Sapec announces plan to go private at €60/share

Yesterday at the end of the evening the story broke that the family controlling Sapec want to take the company private at €60/share after the payment of the €150 special dividend. This is great news, because I would have happily sold my shares for a lot less after receiving the dividend. Sapec has a book value per share of €41.60, and as you can see here I was doing my math with €30/share valuation for the stub. The book value doesn’t ascribe any value to the €36 million Sapec has provided for the Novo Bank guarantee. While the market has been skeptical about a recovery of this it could be worth up to €27/share, so the offer price of €60/share seems pretty fair. I think there is a very low risk that this deal will fall through. After the special dividend the family obviously has the liquidity to buy out minority shareholders, the fund that controls 15% of the outstanding shares has agreed to tender at €60/share and the family already controls 55% of the outstanding shares.

The timing of the announcement is a little bit unfortunate for me. The stock is scheduled to trade ex-dividend tomorrow with the payable date being Friday at the end of the week, and I thought it would be a good idea to substantially increase my position. With the majority of the cash coming back super fast the internal rate of return is pretty good, even when it would take five or six years to utilize the tax deductible this trade would generate. Yesterday the stock was halted, and today the price is of course up significantly. Luckily the math still works for me, and while it hurts to buy the stock so much higher I did execute the plan and increased my position from 5% to almost 50%!

It’s a big bet, but in my mind not as big as it sounds. I see it more as a roughly 15% position in the stub and a 5% position in a Belgium tax receivable while the Dutch tax credits provide lots of almost free upside. After the special dividend I think the stub should trade close to €60/share so I would be able to close out that part of the trade fast as well, and if it doesn’t it will probably be an attractive merger arb play.

Disclosure

Author is massively long Sapec

30 thoughts on “Sapec announces plan to go private at €60/share

  1. woyzeck

    Great stuff. I appreciate your aggressiveness. Munger would be proud. What price were you able to pick up shares this morning?

    Reply
      1. woyzeck

        Lucky you, great price! Congrats.

        Unfortunately had to transfer cash into my account. Probably gonna stay around these levels, but even at these levels still attractive.

        Reply
    1. Alpha Vulture Post author

      It’s going to be a tender offer, so expect that it will be relatively quick. They will probably release the prospectus is the coming weeks, then have probably a period of something like a month to tender shares, and then the cash will come in another week. Maybe around two months.

      Reply
  2. Alan

    Thanks for sharing, very much enjoy your blog.
    Did you have 45% cash available, or do you use leverage?

    Reply
  3. Numa

    What is the price target before the dividend in your opinion. How u calculate the tax from the dividend. Thanks.

    Reply
  4. Tom

    The linked article indicates that the dividend is subject to 30% withholding, reducing the net dividend to 105 euros. What do you do to reduce this withholding?

    Reply
  5. Tom

    It looks like US investors are subject to a 15% withholding. I’d appreciate confirmation regarding this number if you know the answer. It also looks like the current price, high 180s, already reflects a withholding rate below 15% (which a lot of potential investors qualify for, just not me).

    Congratulations AV!!!!!! Depending upon the tax rate you are subject to, you may end up selling your shares today and not have to worry about waiting to get your money (basically an infinite IRR).

    Reply
  6. Tom

    Congratulations AV!!!!!! Depending upon the tax rate you are subject to, you may end up selling your shares today and not have to worry about waiting to get your money (basically an infinite IRR).

    It looks like US investors are subject to a 15% withholding. I’d appreciate confirmation regarding this number if you know the answer. It also looks like the current price, high 180s, already reflects a withholding rate below 15% (which a lot of potential investors qualify for, just not me).

    Reply
    1. Alpha Vulture Post author

      My effective tax rate is probably close to zero (but will need lots of patience). My sheet still spits out an expected IRR of roughly 20% at the current price for my personal situation, so think I will just have to do the paperwork…

      Reply
  7. woyzeck

    The tender offer will be planned at the end of August or beginning of September, according to Belgian newspaper De Tijd, i.e. ~20% spread at current prices.

    Reply
        1. woyzeck

          my estimate was based on the following assumptions:

          current price = €58/share
          tender offer = 31-aug-2017 (= 71 days from today)

          (€58 * 1.1904) ^ (71/365) = €60

          IRR = 19%

          Reply
          1. Alpha Vulture Post author

            It’s not going to be that fast. After launching the tender offer it will probably remain open for roughly a month and afterwards it will probably take another week or so before the cash is paid. I would expect the deal to close early or mid October.

  8. fab

    Is there still any conditions for this tender to be closed aka can it still fail for some reason ?

    Thanks

    Reply
  9. 60North Investments

    Thanks AV for the idea, worked out nicely, assuming all goes well to the finish line, even for us coming little late to the party.

    Thought people might be interested: if you submitted your tax reclaim in the past month or are submitting it now, don’t expect getting money back until earliest late 2018. They said they have 30k reclaims on the line and are quite short on funds, +-18 months was their guess.

    Reply
    1. Alpha Vulture Post author

      You got this information straight from the Belgium tax authorities? Anyway, this is sort of the timeline that I expected. Takes at least a year from what I have heard.

      Reply
  10. Vincent

    Does anyone use Interactive Brokers? I finally get a withholding statement from IB without signature. But they say it might not be accepted by Belgium tax authority. Any idea?

    Reply
    1. Alpha Vulture Post author

      I guess you can try… you have 3 years to do the reclaim, so if it doesn’t work there is still time to try something else. I used Binck for this transaction because I wasn’t sure IB would be able to deliver the right paperwork.

      Reply
      1. 60North Investments

        From IB I included just an Activity Statement, which showed the total amount of dividends from Sapec, and the amount withheld. The Belgian tax authority first “contested” this, but after explaining, they confirmed it to be alright. I sure hope they stand by that.

        Asked some weeks ago about the 60€ buyout, IB said that it’s waiting for some paperwork by the depository if I remember correctly. Hopefully it goes forward sooner rather than later. If anyone knows how long these procedures tend to take it’d be interesting to hear.

        Reply

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