Daily BriefsIndustrials

Daily Brief Industrials: Posco International Corporation, RPS Group PLC, Honeywell International and more

In today’s briefing:

  • Posco International Merger: Deal Structure & Arbitrage Dynamics
  • WSP Global/RPS Group: More Consolidation In Engineering Consultancy
  • Honeywell International Inc.: Competitive Advantages & Acquisition-Led Growth

Posco International Merger: Deal Structure & Arbitrage Dynamics

By Sanghyun Park

  • We still have the chance to become eligible. We will still receive the rights if we buy Posco International next Tuesday. But we will exercise them at ₩20,590, NOT ₩27,801.
  • Given that there is little cancellation risk, we can capitalize on the price falling below the appraisal price by opening both Long and Short at the same price.
  • We close Short if the price goes under ₩20,590 and fix the arb spread by exercising the rights with Long.

WSP Global/RPS Group: More Consolidation In Engineering Consultancy

By Jesus Rodriguez Aguilar

  • WSP agreed to acquire RPS Group at a (generous) 206/share (+0.45p interim), in a well-timed transaction at 76% premium, 17.2x EV/Fwd EBIT and 24x Fwd P/E. Irrevocable undertakings are 18%.
  • The offer represents a 43% premium to mean consensus TP. My fair value estimate DCF (WACC 9%, 1.6% terminal growth) is 190.5p/share, 1.5% below the offer price.
  • The shares trade just below the offer. This seems a low risk/low return deal. Gross spread is 0.7% and the estimated annual return is 2.2% assuming settlement by 8 December.

Honeywell International Inc.: Competitive Advantages & Acquisition-Led Growth

By Ishan Majumdar

  • Honeywell has successfully maintained a particularly high level of resilience despite persistent supply chain restrictions, inflationary headwinds, and geopolitical upheaval.
  • Despite the inflationary challenges, Honeywell continued with margin expansion and this helped the management surpass the earnings expectations of Wall Street.
  • It is also increasing technology investments in sustainability through Honeywell Ventures and a classic example was the investment in Electric Hydrogen.

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