Ahead: Recommended Offer

<ul>
<li>Stagecoach has agreed to a <strong>105p cash offer</strong> from DWS (37% premium, 14.7x EV/Fwd EBIT). The board has withdrawn the prior recommendation for an all-share merger with National Express.</li>
<li>National Express could respond by increasing its offer in line with DWS's, but that would imply giving away c. 50% of the combined company, which I think unlikely.</li>
<li>The offer is not incredibly generous, but there are risks (soaring fuel prices, inflation, etc.). Gross spread is nil and the offer is likely to close.</li>
</ul>


Stagecoach has agreed to a 105p cash offer from DWS (37% premium, 14.7x EV/Fwd EBIT). The board has withdrawn the prior recommendation for an all-share merger with National Express.
National Express could respond by increasing its offer in line with DWS's, but that would imply giving away c. 50% of the combined company, which I think unlikely.
The offer is not incredibly generous, but there are risks (soaring fuel prices, inflation, etc.). Gross spread is nil and the offer is likely to close.


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<p><strong>Corrigenda</strong>: There is an error in this insight. Please note the correction.</p>
<p><strong>Correction</strong>: in the 3rd bullet in Executive Summary:<br>Instead of “Short 1 SGE LN, long 0.36 NEX LN” should read “Long 1 SGE LN, short 0.36 NEX LN”</p>
</div>
</div>
<ul>
<li>The deal is defensive and centered in the UK, with US, Spain and Morocco as other major markets. It seeks scale and the synergies look achievable.</li>
<li>The consideration represents a 18% premium, 12.7 EV/Fwd EBITDA and 19.5x Fwd P/E.</li>
</ul>
<div>
<ul>
<li>Stagecoach shareholders will likely approve the integration. <strong>Short 1 SGE LN, long 0.36 NEX LN</strong>. Patience may be needed to set up a large position.</li>
</ul>
<p></p>
</div>



Corrigenda: There is an error in this insight. Please note the correction.
Correction: in the 3rd bullet in Executive Summary: Instead of “Short 1 SGE LN, long 0.36 NEX LN” should read “Long 1 SGE LN, short 0.36 NEX LN”



The deal is defensive and centered in the UK, with US, Spain and Morocco as other major markets. It seeks scale and the synergies look achievable.
The consideration represents a 18% premium, 12.7 EV/Fwd EBITDA and 19.5x Fwd P/E.



Stagecoach shareholders will likely approve the integration. Short 1 SGE LN, long 0.36 NEX LN. Patience may be needed to set up a large position.




National Express/Stagecoach: All-Stock Merger

US/Europe Event-Driven Analyst

John DeMasi

<p><a href="https://www.smartkarma.com/entities/firstgroup-plc" target="_blank" data-smartkarma-citation="entities:21936:1" rel="noopener">Firstgroup PLC (FGP LN)</a> is a UK-based transit provider that has been in the sights of activist investors on and off for a number of years.</p>
<p>In this report I look at the history of activist tilts towards FGP LN including the latest attempt by Coast Capital, as well as delve into business performance and share price valuation, and see what it all means for event-driven investors.</p>

Firstgroup PLC (FGP LN) is a UK-based transit provider that has been in the sights of activist investors on and off for a number of years.
In this report I look at the history of activist tilts towards FGP LN including the latest attempt by Coast Capital, as well as delve into business performance and share price valuation, and see what it all means for event-driven investors.

FirstGroup Plc – Barbarians at the Bus Stop

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Concerns over perceived U.S. central bank policy missteps have been <em>somewhat alleviated </em>following dovish takeaways from Fed Chair Powell’s comments this week. However, trade tensions remain a concern for global markets despite optimism surrounding the Trump/Xi meeting at the G20 summit this week. Therefore, our outlook remains cautious and we expect consolidation to continue as global equities enjoy a bounce off of recent lows. Ultimately, we will need to see more definitive signs of bottoming throughout Europe, Asia, and the U.S. before getting positive on global equities.  We provide a technical appraisal of major markets and highlight attractive set ups in global transportation, communications, and financial sectors</p>

Concerns over perceived U.S. central bank policy missteps have been somewhat alleviated following dovish takeaways from Fed Chair Powell’s comments this week. However, trade tensions remain a concern for global markets despite optimism surrounding the Trump/Xi meeting at the G20 summit this week. Therefore, our outlook remains cautious and we expect consolidation to continue as global equities enjoy a bounce off of recent lows. Ultimately, we will need to see more definitive signs of bottoming throughout Europe, Asia, and the U.S. before getting positive on global equities.  We provide a technical appraisal of major markets and highlight attractive set ups in global transportation, communications, and financial sectors

Global Equity Strategy: Bouncing off Lows, China Perking Up

United Kingdom

Stagecoach Group plc is an international transport group, with operations in the UK, United States and Canada. The Company operates bus, coach, train, and tram services.

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Stagecoach (SGC LN)

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The Board recommends Kinetic and Globalvia offer, but the market believes Go-Ahead is worth more. The shares are trading 6% above the consideration...

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Stagecoach has agreed to an offer by DWS Infrastructure, and has therefore withdrawn its previous recommendation to the offer by National Express,...

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At the closing 15 Dec. prices, the spread was 6%. This may be explained by the expected close review by the CMA and the anticipated twelve months...

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FirstGroup Plc – Barbarians at the Bus Stop

Firstgroup PLC (FGP LN) is a UK-based transit provider that has been in the sights of activist investors on and off for a number of years. In this...

John DeMasi

Global Equity Strategy: Bouncing off Lows, China Perking Up

Concerns over perceived U.S. central bank policy missteps have been somewhat alleviated following dovish takeaways from Fed Chair Powell’s comments...

Vermilion Research

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