A pulse to the dog’s face. On October 8, the deadline to accept the IFM takeover of 22% of Naturgy ends. At a price of € 22.07 per share, the Australian fund’s proposal is valued at € 5 billion. The process since the offer was launched at the end of last January has been anything but a bed of roses for IFM. The board and the main Naturgy shareholders will not attend the takeover bid and have veiledly suggested to the rest of the shareholders that they think twice before selling their securities. In addition, the main owner of the gas company, Criteria reiterates that it will not sell Naturgy shares to IFM and continues to buy securities by buying shares on the market. On the verge of knowing if the maneuver will be successful (it is conditional on achieving at least 17% of the capital) a new battlefield has opened between the contenders: the fund is considering, if it manages to enter the board, suspend the dividend , while the company chaired by Francisco Reynés have recalled, via a relevant fact to the CNMV, that the remuneration policy is not touched.
It is difficult to imagine more incidents than those that have occurred in the eight months that have elapsed since the takeover bid was announced at the end of January until now. The price has even been modified, which started from 23 euros per share to the final 22.07, after discounting the IFM fund the dividends paid by Naturgy in March and August. In addition, in July of this year, in full operation, the president of Naturgy, Francisco Reynés, presented his 2021-2025 strategic plan because, as he said, “a company cannot be paralyzed by a takeover bid”.
After six months of waiting, the Government finally decided to authorize the operation in its Council of Ministers on August 3, although putting tough conditions on the Australian fund. And as a culmination, in mid-September, the Government decree to try to stop the riot in the price of the kilowatt with an estimated impact of 3,200 million in its results for this and next year on the three major energy companies (Iberdrola, Endesa and Naturgy).
In this battle full of script twists, the attitude of Criteria (Caixabank’s investment arm) is also striking. The holding company led by Isidro Fainé, the main shareholder of the gas and electricity company, increased its purchases of Naturgy shares in the middle of the takeover period, raising its stake from 24.8% in January this year to 26.115% in September . The rest of the significant shareholders have remained quiet, although they will not attend the offer. The GVC fund held its 20.4% of the capital, the GIP fund 20%, and the Algerian gas company Sonatrach 3.85%. And while, IFM Australians remain firm in their offer (conditional on obtaining at least 17% of the capital), which invites analysts to speculate on possible unknown agreements between large shareholders.
With this shareholding structure, Ángel Pérez, an analyst at Renta 4, finds it difficult to carry out the takeover bid. “The free-float [capital libre que cotiza en el mercado] it is only 28%, so reaching 22% is difficult. IFM’s offer price does not offer an exorbitant premium and it is a company with historical shareholders (around 73,000) who have been there for many years collecting dividends and who will be difficult to sell. IFM has assured that it would continue with the operation if it achieved 17% and even less, but it is difficult to reach these percentages. One example is that the subscription period for the offer is 30 days, which will end on October 8, when the normal is 15 days, ”says Pérez.
It is not clear that the offer will triumph, analysts point out that the current price of Naturgy on the stock market (around 21.7 euros) has been artificially maintained thanks to the takeover bid and has not suffered the falls of Iberdrola or Endesa after the approval of the electrical decree. Pérez explains: “We recommend selling already in the market. By hypothetically earning 2% or 5% more than current prices, you run the risk that the operation will not go out and that its price will be cut as a result of the impact on its accounts of the decree ”. A vision shared by José Ángel Fuentes, mutual income manager at Mutuactivos. “The takeover has protected Naturgy’s share price from circumstances in the market that have negatively affected the sector, such as sensitivity to increases in interest rates, regulatory risk, etc.”, he explains. And he adds: “We prefer other options within the electricity sector.”
In the heat of the new electricity regulation, a Barclays report points to an impact on Naturgy’s accounts of 100 million euros for this year and a similar figure for next year. In addition, the British bank considers that the offer of 22.07 euros is insufficient to value the share, whose target price is 24.7 euros: “We continue to believe that IFM’s offer price does not reflect the total value of Naturgy, in particular the potential cost reduction and the value of its renewable portfolio ”.
According to Naturgy’s strategic plan 2021-2025, the company wants to invest 14,000 million euros, whose large items are 8,700 million for the ecological transition and 4,100 million to the distribution networks. An ambitious plan that may require divestments and whose results will not be immediate, so going to the takeover bid or selling the shares now can be a good strategy for those who do not want to wait long. A report by Goldman Sachs forecasts net income 15% below the plan presented by the company in 2025. “In addition, the increase in capex also implies increasing leverage.” Mutuactivos describes the new Naturgy business guide focused on the energy transition as interesting, but they believe that “it is not exempt from execution risks due to the large volume of investments at stake.”