(Makor) Porsche AG's IPO / PAH3 holding discount update

 

Find below an update on Porsche AG’s potential IPO

 

1/ Conclusion

 

We do not believe a long PAH3 holding discount is attractive.

Indeed, we calculate the PAH3’s holding discount post IPO to be around -25.3% and do not expect it to be tighter (holding’s risk profile increased by the €6.6bn net debt post Porsche AG’s IPO)

The key unknown remains the discount that will be applied by the market on Porsche AG’s unlisted Ord shares versus Pref (we use 20%)

 

However, we still believe there is value in a long PAH3’s position and hence suggest a Long PAH3/Short SXAP position

Even more so since such a position would have only returned a positive 1.8% IRR since Feb 18th but such IRR was as high as 18% early April

 

2/ Recent disclosures

 

PAH3 and VOW heads of agreement terms as of May 05 at Q1 2022 results:

  • Porsche AG capital to be divided in 50% Pref shares and 50% Ord shares
  • 25% of Porsche AG’s Pref Shares to be placed during IPO
  • PAH3 to acquire 25% + 1 share of Porsche AG Ord shares at a 7.5% premium to Porsche AG’s Pref share’s placement price
  • 49% of the total proceeds (IPO of Pref shares + sale of Ord shares) to be distributed to shareholders
  • A progress update will be made in Late summer 2022

 

We are assuming that Porsche AG’s Pref shares will have no vote

 

3/ Expected structure of Porsche AG’s capital

 

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4/ PAH3’s control of Porsche AG

 

We are assuming at this stage that Porsche AG is IPOed debt free as we have no details

We are now assuming that PAH3 would finance the acquisition of its 25% + 1 share of Porsche AG Ord shares 100% in debt

PAH3 controls 31.4% of VOW’s capital and 53.3% of VOW’s voting rights

PAH3 would control 65% of Porsche AG’s voting rights

 

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5/ Detailed calculations

 

Find below our calculations on the potential Porsche AG’s IPO and impact for PAH3

We use a 55% discount to RACE IM’s multiple hence an implied €78.6bn equity value for Porsche AG

PAH3 would need to raise €7.4bn post special dividend to finance the acquisition of its 25% + 1 share of Porsche AG Ord shares (12.5% of Porsche AG’s capital)

 

 

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6/ PAH3’s holding discount

 

PAH3 current discount to NAV is -32.6% but was as tight as -26% early April

 

Implied PAH3 holding discount post IPO:

  • If we were not to consider any discount for PAH3’s position in Porsche AG’s Ord versus the Pref, the implied discount post IPO would be -30.5%
  • When considering a 20% discount as per the SOP post IPO below, PAH3 holding discount would be -25.3%

 

PAH3 has currently no debt and would end up post IPO with a net debt of €6.6bn. This is acceptable but would raise the holding’s risk profile

 

Find below, PAH3’s current discount to NAV:

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We make the following assumptions for our PAH3 SOP post Porsche AG’s IPO:

  • An equity value of €79bn for Porsche AG
  • We apply a 20% discount to PAH3’s position in Porsche AG’s Ord versus Pref’s IPO price (unlisted)
  • PAH3 would pay €10.6bn for the stake but receive €3.1bn in special dividend which means they only have to finance €7.4bn
  • We use VOW ex special dividend price to calculate the value of PAH3’s VOW post IPO

 

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David