Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Singapore Press, Tabcorp, Invesco Office, Justbon, IHH Healthcare, JD.com

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<p>On 23 April, Société Investissement Deconinck and <a href="https://www.smartkarma.com/entities/wendel-sa" target="_blank" data-smartkarma-citation="entities:21503:1" rel="noopener">Wendel SA (MF FP)</a> offered to acquire a 49.1% stake in <a href="https://www.smartkarma.com/entities/tarkett-sa" target="_blank" data-smartkarma-citation="entities:21562:1" rel="noopener">Tarkett SA (TKTT FP)</a> for €20 per share, cum dividend (approximately €640 mn). Wendel will be able to hold up to 30% of Tarkett at the end of this transaction.</p>
<ul>
<li>This represents 0.6x EV/21e Revenue, 6.7x EV/21e EBITDA and 23.7x P/21e E (source: Capital IQ consensus).</li>
</ul>
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<p data-bind="visible: !isCollapsed(), html: content">The bidders already hold 50.68% of the capital, and the Deconinck family will tender an additional 0.6%. There are no conditions attached to the offer, other than recommendation from the Supervisory Board.</p>
<p data-bind="visible: !isCollapsed(), html: content">The bidders intend to <em>squeeze out and delist</em> Tarkett if they obtain <em>acceptances over 90%</em>. It should be noted that because the offer is taking place according to the simplified procedure, it will not be reopened after the final result is published.</p>
<p data-bind="visible: !isCollapsed(), html: content">Comparables are trading at 12.1x EV/Fwd EBITDA vs. 6.5x for Tarkett, which suggests  there may be rich rewards from restructuring the business. However, there is execution risk.</p>
<p>As the rationale says, "the reinforcement of the family’s control and the contribution of Wendel, a renowned long-term family investor will enable Tarkett to pursue its ongoing transformation and to seize new opportunities".</p>
<p>By using DCF on conservative assumptions (EBITDA figures from Capital IQ consensus, WACC of 9%, 5x EBITDA exit multiple, PV of terminal value equal to €1,262 mn), I estimate a fair value of <strong>€21.18/share</strong>.</p>
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<li>
<p>This is in line with comparable companies implied Fwd P/E valuation of €21.28/share.</p>
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<li>
<p>Median Capital IQ consensus TP is €20/share (7 analysts cover Tarkett).</p>
</li>
</ul>
<p><em>There could be a sweetened offer</em>, and the market seems to think so, as the shares have traded at or slightly above the offer price since announcement. Also traded volume has been above the daily average since the offer announcement.</p>
<p>At current prices €20-20.10, I recommend <strong>Long TKTT, TP €21.28</strong> (6.1% upside) as the risk/reward seems favourable.</p>
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On 23 April, Société Investissement Deconinck and Wendel SA (MF FP) offered to acquire a 49.1% stake in Tarkett SA (TKTT FP) for €20 per share, cum dividend (approximately €640 mn). Wendel will be able to hold up to 30% of Tarkett at the end of this transaction.

This represents 0.6x EV/21e Revenue, 6.7x EV/21e EBITDA and 23.7x P/21e E (source: Capital IQ consensus).










The bidders already hold 50.68% of the capital, and the Deconinck family will tender an additional 0.6%. There are no conditions attached to the offer, other than recommendation from the Supervisory Board.
The bidders intend to squeeze out and delist Tarkett if they obtain acceptances over 90%. It should be noted that because the offer is taking place according to the simplified procedure, it will not be reopened after the final result is published.
Comparables are trading at 12.1x EV/Fwd EBITDA vs. 6.5x for Tarkett, which suggests  there may be rich rewards from restructuring the business. However, there is execution risk.
As the rationale says, "the reinforcement of the family’s control and the contribution of Wendel, a renowned long-term family investor will enable Tarkett to pursue its ongoing transformation and to seize new opportunities".
By using DCF on conservative assumptions (EBITDA figures from Capital IQ consensus, WACC of 9%, 5x EBITDA exit multiple, PV of terminal value equal to €1,262 mn), I estimate a fair value of €21.18/share.



This is in line with comparable companies implied Fwd P/E valuation of €21.28/share.


Median Capital IQ consensus TP is €20/share (7 analysts cover Tarkett).


There could be a sweetened offer, and the market seems to think so, as the shares have traded at or slightly above the offer price since announcement. Also traded volume has been above the daily average since the offer announcement.
At current prices €20-20.10, I recommend Long TKTT, TP €21.28 (6.1% upside) as the risk/reward seems favourable.














