November 28, 2024 14:55 GMT
TRANSPORTATION: IDS; Daniel Křetínský may close in next 2 weeks (BBC)
TRANSPORTATION
(IDSLN; NR/BBB Neg/NR)
BBC leaks were priced into equities for some time now. Despite a rally in we are still skewed to see (some) value on €28s and more clearly see value on €26s (+3pts on HY ratings, +90bps over bunds in carry). No firm view on longer £30s that have been left wide. To refresh memories, details of the take-private transaction are;
- £3.70/share; excluding the dividend already paid price £3.68 vs. stock at £3.58 (+2.8%)
- 72% premium to clean price and was bumped +16% from initial £3.2 offer in April
- including £1.7b in net debt then it valued the company at £5.2b; 9.1x LTM EBITDA (a cheaper 5.8x on forward earning expectations)
- The £3.5b in equity value will be funded by £2.3b in debt (bbg, EP Group head of M&A)
- £1.2b in bridge loans to be refi'd into bonds 2-3yrs after closing OR to be repaid by EP group in cash
remaining £1.1b in term loans out to 5-6yrs
- £1.2b in bridge loans to be refi'd into bonds 2-3yrs after closing OR to be repaid by EP group in cash
- Current debt load is net £1.9b/gross £2.6b levered 3.3x/4.5x
- Adding on EP's load will take leverage to 7.3x/8.5x.
- Above on trailing and poor earnings from last year. 1H EBITDA is up +185%yoy, consensus sees FY +60% at £900m - which is effectively GLS profit in-line with recent years + Royal Mail EBIT breakeven (latter is guidance given).
- On that earnings recovery leverage would still be a high 4.7x/5.4x.
- Structured to maintain IG ratings (EP group says) - without which par CoC would kick in on all bonds
- Daniel K's EP Global (PE firm) is BBB- rated and EP noted in acquisition doc's IDS will become a "core subsidiary of EP" such that the rating would not be lower than that of EP's.
- S&P has not confirmed above but does view EP group capping the ratings at BBB- (i.e. minimum 1-notch downgrade on close).
- If HY ratings do occur (within 120 days of change of control) then €26s will have +3pts upside to par. €28s and £30s trade +6pts/+3pts above par but have 1.25% step-up protection.
- 1.25% step-ups are not tied to CoC event, only on ANY one agency moving into HY. Step-up applicable from the first coupon-date following the rating action - both have coupons annual in Mid-Sept.
IDS investors will join Daniel K's large portfolio of companies (some controlling some smaller stakes) including; Sainsbury (#2 grocer in UK), Casino (#7 grocer in France), PostNL (the Royal mail eqv. in Netherlands), Foot Locker, Fnac Darty, Metro AG and Thyssenkrupp.
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