Cyfrowy Polsat - Tender Offer a Fair Exit Option But Not Much More
Cyfrowy Polsat, along with its owner, Zygmunt Solorz-Żak, announced they were seeking to repurchase up to 263.8 million of the Company’s shares by way of a tender offer at PLN 35.00 per share, set to run from 18 October to 16 November, 2021.
Mr. Solorz-Żak on 27 September issued a message to shareholders where he expressed encouragement for Cyfrowy to meet head on “new challenges” that lie ahead, but, unfortunately, he did not elaborate on what these challenges might be. Therefore, working with what we have, we have updated our models for Cyfrowy to reflect the July sale of mobile masts and improved price trends in the Polish mobile market, arriving at a new target price of 36.20zl per share. This is comparable to Cyfrowy’s 35zl tender offer, which we see as a fair reflection of the Company’s value (at 35zl, we get 2022E FCFE Yield of ~7.9% and EV/EBITDA=7.6x), albeit not offering much by way of an exit premium to minority shareholders.
That being said, as we see low odds of the bid being raised, with the upside potential to our target coming in at a low 2%, given the uncertainty as to how Cyfrowy will spend its FCF after 2021, and hence about its future dividend policy, we see the tender offer as an acceptable exit opportunity.
Investors are keen to find out how Cyfrowy intends to use the PLN 6.1bn earned on the mast sale as a matter of strategic importance. By the time it unveils an updated strategy plan, Cyfrowy will have kicked off a 5-year share repurchase program (if approved at a 16 November GM), but this is a less comfortable exit option in our view.
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