A dozen companies on the Spanish Stock Exchange have takeover offers on the table. Either direct competitors (such as Banco Sabadell, Ercros or Talgo) or the shareholders themselves, many of them in venture capital companies (Grifols, Lar España, Applus or Edreams), have made their offers to the group of owners to take control or acquire the last shares that they do not yet own. In this year full of this type of operations, known as takeover bids, the only one that has been fully resolved is the one carried out by the owner of Prosegur, Helena Revoredo, on the security firm to acquire an additional 15% of the capital with which she raised her presence to over 73% in the firm. These massive purchases of shares to take control of a company are not a bed of roses. Banco Sabadell is trying to defend itself from the offer launched by BBVA, after some initial contacts without agreement; Ercros is also not looking favourably on the competing offers from the Portuguese group Bondalti, followed by that of the Italian Esseco; Amber had to fight to finally acquire Applus, and Grifols shareholders are still waiting for the presentation and price of the exclusion offer from the founding family together with the Brookfield fund. But the loudest is undoubtedly the offer from the Hungarian group Magyar Wagon, which wants to acquire Talgo by paying five euros per share. The frontal opposition of the Government to this operation due to the connections with the Hungarian Prime Minister, Viktor Orbán, and possible Russian money in it, promise a long and complicated struggle. One of the common characteristics of these offers is the payment in cash, with the exception of BBVA, which has offered an exchange of shares: one share of the bank chaired by Carlos Torres for every 4.83 shares of Sabadell. The type of buyer is key to whether the offer is more or less generous, according to César Sánchez-Grande, head of institutional analysis at Renta 4: “Those who launch a takeover bid on competitors always pay more because, in addition to getting the company at a good price, they will then achieve business synergies. However, for venture capital there are no such synergies and it is normal for their offer to be more adjusted.” Julián Pascual, president and equity manager at Buy & Hold, speaks of opportunistic operations in companies “that are going through a stressful situation, such as the cases of Grifols or Talgo.” This manager considers that the accumulation of operations is pure coincidence. “Although the price of small companies in Europe is depressed, I think the reason is the improvement in financing, after the rate hikes and the credit restriction. Now financing is more accessible and that encourages optimism,” he concludes. However, Ricardo Seixas, director of Iberian variable income at Bestinver, believes that the starting point is a market with numerous stocks with potential for growth. “The Spanish stock market is still discounted and this encourages corporate operations. Of course, the one making the offer sees more value in the company than the one who sees the market and considers that under its umbrella it can exploit that potential.” César Sánchez-Grande also explains the avalanche of operations at low prices and expects more takeover bids throughout the year. “The reasons are found in the attractive prices, the good prospects of the sector and possible synergies that justify the purchase, as would be the case with BBVA and Sabadell.” He also gives examples of how cheap the market is: “The partial takeover bid for Prosegur indicates that the owners consider that the share price did not reflect its true value. Another clear case of a depressed share price is Talgo, since only the train maintenance business justifies a share price of three euros,” he explains.
The dilemma: to go or not
Normally, takeover bids are made with an extra price (premium) on the share price. Apparently they are good news for the shareholder, but do they really benefit them? The price offered compared to the company's historical price, the potential value in the future or whether the buyer is taking advantage of a bad situation are questions that arise when deciding whether or not to accept an offer. Seixas points out that receiving a takeover bid on a security in which you are invested is not interesting, since the situations in which you lose out outweigh those in which you make money. «Normally, the offer falls short because the buyer does not pay you all the potential that he foresees regarding the future evolution of the stock. However, if a company has very little liquidity (free float) that makes it difficult to buy and sell the security on the Stock Exchange, the takeover bid is well received,» he says. For his part, Sánchez-Grande places more emphasis on the case of the thousands of small investors: «It depends on the price at which the share was bought. It is difficult to say whether they are harmful or beneficial. There are rules regarding the average price of the last six months or that it is not lower than an offer made in the last year. The supervisory body (CNMV) is responsible for monitoring the prices of the offers and approving them so that they comply with the law.” And he gives the example of Talgo, which was listed at 9.5 euros in May 2015 and has touched lows of 2.4 euros in September 2022 with an offer now of five euros. For Julián Pascual, in takeover bids the investor is faced with a dilemma between the short and long term in the sense of whether it is in their interest to receive a premium to sell the shares now and at the same time give up the future potential of the company. “In general, attending the offers is usually harmful. One case would be that of Grifols, which has not been well managed in recent years, but which has a quasi-oligopoly business and very good expectations.” And he adds: “On some occasions we have invested thinking that a company can be acquired, but it is not normal.” In the analysis you make to decide on a company, Pascual recalls, “you always look for the long-term potential of the value and not wait for an operation that, in general, is not controllable. With this long-term investment thinking, the appearance of a takeover bid is usually a punishment.” Finally, Seixas and Pascual complain about the excessive public intervention in this type of market operations. The Bestinver expert considers that it is a brake on new companies being listed on the Spanish Stock Exchange, since it is as important that it is easy to enter and stop being listed.
The worst possible scenario
The exclusion takeover bid involves the company's exit from the Stock Exchange and is the most extreme scenario, since the shareholder who decides not to participate is left without the possibility of buying and selling shares. Of the current offers, the Amber group announced two weeks ago its intention to exclude Applus from the market and both the Grifols takeover bid (pending presentation) and that of the socimi Lar España will also seek to leave the market. Ricardo Seixas, from Bestinver, describes exclusion operations as the worst scenario for the investor due to this loss of liquidity and the impossibility of betting on the future evolution of the company forever. And César Sánchez-Grande, from Renta 4, explains that «in the case of normal takeover bids, the investor decides whether to participate or not, whether it is of interest to him or not. In exclusion bids, the issue is more complicated because he is left without liquidity, although he will continue to collect dividends in the hope that new windows will open to sell the shares,» he concludes. Follow all the information on Economy and Business on Facebook and Twitter. Xor in our weekly newsletter