Indra has launched a full bid for Tecnocom at 4,25 euros per share in cash and stock.The company is offering 2,55 euros in cash and 0,1727 euros in Indra shares, after already buying up 52,702% of the company. The transaction values Tecnocom at €318,75 million and 60% of the amount due to be paid will be in cash and 40% in Indra shares, valued at 9,8461 euros (the average price for the last five days).
Indra has already received an irrevocable acceptance from various Tecnocom shareholders representing 52.7% of its capital. Minimum acceptance condition for the bid: 70.01%. The deal will be closed in the first half of 2017.
Bankinter analysts believe the operation is posible for two reasons: (a) Indra gains size without practically any EPS’17 dilution and (b) it represents the second phase of the company’s restructuring, which is to gain dimension via inorganic growth.
“So we think the internal restructuring phase, which was the hardest and most uncertain, is now completed. If we consider a hypothetical financial cost of 3.5% for this operation, and that 100% of Tecnocom shareholders agree to it (an ideal situation which normally doesn’t happen), Indra will have to issue 12,95 million shares (+7.9% del capital). If we accept that Tecnocom’s (estimated) net profit for 2017 will be €13 million and Indra’s about €85 million, there will be practically no dilution from the transaction (-0.3%) in 2017, according to our initial forecasts. But it will allow Indra to increase its size.
In Bankinter’s opinion, the market should discount the operation slightly positively. The analysts’ main reservation is related to Indra’s gearing, given that its ratio NFD/Ebitda’17 before the deal is 2.7x. This contrasts with a sector where, in general, there is net positive cash. This operation would mean an increase of €191,3 million in debt (NFD) to €814 million. Its DFN/Ebitda’17 ratio after the transaction would rise to 3.04x.
On the positive side, this acquisition represents a further step in Indra’s new strategy:
“As a first stage, the company embarked on an internal restructuring (change of management team, return to positive cashflow, debt reduction, reorganisation of its businesses and countries where it operates etc). Now, in a second phase, it is focused on inorganic growth which should enable it to gain critical mass more quickly.For that reason, taking into account we are estimating a -Dilutive/+Accretive of -0.3%, there is a revaluation potential for the company of +31%.”
For Norbolsa analysts, Indra is looking to strengthen its position in the financial services segment with this transaction, as well as improve its operational gearing. It also aims to boost its own solutions range, particularly in the area of payment methods.
At the same time, it will increase its exposure to the private sector and incorporate a complementary team.
