TRANSPORTATION: DSV ( A3 Stable/A- Neg) equity raise and some follow ups
Net positives from us below.
The €5b equity raise announced late yesterday (or 12.4% of existing share capital to be issued) was done flat to Thursday's close at DKK 1,410.5/share with reports books were covered "multiple times". Impressive pricing keeping in mind stock has rallied +50% from this year's lows (mostly on hopes of winning the Schenker bid). It is another +6% this morning.
For comparison in 2015, again to fund an acquisition, it did a similar sized raise (10% of the existing shares) at a -2.5% discount - again small but in nominal size that was only DKK5b (~€670m) - it has since over tripled in size through acquisitions hence the market cap growth. Looks like pre-commitments yesterday helped including Blackrock with €1b, Canada Pension with €600m, Capital Group with ~€640m and Norges Bank with ~€360m.
If we see similar demand for the expected ~€6b in debt supply (across TL and € bonds) secondary may be able to come in a tad (€29s at Z+88/B+115). Proportionally debt markets will have to digest more (€3.2b outstanding in public bonds so could be over 100%/doubling).
Prelim Q3 results yesterday were flat yoy and the mid-point of FY EBIT guidance is -7%yoy - both ~in-line with consensus. The FY fall mainly reflects normalising freight rates {WCI Composite Index; $3489/40ft box} - sea makes up just shy of 30% of revenue and gross profit for reference but will move to low 20's on Schenker acquisition (Schenker is heavier in road).
As we said, on fundamentals there is integration risk given Schenker runs half the margins and DSV has hamstringed itself with 2yr employee guarantees. Still this is a seasoned M&A operator and has successfully integrated lower margin businesses before - see the €4.7b acquisition of Panalpina in 2019 who was half of DSV size but running a 2% (vs. DSV's 7% at the time) operating margin. DSV currently runs 10-12% for reference and has successfully held it at the top-end of the sector over the years.
Presser here