  

Wendel & Deconinck/Tarkett: Take Private Deal, Possibility of a Sweetened Offer

<p>US company Allied Universal has discussed a "highly conditional indicative offer" of "<em>at least <strong>210 pence</strong></em>" per share, <em>subject to due diligence, </em>with G4S' Board.</p>
<ul>
<li>This could be the opening salvo in a bidding war for G4S.</li>
<li>According to press, G4S had been inviting offers from other industry players in the hope of a white knight arising.</li>
<li>"The board carefully considered this proposal with appropriate advice from the company's financial and legal advisers and rejected it on the basis that the highly conditional offer, at 210p per share, significantly undervalues G4S and its prospects."</li>
<li>G4S said that it was “engaged with Allied and an independent consultant to establish a process through which commercially desensitised information may be provided”.</li>
</ul>
<p>Allied Universal currently enjoys some advantage over GardaWorld, whose 190p hostile bid has been strongly dismissed by G4S.</p>
<p>G4S' shares closed at 214p on 5 November.</p>
<p>Considering the hostile offeror and white knight, it is likely that a familiar <strong>bidding war</strong> will ensue. I recommend LONG G4S at the current price of 214p. <strong>An improved offer could come at around 227p (blended multiple of EV/NTM EBITDA and P/E).</strong> That would be a nearly 20% higher than GardaWorld's hostile offer, would reflect G4S' better prospects and would be more palatable to its Board.</p>

US company Allied Universal has discussed a "highly conditional indicative offer" of "at least 210 pence" per share, subject to due diligence, with G4S' Board.

This could be the opening salvo in a bidding war for G4S.
According to press, G4S had been inviting offers from other industry players in the hope of a white knight arising.
"The board carefully considered this proposal with appropriate advice from the company's financial and legal advisers and rejected it on the basis that the highly conditional offer, at 210p per share, significantly undervalues G4S and its prospects."
G4S said that it was “engaged with Allied and an independent consultant to establish a process through which commercially desensitised information may be provided”.

Allied Universal currently enjoys some advantage over GardaWorld, whose 190p hostile bid has been strongly dismissed by G4S.
G4S' shares closed at 214p on 5 November.
Considering the hostile offeror and white knight, it is likely that a familiar bidding war will ensue. I recommend LONG G4S at the current price of 214p. An improved offer could come at around 227p (blended multiple of EV/NTM EBITDA and P/E). That would be a nearly 20% higher than GardaWorld's hostile offer, would reflect G4S' better prospects and would be more palatable to its Board.

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>Our outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains positive and we continue to expect higher equity prices going forward.  In additional to highlighting important technical levels across major markets, we reiterate our recommendation to add exposure to global financials, and highlight a number of attractive Financial stocks, with an emphasis on UK and European names. </p>

Our outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains positive and we continue to expect higher equity prices going forward.  In additional to highlighting important technical levels across major markets, we reiterate our recommendation to add exposure to global financials, and highlight a number of attractive Financial stocks, with an emphasis on UK and European names. 

Global Equity Strategy: EU and UK Financial Stocks Are Attractive

Bespoke Research on China and neighbouring regions, Bixmoor

Bixmoor

Bespoke Research on China and neighbouring regions

Bixmoor specialises in providing bespoke research to business, governments and the financial community on China and neighbouring regions. We seek to build long-term relationships with our clients, based on our expertise, our reliability and our determination to find the right solution.

Thematic (Sector/Industry)

<p>High debt burdens are not just a developing world phenomenon. The growth of Quantitative Easing programs has resulted in significantly increased debt in many countries, including a good number in the European Union, whose debt levels are masked by accounting procedures.</p>

High debt burdens are not just a developing world phenomenon. The growth of Quantitative Easing programs has resulted in significantly increased debt in many countries, including a good number in the European Union, whose debt levels are masked by accounting procedures.

The Potential for National Financial Default

France

Wendel SA operates as an investment firm. The Company internationally invests in industrial and services companies, such as paint manufacturers, waste collection, building materials, equipment, electronics, insurance, telecommunications, and other industries.

Wendel SA (MF FP)

Last Week in Event SPACE: Singapore Press, Tabcorp, Invesco Office, Justbon, IHH Healthcare, JD.com

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Wendel & Deconinck/Tarkett: Take Private Deal, Possibility of a Sweetened Offer

There could be a sweetened offer, and the market seems to think so. At current share prices of €20-20.10, I recommend Long TKTT, TP €21.28 (6.1%...

Jesus Rodriguez Aguilar

G4S Playing Hard-To-Get

Considering the hostile offeror and white knight scenario, it is likely that a familiar bidding war will ensue. An improved offer could come at...

Jesus Rodriguez Aguilar

Global Equity Strategy: EU and UK Financial Stocks Are Attractive

Our outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains positive and we continue to expect higher equity prices going forward. ...

Vermilion Research

The Potential for National Financial Default

High debt burdens are not just a developing world phenomenon. The growth of Quantitative Easing programs has resulted in significantly increased...

Bixmoor