GBL Sale Of 8.5m Shares Of SGS SA Could Make Way For Sizable Private Asset

GBL announced that it had sold, through its wholly-owned subsidiary ‘Serena S.à r.l', 8.5m shares of SGS SA (~4.5% of SGS' shares outstanding) by way of an accelerated bookbuilding process for total proceeds of €0.8b. GBL will continue to remain SGS' largest shareholder with ~14.6% of the capital and voting rights. In the context of the Offering, GBL has entered into a 90-day lock-up commitment with respect to its remaining shares of SGS. The Offering is expected to settle on March 10, 2025. We welcome this news since the partial divestment from SGS will provide management with the required liquidity to make a sizable private investment which in turn could lead to a greater than 50.0% share of the NAVps coming from private assets, which would make GBL a more attractive name. As we wait for GBL's FY24 results, we reiterate our BUY rating and €100.0 TP.
Investment Case: We believe that GBL's future equity story will be dictated by the attractiveness and performance of its private assets (incl. GBL Capital & Sienna IM). During its 2024 CMD, GBL unveiled a new potential portfolio composition in which direct and indirect private assets could make up for more than 50% of the portfolio while listed assets would be trimmed to approx. 50.0%. We think such a portfolio composition would make GBL more attractive since GBL's portfolio will be one of the few ways to gain exposure to highly dominant European companies with high growth prospects benefitting from strong structural trends. We also think that the market has not sufficiently appreciated GBL's initiatives to simplify its shareholder structure, active portfolio rotation, back-to-back sizeable share buyback programs, significantly higher dividend that is expected to grow and the quality of portfolio companies. Despite GBL's portfolio being significantly exposed to public market fluctuations (~60% of NAV is made up of listed assets), we believe that the private assets are of high quality, have resilient business models and will continue to post strong sales and EBITDA – all of which lead us to believe that GBL's private assets are relatively insulated from public market volatility.