Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Xetra  >  Continental    CON   DE0005439004

CONTINENTAL (CON)
Mes dernières consult.
Most popular
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets

Fund investors deflate tyremaker Pirelli's IPO price hopes

share with twitter share with LinkedIn share with facebook
share via e-mail
0
09/15/2017 | 10:45am CEST
A Pirelli's tyre is pictured at the headquarters in Milan

Tyremaker Pirelli has given up on what sources say was an initial valuation goal of 9 billion euros (8.00 billion pounds) ahead of its return to Milan's stock market next month, after several fund managers baulked at paying such a lofty price.

The maker of Formula 1 racing tyres said on Thursday its owners would sell up to 40 percent of the company within a price range of 6.30-8.30 euros per share, giving it a valuation of between 6.3 billion and 8.3 billion euros.

Controlling shareholder China National Chemical Corporation (ChemChina), which took over Pirelli two years ago and delisted it, and two other shareholders had been looking for a premium valuation of up to 9 billion euros, sources familiar with the matter have said.

However, fund managers raised doubts, citing Pirelli's relatively high debt, complex governance structure and risk that the share price could be hit by a wave of selling once a lock-up period for one of the existing minority shareholders expires.

At the top of Pirelli's price range, ChemChina and the two minority shareholders will raise up to 3.3 billion euros in the IPO, assuming Pirelli's bankers take an over-allotment. That would make it Europe's second largest offer this year behind the 3.4 billion euros raised by Allied Irish Banks (>> Allied Irish Banks PLC) in June.

The price range represents a multiple of 11.3-14.9 times Pirelli's forecast 2018 earnings, according to estimates published by Banca IMI, a global coordinator for the IPO. Banca IMI valued Pirelli at between 7.6 billion and 8.7 billion euros.

But four Italian fund managers said the group was worth 6.6 billion to 7.5 billion euros, or 11.9-13.5 times 2018 earnings.

That would put Pirelli above rival tyremakers Michelin (>> Michelin) and Continental (>> Continental) but short of the industry's most highly valued manufacturer, Finland's Nokian (>> Nokian Renkaat Oyj).

Angelo Meda, head of equities and portfolio manager at Banor SIM, which manages 4.8 billion euros in assets, trimmed his maximum valuation after the price range was released.

"I am not going to buy it if it's valued at more than 7 billion euros," he said.

One large London-based investor who has looked at Pirelli's offer said the group was a good business but questioned whether it deserved a premium valuation.

Pirelli declined to comment.

Giacomo Tilotta, portfolio manager at AcomeA SGR, also cut his valuation, saying Pirella was attractive at around 6.6-7.0 billion euros compared with 7.0-7.5 billion euros previously.

He said debt was the main reason why the company should not carry a hefty premium over peers. Pirelli's net debt is 3.1 times estimated 2017 core earnings, compared with 0.8 times for Michelin in the first half of 2017, while Nokian is cash positive.

VALUATION DEBATE

Pirelli, established in 1872 and one of Italy's best-known corporate names, said it would list in the first half of next month. It is expected to set a listing date of Oct. 4.

The company markets itself as a premium tyremaker focussing on upmarket consumer tyres. The group's less profitable truck and industrial tyre business is being retained by ChemChina.

Banca IMI said in a study that Pirelli warranted a valuation above its direct peers' average 2018 earnings multiple of 11.1, citing its "superior financial profile and higher expected earnings growth".

Shares in rivals Continental and Michelin sell on a 2018 earnings multiple of around 11, according to Banca IMI. High-end winter-tyre manufacturer Nokian Tyres (>> Nokian Renkaat Oyj) commands 15.7.

"Pirelli is at the forefront of a trend for fitting vehicles with larger and larger tyres, but it's not a protected niche," said the London-based investor.

"Other tyremakers are making in-roads into this market, which might erode its profit margins as competition heats up," the investor added.

A person familiar with the matter said more than 700 potential investors in Europe, Britain and the United States had expressed an interest in the IPO, which is being marketed by nine Italian and foreign investment banks, led by global coordinators Banca IMI, JP Morgan and Morgan Stanley.

