Brief M&A: CMA CGM – Understanding the Strategy and more

In this briefing:

  1. CMA CGM – Understanding the Strategy
  2. TPV Technology: CEC’s Offer Not as Generous as It Looks

1. CMA CGM – Understanding the Strategy

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With their 2Q 2019 results expected to be released on Friday 6th September 2019, after market close, we thought it timely to highlight a framework to assess CMA CGM’s management’s ability in executing on their strategic transformation program.

CMA CGM, global shipping, and logistics company are in the process of integrating its acquisition of CEVA, an asset-light logistics company, into its business. As part of this process, CMA CGM has changed its strategic direction with a goal to now being a global leader in the transport and logistics sector.

Key to the successful integration of the two businesses and the longer-term success of the firm will be their ability to grow and optimize/realize scale efficiencies as a combined entity enabling them to increase profitability and maintain a market leadership position.

Key to being able to successfully monitor their implementation of the strategy will be identifying key KPI’s, both quantitative and qualitative, that the analyst can use to track progress. In this note, we suggest a set of financial KPI’s as well as a couple of key qualitative/subjective measures.

We see a good reason for long-term optimism, primarily as a result of consolidation, leading to cost optimization, and digitization efforts, both identified as KPI’s within this note.

2. TPV Technology: CEC’s Offer Not as Generous as It Looks

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Tpv Technology (903 HK) is a leading display solutions provider. On Monday, TPV’s largest shareholder, CEC, launched a privatisation proposal by way of a scheme of arrangement. CEC’s offer of HK$3.86 cash per share is a 41% premium to the last closing price of HK$2.73 per share.

On a fundamental basis, TPV is doing a commendable job as it is improving margin and cash generation in the face of unrelenting revenue decline. Overall, we believe that CEC’s offer is unattractive for shareholders willing to take a long-term view.

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