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reported this morning that Mario Gabelli "appears to be angling for $13/share"; Gamco owns 11M shares (6.5% S/O) which is ~36% of the share float excluding Carl Icahn (138.6M shares / 82% S/O). The $9.25/share offer is conditioned on a majority of the minority tender. A $7.00/share proposal was announced 2/29/16 and was further increased to $8.00/share on 6/20/16.
Gamco was an investor in Pep Boys (PBY) which initially had a definitive agreement to be acquired by Bridgestone Corp for $15.00/share and subsequently received a number of proposals from Carl Icahn, who ultimately acquired the company for $18.50/share in cash (note: Bridgestone had raised its offer to $17.00/share). Gamco owned ~3.3M shares (~6.1% S/O) of PBY.
FDML was trading in the $4-$5/share range in January-February 2016 prior to Carl Icahn making his initial proposal; the shares had traded in the $7.00-$8.50/share range during 4Q15 and had closed at ~$16/share at the end of 2014. The current $9.25/share deal price values FDML at 2017E multiples of 0.6x EV/Revs ($7.7B), 5.9x EV/EBITDA ($770M, 10% margin) and 7.4x P/E ($1.25 EPS).
The Gamco "ask" implies FDML valuation multiples of 0.67x EV/Revs, 6.7x EV/EBITDA and 10.4x P/E. A standalone comparable is AXL ($1.3B MC, $2.4B EV) which at $17/share has 2017E valuation multiples of 0.6x EV/Revs ($4.15B), 4.0x EV/EBITDA ($609M, 14.7% margin) and 5.4x P/E ($3.17 EPS). A 250bp margin improvement at FDML (12.5% EBITDA margin) and the current $9.25/share deal price implies adjusted 2017E valuation multiples of 4.7x EV/EBITDA ($962M) and 4.7x P/E ($1.99 EPS); a $13/share price implies multiples of 5.3x EV/EBITDA and 6.5x P/E.
FDML is a cyclical business (Auto Parts industry) with significant capex requirements as well as pension obligations; the single digit valuation multiples reflect those dynamics. Unlike PBY, Carl Icahn already owns 82% of the company and there is not a competing proposal (nor is there expected to be one). The Gamco statement suggests an attempt to squeeze some additional deal consideration with the leverage being the unaffiliated shareholder tender condition.
A 10%-20% bump gets a price of about $10.15-$11.10/share; the alternative is the FDML stock price trading at ~$7/share absent the Icahn deal offer. Gamco has some leverage in its large block of shares and the inefficiencies of Carl Icahn having full ownership of FDML. Net is that expect there to be a price bump contingent on Gamco tendering its shares into the tender offer.