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.

Naturgy - IFM: Consideration Adjustment, New TP, Attractive Spread

IFM's Partial Offer for Naturgy: Role of Spanish Government and Apportionment Scenarios

IFM Investors to Launch a Partial Hostile Tender Offer for Naturgy

Event-Driven

Press reported on 23 June that IFM's investment committee questioned the continuation of its partial offer on <a href="https://www.smartkarma.com/entities/naturgy-energy-group-sa" target="_blank" data-smartkarma-citation="entities:21271:1" rel="noopener">Naturgy Energy Group SA (NTGY SM)</a> following news that its CEO was involved in a espionage court case.
Meanwhile CriteriaCaixa intends to reach a 29.99% stake in Naturgy. As of 29 June, it has declared a 25.534% stake so far. While this ensures that CriteriaCaixa remains the top shareholder, it is also a wink to the Spanish populist government.
At a share price of €21.93 (closing price of 29 June), CriteriaCaixa would spend c. €939 mn to acquire an additional 4.456%. Share purchases by Criteria Caixa will remove free float shares, this may reduce the chances of success of the IFM's partial offer, depending on what retails shareholders do.
Assuming IFM obtains government approval, the offer would target nearly 100% of the float, which would remove the need for apportionment; but the minimum acceptance condition implies that IFM would need 76% of acceptances, which is high, in my view.
According to Naturgy, 7.7% of the share capital belongs to retail shareholders, most of whom would not likely tender in case the share price goes above the offer price. Institutional shareholders may be more concerned with future lower liquidity (float under 6%) and exit from the main index that is likely to happen in case IFM succeeds, so they may be more inclined to tender.
CriteriaCaixa's share purchases are supporting the share price of Naturgy, which seems on course to increase above IFM's offer.
Gross spread is c. 2% (c. 4% annualized assuming the offer closes by December). Recommendation is long NTGY SM, the main risks are that either IFM withdraws its offer (not very likely) or does not reach the minimum acceptance condition which would lead to short term share price weakness.

Press reported on 23 June that IFM's investment committee questioned the continuation of its partial offer on Naturgy Energy Group SA (NTGY SM) following news that its CEO was involved in a espionage court case.
Meanwhile CriteriaCaixa intends to reach a 29.99% stake in Naturgy. As of 29 June, it has declared a 25.534% stake so far. While this ensures that CriteriaCaixa remains the top shareholder, it is also a wink to the Spanish populist government.
At a share price of €21.93 (closing price of 29 June), CriteriaCaixa would spend c. €939 mn to acquire an additional 4.456%. Share purchases by Criteria Caixa will remove free float shares, this may reduce the chances of success of the IFM's partial offer, depending on what retails shareholders do.
Assuming IFM obtains government approval, the offer would target nearly 100% of the float, which would remove the need for apportionment; but the minimum acceptance condition implies that IFM would need 76% of acceptances, which is high, in my view.
According to Naturgy, 7.7% of the share capital belongs to retail shareholders, most of whom would not likely tender in case the share price goes above the offer price. Institutional shareholders may be more concerned with future lower liquidity (float under 6%) and exit from the main index that is likely to happen in case IFM succeeds, so they may be more inclined to tender.
CriteriaCaixa's share purchases are supporting the share price of Naturgy, which seems on course to increase above IFM's offer.
Gross spread is c. 2% (c. 4% annualized assuming the offer closes by December). Recommendation is long NTGY SM, the main risks are that either IFM withdraws its offer (not very likely) or does not reach the minimum acceptance condition which would lead to short term share price weakness.

Naturgy Energy Group SA

IFM/Naturgy: Enter CriteriaCaixa