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.

Credit Agricole/CreVal: Purchase Obligation

CreVal - Crédit Agricole: Grounds for an Improved Offer

Creval - Crédit Agricole: Playing Hard to Get

Event-Driven

Societa Cattolica di Assicurazioni / Event-Driven

Societa Cattolica di Assicurazioni (CASS IM)

On 31 May, <a href="https://www.smartkarma.com/entities/assicurazioni-generali-spa" target="_blank" data-smartkarma-citation="entities:21191:1" rel="noopener">Assicurazioni Generali (G IM)</a> SpA launched a voluntary tender offer to acquire the 76.33 of <a href="https://www.smartkarma.com/entities/societa-cattolica-di-assicuraz" target="_blank" data-smartkarma-citation="entities:21168:1" rel="noopener">Societa Cattolica Di Assicuraz (CASS IM)</a> it does not already own.
Generali will offer €6.75/share, cum dividend.
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<li>
A 15.3% premium to Cattolica's closing share price on 28 May 28, for an implied equity value of €1,541.3 mn and an implied EV of €2,437.3 mn. The offer represents 0.67x P/21e BV and 11.2x Fwd P/E. 
</li>
<li>
In case of total acceptance of the offer, at the current bid price, Generali will pay a consideration of €1.176 bn.
</li>
<li>
Minimum acceptance condition: 66.67% of the share capital, which could be lowered to 50% plus one share.
</li>
<li>
Synergies in operating costs, technical ratios and revenues, are estimated to reach a run-rate pre-tax of more than €80 mn p.a., with cost of synergies €150 mn - €200 mn.
</li>
<li>
Generali expects the transaction to finalize by mid-November 2021, subject to all necessary approvals and authorizations. There should not be any antitrust issues, as in any of the three main segments, combined market share would be around 20%.
</li>
</ul>
On 31 May, shares of Cattolica closed at €6.97, a 15% increase vs. the prior trading session and 3.2% above the offer. Cattolica trades at 0.7x vs an 0.9x average of Italian insurers.
Fair value on a standalone basis is €6.64/share (average of comparables median implied Fwd P/E and discounted excess returns, WACC = 8.5%, g=1.8%, estimates from Capital IQ).
Synergies, taxed and capitalized, could be worth up to €1.28/share. Assuming that Cattolica's shareholders capture 60% of the PV of those synergies, TP of Cattolica as a target is €7.4/share. This represents 8.7% upside to the offer price.
Although the Board of Cattolica has not yet issued a reply, this situation may follow a script similar to <a href="https://www.smartkarma.com/insights/creval-credit-agricole-playing-hard-to-get" target="_blank" data-smartkarma-citation="insights:45742" rel="noopener">Creval - Crédit Agricole: Playing Hard to Get</a>, <a href="https://www.smartkarma.com/insights/creval-credit-agricole-grounds-for-an-improved-offer" target="_blank" data-smartkarma-citation="insights:50036" rel="noopener">CreVal - Crédit Agricole: Grounds for an Improved Offer</a> and <a href="https://www.smartkarma.com/insights/credit-agricole-creval-purchase-obligation" target="_blank" data-smartkarma-citation="insights:50658" rel="noopener">Credit Agricole/CreVal: Purchase Obligation</a>. Therefore, a sweetened offer is highly likely, in my view.
Recommendation is long CASS IM, TP €7.4.

On 31 May, Assicurazioni Generali (G IM) SpA launched a voluntary tender offer to acquire the 76.33 of Societa Cattolica Di Assicuraz (CASS IM) it does not already own.
Generali will offer €6.75/share, cum dividend.


A 15.3% premium to Cattolica's closing share price on 28 May 28, for an implied equity value of €1,541.3 mn and an implied EV of €2,437.3 mn. The offer represents 0.67x P/21e BV and 11.2x Fwd P/E. 


In case of total acceptance of the offer, at the current bid price, Generali will pay a consideration of €1.176 bn.


Minimum acceptance condition: 66.67% of the share capital, which could be lowered to 50% plus one share.


Synergies in operating costs, technical ratios and revenues, are estimated to reach a run-rate pre-tax of more than €80 mn p.a., with cost of synergies €150 mn - €200 mn.


Generali expects the transaction to finalize by mid-November 2021, subject to all necessary approvals and authorizations. There should not be any antitrust issues, as in any of the three main segments, combined market share would be around 20%.


On 31 May, shares of Cattolica closed at €6.97, a 15% increase vs. the prior trading session and 3.2% above the offer. Cattolica trades at 0.7x vs an 0.9x average of Italian insurers.
Fair value on a standalone basis is €6.64/share (average of comparables median implied Fwd P/E and discounted excess returns, WACC = 8.5%, g=1.8%, estimates from Capital IQ).
Synergies, taxed and capitalized, could be worth up to €1.28/share. Assuming that Cattolica's shareholders capture 60% of the PV of those synergies, TP of Cattolica as a target is €7.4/share. This represents 8.7% upside to the offer price.
Although the Board of Cattolica has not yet issued a reply, this situation may follow a script similar to Creval - Crédit Agricole: Playing Hard to Get, CreVal - Crédit Agricole: Grounds for an Improved Offer and Credit Agricole/CreVal: Purchase Obligation. Therefore, a sweetened offer is highly likely, in my view.
Recommendation is long CASS IM, TP €7.4.

Generali/Cattolica: Voluntary Tender Offer