State-owned ChemChina holds 65 percent of Pirelli's sole shareholder, Italy-based Marco Polo, through a Luxembourg-based firm. Pirelli boss Marco Tronchetti Provera and banks UniCredit (>> UniCredit SpA) and Intesa Sanpaolo (>> Intesa Sanpaolo) hold around 22 percent of Marco Polo via a holding company. The rest is held by investment fund LTI, linked to Russia's Rosneft (>> NK Rosneft' PAO), which has a lock-up period of 180 days after the IPO.

The person familiar with the matter said Rosneft had never said it would sell out, while another source close to the deal said Rosneft's post-IPO stake would be small.

ChemChina will remain the biggest shareholder after the IPO, with around 40 percent, though Pirelli has said most of its directors will be independent and that Tronchetti Provera will play a key role in picking his successor in 2020.

Banca IMI gave Pirelli an enterprise value of up to 12 billion euros, including net debt of 3.36 billion euros.

Two years ago, when ChemChina bought the business and delisted it, Pirelli had an enterprise value of roughly 8.3 billion euros, though that included the industrial tyre division.

"Now that the company is a bit smaller they are seeking an enterprise value of up to 12 billion. That's too much," said Meda.

(Additional reporting by Agnieszka Flak in Milan; Writing by Silvia Aloisi; Editing by Mark Bendeich, Greg Mahlich)

By Maria Pia Quaglia, Elisa Anzolin and Simon Jessop

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on CONTINENTAL
01:42p CONTINENTAL : MILITARY $52.38 Million Federal Contract Awarded to Contitech USA
09/21 CONTINENTAL : Patent Issued for Method for Field-Oriented Control of a Frequency..
09/21 CONTINENTAL : Patent Issued for Method of Operating a Capacitive Actuator in a M..
09/20 CONTINENTAL : MILITARY $582,568 Federal Contract Awarded to ContiTech USA
09/18 CONTINENTAL : Pull Up and Have Your Car Parked for You Continental Implements Fu..
09/15 CEO DR. DEGENHART : “Our cars will increasingly become our offices and fro..
09/15 Fund investors deflate tyremaker Pirelli's IPO price hopes
09/14 CONTINENTAL : Patent Issued for Flash LADAR Collision Avoidance System (USPTO 97..
09/14 CONTINENTAL : Researchers Submit Patent Application, "Fuel Rail Assembly for an ..
09/14 CONTINENTAL : Patent Issued for Turbine Housing for a Turbocharger (USPTO 975245..
More news
News from SeekingAlpha
09/20 Continental (CTTAY) Presents At Berenberg & Goldman Sachs Sixth German Corpor..
09/05 Oppenheimer International Growth Fund Inst (OIGYX) August Summary
08/10 Continental Aktiengesellschaft (CTTAY) Presents At Jefferies 13th Annual Indu..
08/08 Oppenheimer International Growth Fund Inst (OIGYX) July Summary
08/06 Continental (CTTAY) Q2 2017 Results - Earnings Call Transcript
Financials (€)
Sales 2017 43 816 M
EBIT 2017 4 836 M
Net income 2017 3 174 M
Debt 2017 2 837 M
Yield 2017 2,20%
P/E ratio 2017 13,45
P/E ratio 2018 12,18
EV / Sales 2017 1,03x
EV / Sales 2018 0,95x
Capitalization 42 501 M
Chart CONTINENTAL
Duration : Period :
Continental Technical Analysis Chart | CON | DE0005439004 | 4-Traders
Technical analysis trends CONTINENTAL
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 30
Average target price 219 €
Spread / Average Target 3,2%
EPS Revisions
Managers
NameTitle
Elmar Degenhart Chairman-Executive Board
Wolfgang W. Reitzle Chairman-Supervisory Board
Wolfgang Schäfer Head-Finance, Controlling, Compliance, Law & IT
Karsten Michels Head-Systems & Technology
Michael Iglhaut Member-Supervisory Board
Sector and Competitors
1st jan.Capitalization (M$)
CONTINENTAL15.38%50 793
DENSO CORP11.99%40 193
JOHNSON CONTROLS INTERNATIONAL PLC-2.94%37 193
DELPHI AUTOMOTIVE PLC50.02%27 426
MAGNA INTERNATIONAL INC.11.36%19 493
HYUNDAI MOBIS CO., LTD.--.--%18 759