SAPEC (or looking for 75% return in less than a year)

A few weeks ago SAPEC announced the sale of their main business (agriculture business – AB):

 At 03/11/2016 they announced they were considering offers to sell that business for “an amount equal to 11 to 12 times its recurring EBITDA” of 39.5M and four days later they announced  the sale to Bridgepoint for 456 million enterprise value (11,55 x EBITDA).

To quote “The sale of AB was made on the condition of obtaining the approval of the Portuguese and Spanish competition authorities” “ there are no overlappings between the activities of Bridgepoint’s subsidiaries and those carried out by the Sapec’s AB sector, and a clearing is expected within two months of submitting the dossier, which will take place by the end of November”.

So the likelihood of the deal closing seems very high (it is a small deal to Bridgepoint).

What if?

The 03/11 announcement is somewhat reassuring. In my interpretation it is implied that there was more than one offer between 11 and 12 times recurring EBITDA. The deal can fall anyway, but I would guess the likelihood of no deal happening is very low.

What will they do with the money?

“Sapec intends to strengthen its other activities in Portugal and Spain and, once the transaction has been completed, to distribute to its shareholders a substantial part of the cash received, under specific terms and timing still to be considered.”

So here come the numbers:

SAPEC net debt as of 06/2016: 162,5M (according to the statement 137,6 M in AB)

Cash to receive + debt assumed from AB: 456M

SAPEC after closure:

Net cash: 293,5M

Industrial chemicals (2015 EBITDA: 1,059 k€)

Environment 2015 EBITDA: -29k€ (they are planning the sale, negotiations were underway for a management buyout)

Agro commodities distribution (2015 EBITDA: 969K€)

Logistics (2015 EBITDA: 1389 k€)

Assets held for sale: liquid bulk terminal in Cadiz (at the books for net 7M)

Real estate:

-          100 hectares of the industrial park in Setubal (www.blueatlantic.pt)

-          100 hectares for tourism in Lousal  

Other positions: ENERGIA LIMPIA INV., THARSIS AND NATURENER: they explain extensively in the annual report (note 14 a pages 70-72). SAPEC guarantees 36M of debt to a bank, so in the worst case they lose 36M

To be conservative I would argue that all these assets are at worst canceled by the 36M guarantee, but they are probably worth a few millions more, at least.

CONSERVATIVE EQUITY VALUATION

Net cash after closure of 293,5M (which I believe will mostly be distributed to shareholders)

MARKET CAP: 168M (124€/share)

Conservative upside: 75%

Expected period of realization: 6 to 12 months

Disclaimer: I own shares of SAPEC. This is not an investment advice and I am not a professional adviser. Always do your own research. I am and will be wrong about many things, it is possible that this is one of those.