I Squared and TDR win the Applus takeover bid by just one cent

A dramatic war of public acquisition bids (takeover bids) for Applus, a Spanish vehicle inspection (ITV) and industrial certification company, ended yesterday in a last-minute victory with a narrow victory for a consortium formed I Squared and TDR who formulated final offer 12.78 euros per share in cash, higher than the final price of €12.51 offered by rival Apollo Global Management.

These were the prices presented in a sealed envelope by the two bidders before the National Securities Market Commission (CNMV), in a last-ditch effort when both had to improve their takeover bids in a battle that lasted almost a year. The consortium’s previous offer was 11 euros, and Apollo’s offer was 10.65 euros.

The victory, in fact, amounted to the slightest difference, just over a cent, totaling 1.29 million euros. If Apollo’s offer had been less than 2% lower than I Squared’s offer and TDR, i.e. €12,525, it would have had the opportunity – under takeover legislation – to submit a final improvement since it was the first offeror.

But, as the CNMV said yesterday, since the offer was 2.1% lower, “the requirements for Manzana Bidco (Apollo) to possibly formulate a definitive improvement in its capabilities as the original supplier have not been met.”

Sources close to the process indicate that both sides offered “unrounded” prices to try to get around the 2% difference. “It appears that Apollo bet €12.51 rather than €12.5, thinking that his opponent could reach €12.75 (which was his maximum theoretical price taking into account bank financing and his funds). And I, in turn, , took Squared and TDR to 12.78 euros (not staying at 12.75) to get a little more margin than 2%.”

This is the first time in Spain that a takeover war has been resolved through a system of possible price increases by the first bidder if it remains less than 2% below its competitor’s price.

Total payment amount

The takeover offer by I Squared and TDR is conditional on obtaining at least 50.01% of the capital of Applus. If this were done 100%, the payout on shares would be approx. 1.650 million euros. In addition, he will have to take on the 900 million debts that the Spanish company has.

The most logical thing is that Apollo is now withdrawing its offer, since the majority of Applus shareholders are financial investors who will go to the highest bidder. The New York fund owns 22% of Applus and must choose between selling its position (receiving some capital gain since it bought at €10.65 per share) or maintaining a minority, which is highly unlikely. Part of this capital gain (75%) must be transferred to the funds that sold his participation at the beginning of the year.

If you take control of Applus, the goal of I Squared and TDR is to move to your stock market exclusion. The first of these investors is an infrastructure fund based in Miami, and the second is a venture capital fund based in London.

To finance part of its takeover bid and extend Applus’ debt, the consortium has a $1.520 million loan from seven banks: Barclays, Crédit Agricole, Goldman Sachs, HSBC, Morgan Stanley, Standard Chartered and Deutsche Bank. The rest of the money for payment and refinancing (about 1 billion euros) should come from the I Squared and TDR funds, which are formulating the proposal through Amber EquityCo.

The consortium’s financial advisors are Jefferies, Bank of America, Goldman Sachs and Barclays. For its part, PJT Partners is owned by I Squared and TDR in terms of its funding structure. Legal consultant – Linklaters.

One of the first tasks for new owner Applus will be to try to renew the contract with its subsidiary Idiada, which received a concession from the Generalitat of Catalonia to operate the car testing track and now accounts for about 15% of the group’s profits. operation. This award was put up for auction.

Admission deadline

Amber EquityCo has already received approvals from various Spanish, European and other regulatory authorities to carry out the transaction. The 15-day acceptance period for the two proposals (or the consortium proposal if Apollo pulls out) will begin when CNMV receives payment guarantees and approves price increases, likely next week.

Before the final offer was revealed yesterday and trading was suspended, Applus shares were trading at just above €11.50 on the stock market. After the resumption of trading, securities prices rose sharply and closed at 12.74 euros. Among the opportunistic funds that took positions in Applus due to the takeover war were Walleye Capital, Sand Grove and Melkart.