Takeover offer from Linamar
On Oct 15, Canadian automotive equipment maker Linamar offered to buy Montupet for EUR71.53
per share in cash, translating into a premium of c.15% to the previous day’s closing price but an
8% discount to the February peak of EUR77.8.
Implied valuation in line with the sector, below our TP
Linamar’s offer price implies 8.4x 2017e EV/EBIT and 10x 2017e P/E, i.e. broadly in line with the
European equipment maker sector (8x 2017e EV/EBIT, 10.3x P/E). However, it stands below our
TP of EUR78, which is based on a 10% sector premium justified by Montupet’s long-term growth
prospects and above-average margins and FCF generation.
Higher counter-bid still possible
Montupet’s senior managers and anchor shareholders, who collectively own c.36.6%, have agreed
to support the tender offer and not to solicit any other offers. However, they may still withdraw in
the event of a higher competing offer, in which case a break-up fee will be payable to Linamar.
Linamar’s offer is contingent on a 50% acceptance rate, including the management stake.
We maintain our Outperform rating and EUR78 TP
The shares are trading roughly in line with the offer price. We think it is worth holding on to them at
this point in the expectation of a potential counter-bid. With significant recent M&A activity in this
space, we see potential strategic interest from other European/North American peers or Chinese
players trying to enter the European market. Given Montupet’s small global market share we see
no major antitrust issues.
Timeline
Linamar’s tender offer is expected to open to the public in early December 2015, pending approval
by the AMF, and is expected to close in February 2016.