H1 update
Apologies for the long absence, but June has been a hectic month. (No, I wasn’t on holiday. Yes, I definitely need one. And no, I was not hiding under the desk scared by the crashing markets.)
I’ll return shortly to writing about under-the-radar European companies: meanwhile, this table summarises the YTD and “since writing” performance for all companies analysed so far. Needless to say, these numbers should not be the basis for your buy, hold or sell decisions right now. Also, as I said when I started this Substack, this is NOT a stock picking service (no guarantee that the stocks mentioned will turn out to be either winners or losers), and I may or may not invest in these companies.
Two of the companies analysed recently completed some relevant transactions that need to be mentioned.
Shaftesbury: after few weeks of rumours, Shaftesbury finally confirmed on June 16 the terms of the all-stock merger with Capital & Counties (Capco). For each share, SHB shareholders will receive 3.356 new Capco shares: this exchange ratio has been agreed based on the respective NAVs and market caps, and will result in SHB shareholders owning 53% of the combined entity.
This is far from an ideal outcome for SHB. First of all, this amounts to a nil-premium takeover by Capco (despite SHB’s shareholders owning the majority of the new company): the simple methodology decided for the exchange ratio does not account for the better prospects and better recent recovery of SHB’s properties. Second, all senior managers from SHB will retire or leave the company, and Capco management will take over: SHB’s managers were in large part responsible for its performance over the last 20 years and in my opinion far superior to Capco’s.
While the merger does make sense in terms of properties (significant complementarity in the type of properties and their location around London) and was blessed by both companies’ majority shareholder (Norges Bank owns 25% of SHB and 15% of Capco), the price is definitely more favourable to Capco, and the market seems to agree: currently the combined entity trades at a 20% discount from NAV, vs. a recent average of less than 8% for SHB alone.
Aker Horizons: reversing its previous strategy, in March Aker Horizons (AKH) announced an all-stock merger with its listed subsidiaries Aker Offshore Wind (AOW) and Aker Clean Hydrogen (ACH). Both will now become fully-owned subsidiaries, with AOW that will be combined with Mainstream Renewable Power. As a follow-up, AKH sold 27.5% of Mainstream Renewable Power to the Japanese company Mitsui for €575 million, implying a valuation for the entire Mainstream of €2.1 billion.