Swedol
Swedol - Early Christmas shopping by Momentum Group (ABG Sundal Collier)
2019-11-11 19:26
Momentum Group to buy Swedol at ~14x EBIT(ABGSCe)
Sees synergy opportunities with Tools & Consumables
Swedol CEO to head division with margin expansion goal
Momentum offer at SEK 46.50, +39% vs. last week’s closeMomentum Group has bid for Swedol, offering SEK 46.50 per share or a share consideration of 0.40 new Class B shares in Momentum Group for each Swedol A and B share. On our estimates, this indicates a ’19e EV/EBIT multiple of ~14x, which is 8% below our peer group but 40% above Swedol’s closing price on Friday. Majority shareholder Nordstjernan (67% of capital and 72% of votes) has undertaken to accept the share consideration, and if the deal is completed Nordstjernan (also largest shareholder in Momentum Group) will hold around 43-53% of Momentum Group shares. Swedol’s Independent Bid Committee has recommended shareholders to accept the cash consideration. A prospectus for the offer is expected to be published on 9 December, with an acceptance period expected to run from 17 December 2019 to 25 February 2020.
Reasons for the deal, and its potential
The main reason for the deal is to realise synergies between Swedol and Momentum Group, more specifically the TOOLS business in the Tools & Consumables division. Momentum Group sees several potential synergies between the two through end-customers, sales and delivery channels. We expect the deal to be directly margin-accretive, and on our ’20e estimates we expect an EBIT margin of 6.8% for the division (3.8% no deal). Given synergy opportunities in sourcing, delivery and the ability to sell Swedol’s high-margin proprietary products through new channels, there could be further margin upside. The Tools & Consumables division would increase its sales by >75%. Current Swedol CEO, Clein Johansson Ullenvik, will head the division, with the goal of improving EBITA margins to around 10% (similar to his achievement at Swedol).
Swedol has been trading below peers for some time
We have long highlighted that Swedol trades below its
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