Did Exor really make a deal with Philips?
Exor has acquired 15 percent of Philips with excellent timing: the shares are far from the highs of 2021, before the affair of the defective ventilators, but the company seems to have overcome the worst moment. Facts, numbers and insights
Was the purchase of a share in Philips by the Exor group really a bargain?
This is what some observers are wondering these days after the announcement to the market.
THE FINANCIAL TIMES SERENADES FOR EXOR ABOUT PHILIPS
Exor's €2.6 billion investment in Philips' capital is part of a natural evolution for the holding company as it focuses investments on the healthcare, technology and luxury sectors. This is what the Financial Times indicates in an article on Exor's activity. The acquisition of 15% of the Dutch group was the holding's largest since the sale of US reinsurer PartnerRe for 9 billion euros in 2021 and marks a further push into the healthcare sector by the Turin family. John Elkann, chief executive officer of Exor as well as chairman of Stellantis and Ferrari, told the Financial Times that Exor's portfolio expansion is part of an evolution after two decades of placing the holding company on the market, adding that Exor feels " a strong affinity with healthcare” and that “early lessons” from his investment of more than €800 million last year in the private French healthcare group Institut Merieux have 'reinforced our belief in the importance of this sector and the its growth potential. Exor has said it will reinvest the proceeds from the sale of PartnerRe into technology, luxury and healthcare as it has meanwhile acquired a 24% stake in luxury shoemaker Christian Louboutin, a majority stake in Chinese lifestyle brand Shang Xia and a stake 45% in the Italian Lifenet Healthcare. "We're clearly looking at sectors that have the tailwind," said Suzanne Heywood, chief operating officer of Exor and president of CNH Industrial.
MILANO FINANZA'S ANALYSIS OF EXOR'S MOVE WITH PHILIPS
The acquisition of 15 per cent of Philips by Exor is part of a broader plan to focus on the healthcare sector and was carried out with excellent timing: as noted by Fabio Pavesi on MF-Milano Finanza , the entry of the holding company In fact, John Elkann arrived when the share price of the Dutch health technology company was close to historic lows, then rose to 19.3 euros after the announcement of the operation (from 2.6 billion).
THE CASE OF EQUIPMENT FOR SLEEP APNEA
The low value of Philips stock is linked to the malfunction of its sleep apnea devices which, discovered in 2021, forced the company to proceed with the withdrawal and replacement of the defective devices. Sleep apnea, a temporary stoppage of breathing during sleep, can have very serious repercussions on your health.
Last April, the approximately 100,000 Italian users of respirators filed a class action lawsuit against Philips from Turin for slow recalls.
ALL ECONOMIC AND FINANCIAL CONSEQUENCES FOR PHILIPS
The withdrawal of the appliances had significant economic consequences on the accounts of Philips, which closed 2022 with losses of 1.6 billion on a turnover of 17.8 billion. In 2021, by contrast, the company had reported profits of 3.3 billion; since 2016 the balance sheets had always been positive for over 1 billion.
Obviously, the case of the defective appliances also damaged Philips shares, which fell from around 50 euros before the affair to 13 euros in autumn 2022. If Exor had decided to buy 15 percent of the company in spring 2021 it would have disbursed about three times the 2.6 billion paid a few days ago. Moreover, Pavesi points out, the holding company of the Agnelli-Elkann family "did not have sufficient liquidity at the time, which only arrived with the collection of the sale of PartnerRe", a reinsurance company based in Bermuda, in July 2022: a sale that it earned Exor 8.6 billion euros.
PERFECT TIMING FOR EXOR
The timing of the acquisition was excellent for Exor, it was said, because Philips seems to have passed its worst moment: the accounts for the second half of 2023 signal a return to profit, albeit reduced (just 74 million, after the loss of 660 million in the first half of the year), and an industrial margin of 15 per cent of revenues; free cash flow also returned positive in June. Philips expects to end 2023 with revenue growth in the single digits. All gain, it seems, for Exor.
THE ROLE OF GOLDMAN SACHS
According to what was reported by Reuters , it seems that Exor was able to acquire 15 percent of Philips without having to proceed with the communications to the regulatory authorities (communications required in the case of holdings of more than 3, 5, 10 and 15 percent in a company Netherlands) thanks to derivative transactions carried out through the US bank Goldman Sachs.
A filing from the SEC, the US equivalent of Consob, revealed that Exor had bought a 2.99 percent stake in Philips as of June 30, just below the communications threshold. The Dutch financial regulator showed that, as of Aug. 14, Goldman Sachs owned a 12.11 percent stake in Philips obtained through a derivatives structure.
Sources interviewed by Reuters confirmed to the agency that Goldman Sachs acted on behalf of Exor, but did not provide further details.
NOT ONLY PHILIPS: ALL EXOR INVESTMENTS IN HEALTHCARE
Last year Exor invested nearly 1 billion euros in the healthcare industry. The managing director of the holding, John Elkann, spoke of the healthcare sector as "a sector that will continue to grow over the next few decades, to meet the needs of an increasingly aging global population", and which will therefore create " interesting opportunities for the use of capital”.
Exor owns 10 percent of Institut Mérieux, a French holding company that manages several health technology companies, and 45 percent of Lifenet Healthcare, an Italian healthcare group that owns hospitals, outpatient centers and eye clinics. Furthermore, through the Exor Ventures division, it is supporting the development of emerging companies in the health technology sector.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/sanita/exor-philips-2/ on Mon, 28 Aug 2023 06:27:45 +0000.