European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Orange Belgium - Orange: Final Offer and Holdouts

HAL Holding/​Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium

Altice - Next Private Takeover Announcement

Play Communications - Iliad: Offer Announcement

TalkTalk - Toscafund: Preliminary & Non-Binding Proposal

Event-Driven

On 2 December <a href="https://www.smartkarma.com/entities/orange-sa" target="_blank" data-smartkarma-citation="entities:21522:1" rel="noopener">Orange SA (ORA FP)</a> announced that it plans to launch a conditional voluntary public takeover bid on all the shares of Orange Belgium (in SK: <a href="https://www.smartkarma.com/entities/orange-belgium-sa" target="_blank" data-smartkarma-citation="entities:21340:1" rel="noopener">Mobistar SA (MOBB BB)</a> , BBG: OBEL BB) that it does not yet own.
<ul>
<li>Orange S.A. currently owns a 52.91% stake in Orange Belgium S.A.</li>
<li>Orange has stated the offer is conditional, but it has not disclosed what those conditions are.</li>
<li>
Consideration. €22 per share in cash.
<ul>
<li>For the remaining 28.3 million shares, representing a stake of 47.1%.</li>
<li>The offer represents 22.9x P/20E EPS, 5.4x EV/20E EBITDA and 10.9% EFCF yield for 2020E.</li>
</ul>
</li>
<li>There is no minimum acceptance threshold.</li>
<li>Should Orange acquire 95% of the total share capital and 90% of the outstanding minorities, it will initiate a squeeze out (under the same offer terms).</li>
<li>Orange has underlined that its announcement is the expression of an intention and does not constitute a formal notification of a voluntary public takeover bid.</li>
</ul>
On 3 December, shares of Orange Belgium shot up 35.3% and closed at €21.95. On 7 December, the shares closed at €21.80.
This announcement follows recent minority buyout attempts at Altice (see <a href="https://www.smartkarma.com/insights/altice-next-private-takeover-announcement" target="_blank" data-smartkarma-citation="insights:43240" rel="noopener">Altice - Next Private Takeover Announcement</a>), Iliad (see <a href="https://www.smartkarma.com/insights/play-communications-iliad-offer-announcement" target="_blank" data-smartkarma-citation="insights:43457" rel="noopener">Play Communications - Iliad: Offer Announcement</a>) and maybe TalkTalk (see <a href="https://www.smartkarma.com/insights/talktalk-toscafund-preliminary-non-binding-proposal" target="_blank" data-smartkarma-citation="insights:44016" rel="noopener">TalkTalk - Toscafund: Preliminary &amp; Non-Binding Proposal)</a>. Read across: the news could also be supportive for other names in the sector where there is a minority free float.
The offer also represents c. 5.2x EV/NTM EBITDA and c. 20.1x P/NTM EPS vs. the median of comparable companies of 6.0x and 14.6x respectively.
Polygon has build a 5.05% blocking position (through 1,060,032 shares and 1,972,181 CFD).
<ul>
<li>"valuing the company on a range of 6 to 7.5 times EV/EBITDA (which is in line with the trading multiples of Orange Belgium's peers) would result in a price per share of 39.5 to 47.25 euros per share".</li>
<li>Taking the mid-point, that would be €43.375, 97.1% higher that Orange's offer.</li>
</ul>
The gross spread as of 7 December is 1%, which reflects the high probability of the transaction going ahead. For obvious reasons, it is difficult to think of interloper risk, so the cunning move by Polygon will catch some unaware.
Recommendation: LONG Orange Belgium, TP €35.13 per share (implied equity value across median multiple of comparable companies). Risk is that Orange gets cold feet.

On 2 December Orange SA (ORA FP) announced that it plans to launch a conditional voluntary public takeover bid on all the shares of Orange Belgium (in SK: Mobistar SA (MOBB BB) , BBG: OBEL BB) that it does not yet own.

Orange S.A. currently owns a 52.91% stake in Orange Belgium S.A.
Orange has stated the offer is conditional, but it has not disclosed what those conditions are.

Consideration. €22 per share in cash.

For the remaining 28.3 million shares, representing a stake of 47.1%.
The offer represents 22.9x P/20E EPS, 5.4x EV/20E EBITDA and 10.9% EFCF yield for 2020E.


There is no minimum acceptance threshold.
Should Orange acquire 95% of the total share capital and 90% of the outstanding minorities, it will initiate a squeeze out (under the same offer terms).
Orange has underlined that its announcement is the expression of an intention and does not constitute a formal notification of a voluntary public takeover bid.

On 3 December, shares of Orange Belgium shot up 35.3% and closed at €21.95. On 7 December, the shares closed at €21.80.
This announcement follows recent minority buyout attempts at Altice (see Altice - Next Private Takeover Announcement), Iliad (see Play Communications - Iliad: Offer Announcement) and maybe TalkTalk (see TalkTalk - Toscafund: Preliminary &amp; Non-Binding Proposal). Read across: the news could also be supportive for other names in the sector where there is a minority free float.
The offer also represents c. 5.2x EV/NTM EBITDA and c. 20.1x P/NTM EPS vs. the median of comparable companies of 6.0x and 14.6x respectively.
Polygon has build a 5.05% blocking position (through 1,060,032 shares and 1,972,181 CFD).

"valuing the company on a range of 6 to 7.5 times EV/EBITDA (which is in line with the trading multiples of Orange Belgium's peers) would result in a price per share of 39.5 to 47.25 euros per share".
Taking the mid-point, that would be €43.375, 97.1% higher that Orange's offer.

The gross spread as of 7 December is 1%, which reflects the high probability of the transaction going ahead. For obvious reasons, it is difficult to think of interloper risk, so the cunning move by Polygon will catch some unaware.
Recommendation: LONG Orange Belgium, TP €35.13 per share (implied equity value across median multiple of comparable companies). Risk is that Orange gets cold feet.

Contested Orange Plans to Takeout Orange Belgium