Purmo: Consortium increased its bid
The consortium bidding for Purmo announced on Friday that it would increase its offer to EUR 11.15. The move was in response to a competing, but still non-binding, offer of EUR 11. At the same time, the consortium lowered its acceptance rate to 80%, to which it already has a very strong commitment. We raise our price target to the level of the bid and reiterate our Reduce recommendation.
Rettig and Apollo consortium Project Grand Bidco increased its offer to EUR 11.15
The consortium increased its offer from an initial EUR 9.91 to EUR 11.15. This was clearly a response to the still tentative and non-binding EUR 11 offer from Haier in China announced a few weeks ago, which we commented here. The price paid to Rettig, the current majority shareholder, increased from EUR 8.91 to EUR 10.62. Based on our forecasts for this year, the new offer is roughly equivalent to a P/E multiple of 12.5x and an EV/EBIT multiple of 9x. In our view, these are acceptable levels for Purmo and thus the increased offer already values Purmo at fair value and, e.g., well above our DCF of EUR 9. At the same time, the merger agreement between the consortium and Purmo and the recommendation of Purmo's Board of Directors to accept the offer remained in force. Despite (and partly because of) the recent strong margin improvement, we believe Purmo's earnings growth prospects over the next few years are quite moderate, which would likely keep the stock's valuation level low.
Lower acceptance threshold and strict commitment conditions support the success of the offer
Approximately 80% of Purmo's shares are committed to the increased offer, so they can only withdraw their commitment to the offer if the competing offer is above EUR 13.52. For Rettig, agreeing to such a condition is somewhat understandable since they are also involved on the buy side, but for those selling their shares outright, we find the restriction somewhat odd since it prevents them from selling their shares to a potentially significantly higher bidder. We believe it is unlikely that such a high competing bid would be realized, as we believe it would already be on the expensive side for Purmo. Of course, this is not impossible, as at least Haier's interest in Purmo is known, and Purmo's peer Arbonia was sold earlier this spring for a high EV/EBITDA multiple of 12x (which we commented here). At the same time, the consortium has lowered the acceptance threshold from 90% to 80%, so that in the absence of an offer above EUR 13.52 or an unexpected turnaround, the consortium's offer will be accepted. Interestingly, about 10% of the owners who had committed to the lower offer have also committed to the higher offer, but they have the right to withdraw their commitment if a competing offer of at least EUR 11.76 is made for Purmo. In practice, however, a competing bid in the range of EUR 11.76-13.51 cannot achieve more than 20% ownership, so we believe that such an offer would be somewhat pointless, at least from the standpoint of acquiring the entire company.
Regulatory approvals expected in July, tender deadline already extended to July 15
As Purmo announced last week, the offer period was extended until July 15 and regulatory approvals for the transaction are expected in July. Therefore, in the absence of a significantly higher competing offer, the tender offer is expected to be completed by the end of July.
Purmo Group
Purmo Group är verksamt inom komfortlösningar för inomhusklimat i Europa. Bolaget tillhandahåller värme- och kyllösningar till bostadshus och lokaler, inklusive radiatorer, handduksvärmare, golvvärme, konvektorer, ventiler och kontroller. Verksamheten är indelad i ett flertal affärsområden och lösningarna används exempelvis inom industrin samt bland fastigheter. Kunderna återfinns på global nivå med störst koncentration inom Europa. Produkterna riktar sig till företagskunder och privatpersoner.
Read more on company pageKey Estimate Figures17/06
2023 | 24e | 25e | |
---|---|---|---|
Omsättning | 743,2 | 720,0 | 743,0 |
tillväxt-% | −17,80 % | −3,12 % | 3,19 % |
EBIT (adj.) | 55,4 | 71,8 | 74,6 |
EBIT-% | 7,45 % | 9,97 % | 10,04 % |
EPS (adj.) | 0,68 | 0,88 | 1,00 |
Utdelning | 0,35 | 0,35 | 0,37 |
Direktavkastning | 5,21 % | 3,11 % | 3,28 % |
P/E (just.) | 9,82 | 12,84 | 11,26 |
EV/EBITDA | 12,03 | 8,28 | 7,45 |