Global InfraCo, a company owned by Australian fund IFM Global Infrastructure, today announced a voluntary and partial tender offer for up to 220 million shares in Spanish energy company Naturgy, representing 22.69% of the firm’s share capital. The offer price is €23 per share, which is a premium of 28.9% over the volume weighted average price of Naturgy shares for the last six months; 22.7% over the volume weighted average price for the last three months; and 19.7% over Naturgy’s share price at the close of January 25, 2021. That was the last trading day prior to the announcement.
For Bankinter’s analysis team, the offer is “attractive for minority shareholders.”
“In addition to the 28.9% premium over the average share price in the last six months, the free float will be greatly reduced after this offer (below 10%). Global InfraCo’s offer is not for 100% of the share capital, but we think it will represent a floor for the stock in the medium term at around 22 euros/share.”
Naturgy shares performed poorly in 2020 (-16%). The reasons include the fall in gas and oil prices, lower energy demand and the cut in regulated revenues in Spain. In addition there is the reduced contracted capacity in the Maghreb pipeline and depreciation in Latin American currencies. All of this has led to weak results for the year (net attributable profit fell 31% through September 2020).
Global Infra Co, with a long-term investment perspective, has taken advantage of the weak share price in the current situation to launch its bid. Although it is an offer for 22.7% of the share capital, the effective percentage is higher as shareholders Rioja Acquisition and GIP have decided not to participate in the transaction. Under these conditions, the effective offer is for 39% of the share capital.
In fact, shareholders representing 41.36% have agreed not to participate in the transaction. Rioja Acquisition has 20.72% of the share capital and the GIP fund owns an additional 20.64%. Rioja Acquisition is the vehicle formed by CVC and Corporación Financiera Alba when they bought the 20% stake held by Repsol.
Under these conditions, Bankinter changes its recommendation and Target Price on Naturgy.
“We recommend taking up the partial offer of Global Infra Co or sell in the market if it approaches the conditions of this offer (above 22 euros/share). Not taking up the offer or not selling in the market at these levels, would mean keeping a stock with reduced liquidity and a dividend yield (according to our estimates) in the range of 5/5.5% for 2021-22. We think there are other options with more liquidity and higher dividend yield in the sector such as Enagás or REE.”