PostNL (PNLNA NR/BBB[N]/NR) acquirers circling rumours continue

We see value on the PostNL26s at Z+73/B+107/3.7%. Will revisit 31s after earnings.

Yesterday's +7% equity move has not continued. Reminder it was on a newspaper quoted interview response from UPS's regional CEO who gave a broad "open to" answer on acquisitions (question was about PostNL being a target, answer wasn't). It's left share px within recent ranges, but on forward P/E (12x) it is trading rich vs. last 3 years. Equities are likely also pricing some chance (as has been rumoured possibility) of Daniel Kretinsky increasing his current 30% ownership to take it private. The two have very different impacts.

• UPS (A2/A) or other competitors in Netherlands including FedEx (Baa2/BBB) and DHL (A2/NR/BBB+) would not trigger CoC at par (that requires junk ratings) but are higher rated and would see - in particular the 31s - tighten aggressively (see image below for relative value there).
• If Daniel takes it private then he has regulatory approvals he needs to get by (PostNL has the assigned universal service obligation in the country - similar to IDSLN). The 31s trading a pt above par would have limited (30bps right now to par) protection from Daniel adding debt, while CDS is unprotected. Depending on if junk ratings are hit the 26s meanwhile could see +6.4pts of upside to the available par call option.

31s were (reluctantly/on RV) a cheap view of ours in primary but no longer (-25 in since, earnings 2.5 weeks away). We see UPS headlines as too subjective (including equity moves not holding). However waiting in the €26s look attractive risk reward on both PE taking over or a higher rated comp. - the carry in isolation at Z+74/B+107 is wide of most non-distressed IG risk (i.e. ex WBA/VFC) in consumer/transport. Standalone performance could see ratings slide - but this is stub 2y risk and will be the front maturity once the €24s roll-off (unclear if new 31s were to refi that line, UoP was left broad).