Alain Afflelou : Two dividends for the price of one mitigated by the strengthening the family's stake in the group

The Afflelou family announced that it plans to grow its stake in the group to 38% from 29% previously. The controlling shareholder, Lion Capital, will retain a 62% stake. The transaction is accompanied by an € 80m dividend payment financed by the private placement of € 50m of additional senior secured notes due 2029 together with € 30m in cash from balance sheet.
In addition, the group announced the creation of the holding company Afflelou PIKCO, a new direct holding company of Afflelou, and the private placement of € 70m of senior secured FRN PIK Toggle notes due 2030 with a limited number of institutional investors to pay an additional dividend of € 70m to shareholders. The PIK notes are not guaranteed by Afflelou or any of its subsidiaries. Interest on the PIK notes will be payable semiannually in arrears either in cash or in kind or in a combination thereof at the sole option of Afflelou PIKCO.
In this note, we detail our view of the consequences of these transactions on credit quality and update our recommendation in light of current yields.