EUR 100.00 For Business Accounts Only

IBERIAN DAILY 03 SEPTEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAF, INDRA.

Doubts about debt put an end to stock-market complacency
September is the worst month of the year from a statistical point of view and on the second trading day European stock markets met this expectation, sliding >-1.0%. Thus, in the STOXX 600, all sectors except Consumer Goods (that ended flat) closed with losses, led by Real Estate and Travel&Leisure. On the macro side, in the euro zone, August’s inflation rose more than expected to 2.1% and the core data to 2.3% YoY. In Spain, unemployment continued to see the -5.7% YoY slowdown (the lowest level since August’07), with social security affiliation rising 2.3% YoY. In the US, August’s manufacturing ISM rose less than expected due to the drop in production and despite the increase in new orders. July’s construction spending recovered in line with expectations. In Brazil, as expected, the 2Q’25 GDP growth eased to 2.2% YoY. In Japan, the services PMI was raised to 53.1 from 52.6 previously. In China, August’s RatingDog services PMI (ex Caixin) recovered to 53.0, at highs from the past 15 months.
What we expect for today
European stock markets would open with gains of +0.3% with all eyes on French debt. Currently, S&P futures are up +0.10% (the S&P 500 ended -0.22% lower vs. the European closing bell). Asian markets are sliding (China’s CSI 300 -0.80% and Japan’s Nikkei -0.98%).
Today in the euro zone, Spain and the UK we will learn August’s final services PMI, in the US the Fed Beige book, JOLTS job vacancies and July’s factory orders.



COMPANY NEWS

INDRA. Escribano will not exceed SEPI’s stake in Indra in the event of a merger. OVERWEIGHT According to the press, Escribano (14.3% IDR) has pledged SEPI (28% IDR) not to exceed the latter’s stake in the company in the event of a merger. Two investment banks would have been already hired to value Escribano. Note that press rumours suggested that Escribano would be valued at between € 1 Bn and € 1.5 Bn (17%/25% of IDR’s market cap).
The deal with Escribano makes strategic sense, as it would increase IDR’s exposure to Defence, improving the group’s profitability. EM&E would contribute some € 355 M of sales’24 (~7% of IDR’s group sales and ~34% of IDR Defence’s sales) and € 127 M of EBITDA (23% of group EBITDA and ~61% of Defence’s), with an EBITDA margin of 35% (vs. 11.3% group and 20% Defence). The doubts stem from corporate governance given the relationship of both companies. There is also additional uncertainty about the final valuation of EM&E. In this regard, in order for Escribano to gain control of less than 30% of IDR (to avoid a TOB) and less than SEPI’s stake (that would also see its position diluted due to the merger through shares) he should sell more than 10% in the latter based on the valuations leaked by the press on EM&··, which would entail significant selling pressure in IDR. At this point, we do now know other possible options (possibly a valuation of IDR clearly above the current market level at € 5.9 Bn), and thus, this news has a negative slant.