Recordati in the spotlight following CVC’s relaunch, but analysts say the price is still low

(Il Sole 24 Ore Radiocor) - The relaunch of the takeover bid by the CVC and GBL funds is supporting the share price Recordati Ord on the Milan Stock Exchange (FTSE MIB ), even though the takeover bid price remains far below the demands of minority shareholders and the company’s independent directors. Share prices are broadly in line with the 53 euros proposed by the Respighi BidCo vehicle as its ‘best and final’ offer.

The funds have therefore raised the price by 3.3 per cent from the initial €51.29 and believe “that the new price represents a full and fair valuation” of Recordati, “reflecting its stand-alone prospects, particularly in light of the current market environment, which has seen a gradual deterioration in valuations within the European healthcare and specialty pharma sectors in recent times”. Respighi therefore emphasised that “there will be no further increases” to the price and extended the acceptance period until 23 October. The funds are thus attempting to overcome the reservations expressed by minority shareholders – starting with the Palliser fund – and by the independent directors.

The relaunch, as analysts at Banca Akros point out, “confirms that the strong opposition expressed by minority shareholders and independent directors has put pressure on the bidder to improve the terms of the deal”. The experts point out that the adviser Rothschild had indicated a valuation of up to €61.25 per share and that the average target price is €60.1. According to Akros, therefore, “the revised offer is still not sufficient to adequately compensate minority shareholders for Recordati’s standalone value and its growth potential”. The analysts therefore confirm their “buy” recommendation and target price of €65. “Although the higher bid increases the likelihood of the deal’s success,” they conclude, “we continue to regard the price as unattractive relative to the company’s fundamental valuation.” To date, Respighi has acquired 49.79 per cent of Recordati, including the 46.8 per cent contributed by CVC itself, and Equita estimates that ‘through purchases of shares and derivatives’ he could reach ‘over 59 per cent of the share capital’.

Equita also recommends a ‘buy’ on the company’s shares, with a target price of 69 euros. “Whilst the financial terms have improved,” Intermonte concludes, “the new price remains significantly below our target price of 71 euros and, in our view, does not fully reflect the medium- to long-term value creation potential associated with Isturisa and the agreement with Moderna.” “For this reason,” adds the brokerage firm, which reaffirms its ‘outperform’ rating, “from a strictly fundamental perspective, we continue to regard Respighi’s offer as unattractive. That said, the increase in the offer price could persuade some arbitrageurs to tender their shares, in a context where the pressure to tender shares remains high”, not least because “thanks to the stake already held, in accordance with the shareholders’ agreements already signed, CVC and GBL have a sufficient position to dismiss the current board of directors and approve a merger with Respighi aimed at delisting Recordati, whilst granting a right of withdrawal to shareholders who do not accept the offer’.