Apollo reconsiders its strategy in takeover bid for Applus

The battle for control Applus enters a new chapter after a counterattack carried out I’m squared and TDRwhich on Friday raised its offer for the Spanish company to 11 euros per share from the previous 9.75 euros at a valuation of 100 euros.% of capital of 1,420 million euros since EXPANSIÓN advanced on January 29th.

With this move, the consortium of funds responds to the offensive launched by Apollo two weeks ago, when it announced that it had signed sales contracts with various hedge fund to acquire shares representing 21.85% of the capital of the Industrial Certification and Vehicle Inspection (ITV) company at a price of 10.65 euros per share, immediately raising the price of its takeover offer (takeover offer) at this price from the previous 9, 5 euros.

The New York fund fulfilled these contracts and owns 19.91% of Applus shares -She plans to acquire the remaining 1.94% in the near future, so she has already become the first shareholder of the group. However, its takeover bid lags behind competitors’ bids, forcing the company to rethink its strategy.

Calendar

Once I Squared and TDR receive approval from the National Securities Market Commission (CNMV) for the takeover bid, the regulator will open a period for accepting the relevant offers. for a period of 30 days, and at the end of this stage the parties will have the opportunity to simultaneously set the final price in a sealed envelope.

It can be assumed that competitors save your current offers until you reach the envelopesafter which they could raise the price to around €11.20 per share, as the market expects, according to Applus’ stock market close last Friday.

However, it is possible that Apollo, I Squared and TDR will seek a preliminary agreement to share control of Applus. before the end of the period for accepting the relevant offers, as has already happened in takeover wars Cortefillein 2005 and Abertisin 2018. In the first, CVC, PAI and Permira gathered to buy the company in equal shares, and in the second AKC and Atlantia They unified their offerings and took joint control of the company.

The New York-based fund intends to retain 21.85% of Applus if it loses the takeover war, according to sources close to Apollo., unless I Squared and TDR make an exorbitant offer because they see high revaluation potential in the company. However, if Apollo sells shares, the big winners will be hedge fund How Samson Rock, Sand Grove, Millennium Partners and Harris Associates from whom the fund acquired its shares in accordance with the compensation provisions (against embarrassment) are signed in purchase and sale agreements.

Apollo’s threat to retain its 21.85% stake will complicate Applus’ future delisting, as I Squared and TDR will face difficulties in reaching 75% of the company’s capital and they will have to formulate a new takeover proposal, in this case a delisting proposal, to delist it, which requires more time, cost and procedures. Moreover, failure to reach 75% of capital will prevent the consortium from pursuing financial consolidation of the company.

For this reason, it is interpreted among insiders that Apollo’s intention to remain in the capital of Applus, even if he is in the minority, is intended to reach an agreement with I Squared and TDRalthough the hostilities demonstrated so far, with successive price increases, cloud the possibility of reaching an agreement between the parties.

Be that as it may, the truth is that Apollo has no minority investment without a partnership agreement that allows it to control the direction of the company.. Being a minority shareholder in Applus, controlled by I Squared and TDR, will not be viewed favorably by the investment committee of a US fund.

Provisions

It could happen, yes it does Apollo will retain its 21.85% until the terms expire against embarrassment subscribed to hedge fund sell it later to a competing consortium at a higher price. The contracts stipulate that if the US fund sells its 21.85% to a third party at a price above €10.65, the hedge funds must receive at least 75% of the difference.

This clause is valid for one year for most contracts, with the exception of contracts signed with Millennium and Sandy Grovewhere is the deadline against embarrassment This is 24 months.