DSV (DSVDC; A3/A-; S) DSV reported finalist in ~€14b bid for DB Schenker

Headlines it's a final two bidder is not new - but CVC led PE consortium look to be coming in with a more aggressive offer here - and that is new information.

As we said curve is already priced to a 1-notch downgrade, full debt funding is not a given (has done full equity in the past for acquisitions). Yes this is large (nearly same size on sales, lower margin), full debt funding would be 3x turns of leverage (pro-forma assuming no debt comes with Schenker) onto DSV's current net 1.8x leverage pushing it close to 5-handle.

As we said it could limit rating impact by targeting deleveraging particular given it has a history of large acquisitions. It has tabled €760m in equity pay-outs this year - we would expect that to be tapered back if it wins this.

Equity price action has generally been to rally on DSV getting closer to winning this (not pricing any dilution it seems) but it is weaker this morning (-3.5%). It's volatile though so caution on reading through too much.

We don't see a need for DSV curve to head wider on above news or from current levels and see above updates as marginally positive to curve. But disclaimer on the CVC bid coming in higher, as sources note "It’s likely that Deutsche Bahn and the government would re-negotiate the offers with the bidders, they said, adding that no final decision has been made." I.e. subject to change. We saw this with Saudi Arabia's Bahri that was reportedly the highest bidder earlier this year but later dropped out - repricing the chance of DSV winning significantly (<33% -> 50%).

DBHNGR will get (desperately needed) dry powder to delever from this. The stand-alone co left once Schenker leaves looks quiet bleak though.