Because Intesa Sanpaolo applauds CNH’s Chinese shift on Iveco

8 January 20213 years ago babelfish

Concerned unions, analysts and favorable investment banks. Opposing views on the ongoing sale of Iveco by Cnh (Exor) to the Chinese group Faw. Here is what an Intesa Sanpaolo report says

Political-union tensions over Iveco, while analysts on the Stock Exchange applaud the move underway by CNH, which is selling Iveco trucks and buses to the Chinese of Faw.

Concerned unions, analysts and favorable investment banks. Opposing views on the ongoing sale of Iveco by Cnh (Exor) to the Chinese group Faw .

Here are all the details.

THE NEGOTIATION BETWEEN CNH AND FWA ON IVECO

The negotiation with the Chinese car group Faw Jiefang concerns Iveco buses and trucks and involves the Suzzara plant (Mantua), where the Daily is produced, and the Brescia plant, where the Eurocargo are produced. The workers concerned – according to union data – are 1,684 in Suzzara and 2,259 in Brescia. The possible acquisition of a stake in Fpt Industrial, the engine division, present in Turin (2,450) and Foggia (1,700) is also under discussion. Then there are the employees of the central agencies, Faw had already expressed his interest last summer, but now he would have presented an improvement offer. The sale could be an alternative to the plan presented by CNH Industrial in September 2019: the idea was to split in two and set up an autonomous company, listed on the Stock Exchange, of Iveco buses and commercial vehicles and Fpt engines, separate from the agricultural and construction vehicles business.

WHAT TRADE UNIONS FEAR ABOUT IVECO

The negotiations between CNH Industrial and the Chinese Faw for the sale of Iveco worries the unions who fear repercussions on employment in the Italian plants. For this reason, Fim, Fiom, Uilm, Fismic, Ugl and the Quadri Association deem it necessary to “discuss, even in the institutional setting, with the top management of the multinational”. The trade unions have already met in videoconference the head of industrial relations of the group, Vincenzo Retus, who confirmed the negotiation in progress, but reiterated that both the perimeter and the modalities of the operation, which may be of a corporate or industrial nature, still need to be defined. . In Piazza Affari, the stock of CNH – controlled by Exor, the holding company of the Agnelli family – closed with a positive sign (+ 0.5%) after yesterday's jump.

TRADE UNION EXPECTATIONS ABOUT IVECO AND REQUESTS FROM CNH-EXOR

“We asked – explain the unions – to be fully informed and involved in a timely manner. Unfortunately, companies that have deep roots in the industrial and economic fabric of our country and which represent excellence in strategic sectors such as mobility and motorization, are increasingly the object of foreign acquisitions. Any acquisition implies potential employment and industrial risks and a consequent impoverishment of the country, which represent the highest trade union priority ". According to Fim, Fiom, Uilm, Fismic, Ugl and Associazione Quadri, “in the long term, a problem of industrial and employment prospects can arise that must affect not only the trade union, but the whole country system. The industrial plan recently agreed also represents for us the starting point for any discussion, but we are aware that even a possible separation between Iveco and Fpt could have negative repercussions on it ”.

WHAT THE ANALYSTS SAY

“A potential sale of Iveco would represent an alternative and probably a simpler option to the demerger plan and would allow the holding Exor to reduce its weight in the automotive segment”, commented Intesa Sanpaolo this morning. At the same time, however, Mf points out , the sale of Iveco and part of the Fpt business to a Chinese group could raise some problems at a European competitive and political level. Italian political sources (not of the majority) have hypothesized the use of the golden share to prevent an Italian company from being sold to a Chinese company: the initiative came from the senator of the Brothers of Italy, Adolfo Urso, among other things vice president of Copasir. So much so that Equita Sim does not rule out that political pressures may lead to intermediate solutions with respect to the sale.

THE INTESA SANPAOLO REPORT ON IVECO

Instead, from a purely evaluation point of view, Intesa Sanpaolo highlighted that, based on its estimates, the basic offer of Faw would correspond to a multiple ev / ebitda 2021 on Iveco of approximately 5.3 times, "higher than our current valuation that incorporates for Iveco an ev / ebitda 2021 multiple of less than 4 times to approximately 2.6 billion ". Although the Cnh Industrial share price already discounted the news yesterday, "we believe that the potential interest of Faw in Iveco can continue to support the share". In fact, explained Intesa Sanpaolo, "despite being higher than our current valuation on Iveco, the multiples of the basic Faw offer are still positioned below the valuation of Traton, traded at 7.5 times the multiple ev / ebitda 2021, thus providing room for some improvement in the course of negotiations with CNH, in our opinion ".

MEDIOBANCA'S ESTIMATES ON IVECO AND CNH

In its sum of the parts, Mediobanca Securities values the Iveco business 1.9 billion euros, 3.4 billion the entire share of Fpt and gives a negative valuation of 2.6 billion to intra-group costs, leading to an overall valuation of approximately 4 billion euro of on-way activities (assuming a 50% share of intra-group costs). Therefore, "if Faw were to submit an offer of around 4 billion, this would be a value that would increase our valuation as apparently the sale would only include a minority stake in Fpt and would exclude Iveco's special vehicles business", he specified Mediobanca.

THE SEGMENTS OF IVECO

The sale would be positive because Iveco has structurally underperformed its competitors in recent years and is less geographically diversified (Europe over 2/3 of turnover). Ih, New Holland agriculture, Steyr, Case, New Holland Construction, Astra, Magirus, Iveco defense Vehicles) and of the on-highway road section (Iveco, Iveco Bus, Heuliez bus and Fpt industrial). “The sale of Iveco can accelerate the process of separating the two souls of Cnh; for this reason, we are improving our target price on the CNH share from € 12.50 to € 13.5, in line with our valuation of the sum of the parts; we maintain our buy recommendation on the share ”, underlined Banca Akros.

THE ANALYSIS OF EQUITA

While the current sum of the shares of Equita does not discount M&A scenarios (Iveco 2.5 billion dollars plus 0.4 billion Nikola at market prices). "In an M&A scenario, assuming a valuation at an ev / ebit 2022 of 10 times, Iveco would be worth about 3.5 billion euros with a positive impact on the sum of the parts of more than 1 euro", assessed the SIM, lower than the valuation of 4 billion reported only by Il Messaggero (it would involve 0.4 euros per share more).

THE FIDENTIIS REPORT

Certainly, added Fidentiis, the sale of Iveco could represent a more effective way to separate a division with a relatively low level of synergies with the core business and to extract shareholder value: "From an evaluation point of view, we estimate that the move can lead to a potential creation of value of up to 16%, by selling the business at a premium compared to our current valuation in the sum of the parts at 3.2 billion euros (ev, ed) and reducing the holding discount currently applied to Cnh as an industrial conglomerate ".

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/perche-intesa-sanpaolo-applaude-la-sterzata-cinese-di-cnh-su-iveco/ on Fri, 08 Jan 2021 08:35:27 +0000.