Bolloré: interesting points from the independent expert and presenting bank report on the tender offer. Part 2.
or what are the different ways to make sure that an offer appears to be fair?
Let’s now have a look at the independent expert’s report.
Independent’s expert methodology to justify the price are open to discussion:
Vivendi and UMG are valued by using their share price (which is once again not their fair value).
reference to NAV (Net asset value) is discarded. Yet NAV is at 7,93 € compared to an initial 5,75€ offer.
Some good points: the expert discards the approach based on recent transactions on the company by its shareholders and also discards the approach based on trading multiples for similar companies.
These approaches are quick wins and don’t show a serious analysis of the company. Glad to see the expert not using them.
Unfortunately the reference to the Bolloré share price is used…
the revalued net assets method is used which appears a good move at first but we will see some that some assumptions are questionable:
Vivendi is valued on its share price and not its fair value…
UMG is also valued based on its share price and not on its fair value…
Self controlling loop valuation
valued by using Compagnie de l’Odet’s share price and not its faire value again.
12,6% liquidity discount (through the Protective put model or Chaffe method done by an appraisal firm in 2018).
An important table from the independent’s expert report is the self controling loop valuation. There is one major cavaet though:
it is based by using the share price (and not the fair value) of Odet: this makes a massive difference…
The next slide with the detailed valuation of the revalued net assets is also interesting as:
the importance and impact of not valuing to its fair value the 2 most important components of the valuation (1/ Vivendi and UMG 2/ self controling loop)
least favorable valuation of self controling loop is put in the most favorable valuation and the most favorable valuation is put in the least favorable valuation
Logistics BU is valued at 4 505 M€ but CMA CGM is offering to buy it for 5 000 M€ (true this offer came after the expert handed in theri report).
The expert then justifies the resulting discount of 34,2% up to 38,2% by 4 arguments which can be rebutted :
no synergies (i.e the holding discount): this will be much less the case with the simplification of the BU’s (no more logistics meaning that Vivendi and UMG which are 2 media assets) and the historic capital allocation skills.
holding costs: why not but not a major cost and one day they should be a simplification
lower liquidity of Bolloré SE compared to UMG and Vivendi. Liquidity is far from beeing low on Bolloé SE…
Ressource allocation (i.e the holding discount): allocation is on the contrary getting much better with simplified BU’s and once again we have one of the best french capital allocators at the helm of the company.
Cheers!
Jeremy
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Disclaimer: The above article constitutes the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. The authors may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. Disclosure – I hold a position in the Bolloré Galaxy at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).
With regards to the first table "ANR sur base cours de bourse" understand $10bn= Bol's stake in Viv (30%) and UMG (18%). What does "Titres Holdings the Contrôle" refer to? Think the €8bn value is pretty similar to Vivendi's stakes in UMG, Lagardère, TI, FL, Media for Europe and Multichoice. But if it actually refers to that, wouldn't BOL's stake be 30% our of Viv's shareholdings, or €2,4B?
PS. BAL €2,27 BN revenue and €0,27 EBITA, rest of Logistics €5bn revenue and €0,45 EBITA, so BAL was sold to MSC for a much higher amount/multiple than the rest of the Logistics business to CMA GGM, right, or I'm I missing something? Assuming that's correct, why do you think the multiple was much higher in the BAL sale, higher barriers to entry in Africa -and less competitors? Many thanks!