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.

Otis/Zardoya Otis: Lifting the Minorities

Event-Driven

<ul>
<li>This takeout offer of <a href="https://www.smartkarma.com/entities/otis-worldwide-corp" target="_blank" data-smartkarma-citation="entities:34334:1" rel="noopener">Otis Worldwide Corp (OTIS US)</a> for <a href="https://www.smartkarma.com/entities/zardoya-otis-sa" target="_blank" data-smartkarma-citation="entities:21307:1" rel="noopener">Zardoya Otis SA (ZOT SM)</a> makes sense: Otis is trading at 15.7x EV/2022e EBITDA (16.9% 2022e Consensus EBITDA margin), while the offer values Zardoya Otis at 13.7x EV/2022e EBITDA (28.4% 2022e Consensus EBITDA margin), so the target has higher margins but trades at lower multiples than the parent.</li>
<li>On 28 October, the CNMV accepted the offer. Zardoya Otis must issue a report with its opinion within 10 days hence.</li>
<li>The Zardoya family, the second largest shareholder in the company, with a 11.3% stake has yet to comment on the offer. This shareholding is enough to block a squeeze-out. Also DWS and Samson Rock, among others, have got in the shareholding register. </li>
</ul>
<ul class="">
<li class="">Zardoya Otis closed on 3 November at €6.97, 0.6% above the adjusted offer price. I believe a sweetened offer could come at around €8/share, a 15% improvement over the current offer price and would represent 15.7x EV/2022e EBITDA, on a par with the current multiple of Otis, which does not look crazy. Reiterate long ZOT SM. </li>
</ul>


This takeout offer of Otis Worldwide Corp (OTIS US) for Zardoya Otis SA (ZOT SM) makes sense: Otis is trading at 15.7x EV/2022e EBITDA (16.9% 2022e Consensus EBITDA margin), while the offer values Zardoya Otis at 13.7x EV/2022e EBITDA (28.4% 2022e Consensus EBITDA margin), so the target has higher margins but trades at lower multiples than the parent.
On 28 October, the CNMV accepted the offer. Zardoya Otis must issue a report with its opinion within 10 days hence.
The Zardoya family, the second largest shareholder in the company, with a 11.3% stake has yet to comment on the offer. This shareholding is enough to block a squeeze-out. Also DWS and Samson Rock, among others, have got in the shareholding register. 


Zardoya Otis closed on 3 November at €6.97, 0.6% above the adjusted offer price. I believe a sweetened offer could come at around €8/share, a 15% improvement over the current offer price and would represent 15.7x EV/2022e EBITDA, on a par with the current multiple of Otis, which does not look crazy. Reiterate long ZOT SM. 


Otis/Zardoya Otis: Possibility of a Sweetened Offer