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.

Event-Driven

<p>On 23 April, Société Investissement Deconinck and <a href="https://www.smartkarma.com/entities/wendel-sa" target="_blank" data-smartkarma-citation="entities:21503:1" rel="noopener">Wendel SA (MF FP)</a> offered to acquire a 49.1% stake in <a href="https://www.smartkarma.com/entities/tarkett-sa" target="_blank" data-smartkarma-citation="entities:21562:1" rel="noopener">Tarkett SA (TKTT FP)</a> for €20 per share, cum dividend (approximately €640 mn). Wendel will be able to hold up to 30% of Tarkett at the end of this transaction.</p>
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<li>This represents 0.6x EV/21e Revenue, 6.7x EV/21e EBITDA and 23.7x P/21e E (source: Capital IQ consensus).</li>
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<p data-bind="visible: !isCollapsed(), html: content">The bidders already hold 50.68% of the capital, and the Deconinck family will tender an additional 0.6%. There are no conditions attached to the offer, other than recommendation from the Supervisory Board.</p>
<p data-bind="visible: !isCollapsed(), html: content">The bidders intend to <em>squeeze out and delist</em> Tarkett if they obtain <em>acceptances over 90%</em>. It should be noted that because the offer is taking place according to the simplified procedure, it will not be reopened after the final result is published.</p>
<p data-bind="visible: !isCollapsed(), html: content">Comparables are trading at 12.1x EV/Fwd EBITDA vs. 6.5x for Tarkett, which suggests  there may be rich rewards from restructuring the business. However, there is execution risk.</p>
<p>As the rationale says, "the reinforcement of the family’s control and the contribution of Wendel, a renowned long-term family investor will enable Tarkett to pursue its ongoing transformation and to seize new opportunities".</p>
<p>By using DCF on conservative assumptions (EBITDA figures from Capital IQ consensus, WACC of 9%, 5x EBITDA exit multiple, PV of terminal value equal to €1,262 mn), I estimate a fair value of <strong>€21.18/share</strong>.</p>
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<p>This is in line with comparable companies implied Fwd P/E valuation of €21.28/share.</p>
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<p>Median Capital IQ consensus TP is €20/share (7 analysts cover Tarkett).</p>
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<p><em>There could be a sweetened offer</em>, and the market seems to think so, as the shares have traded at or slightly above the offer price since announcement. Also traded volume has been above the daily average since the offer announcement.</p>
<p>At current prices €20-20.10, I recommend <strong>Long TKTT, TP €21.28</strong> (6.1% upside) as the risk/reward seems favourable.</p>
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On 23 April, Société Investissement Deconinck and Wendel SA (MF FP) offered to acquire a 49.1% stake in Tarkett SA (TKTT FP) for €20 per share, cum dividend (approximately €640 mn). Wendel will be able to hold up to 30% of Tarkett at the end of this transaction.

This represents 0.6x EV/21e Revenue, 6.7x EV/21e EBITDA and 23.7x P/21e E (source: Capital IQ consensus).










The bidders already hold 50.68% of the capital, and the Deconinck family will tender an additional 0.6%. There are no conditions attached to the offer, other than recommendation from the Supervisory Board.
The bidders intend to squeeze out and delist Tarkett if they obtain acceptances over 90%. It should be noted that because the offer is taking place according to the simplified procedure, it will not be reopened after the final result is published.
Comparables are trading at 12.1x EV/Fwd EBITDA vs. 6.5x for Tarkett, which suggests  there may be rich rewards from restructuring the business. However, there is execution risk.
As the rationale says, "the reinforcement of the family’s control and the contribution of Wendel, a renowned long-term family investor will enable Tarkett to pursue its ongoing transformation and to seize new opportunities".
By using DCF on conservative assumptions (EBITDA figures from Capital IQ consensus, WACC of 9%, 5x EBITDA exit multiple, PV of terminal value equal to €1,262 mn), I estimate a fair value of €21.18/share.



This is in line with comparable companies implied Fwd P/E valuation of €21.28/share.


Median Capital IQ consensus TP is €20/share (7 analysts cover Tarkett).


There could be a sweetened offer, and the market seems to think so, as the shares have traded at or slightly above the offer price since announcement. Also traded volume has been above the daily average since the offer announcement.
At current prices €20-20.10, I recommend Long TKTT, TP €21.28 (6.1% upside) as the risk/reward seems favourable.














  

Wendel & Deconinck/Tarkett: Take Private Deal, Possibility of a Sweetened Offer