D'leteren group EC clears PHE acquisition but requires divestment of PHE's VGRR assets

Yesterday the EC cleared D'Ieteren's acquisition of PHE, conditional to D'Ieteren's commitment to fully divest PHE's glass repair and replacement activities Mondial Pare-Brise and the Glass Auto Service Label. Although the decision is unfortunate given the strong synergies of these assets with Belron, the outcome does not surprise us as we estimate the combination would have given Carglass a market share in France of roughly 50%. Contrary to the € 115m in revenues that we quoted this morning, D'Ieteren group mentioned that the total contribution of PHE's VGRR assets is more is more around € 50m, making the contribution to PHE's overall FY21 revenue of € 2.0bn very limited. We do however believe the divestment of Mondial Par-Brise will take place at higher multiples than what was paid for the overall stake in PHE Holding (FY21 EV/EBITDA: 6.9x). Earlier this year, D'Ieteren already mentioned that the deal could close somewhere in 3Q22.
As a comparison, Cary recently acquired UK VGRR player Charles Pugh (sales of € 68m) for an EV/EBITDA multiple of 9.0x, while the avg. paid transaction multiple for VGRR assets by Cary between 2018-2021 was 6.3x EV/EBITDA. Note that Cary is currently trading at 16.2x 22e EV/EBITDA whereas Belron is in our Model at 17.1x 22e EV/REBITDA. Given the similar size of Charles Pugh and PHE's VGRR assets, a 9.0x EV/EBITDA multiple would imply an EV value for PHE's VGRR assets of around € 50m.