GRUPO C. OCCIDENTE: THE LONG-AWAITED CATALYST IS HERE - BUY! (ANÁLISIS BANCO SABADELL)
The long-awaited catalyst materialized. BUY!At Friday’s closing bell, GCO announced it has reached an agreement to acquire 100% of Grupo Mémora (139 funeral parlours, 39 crematoriums and 18 cemeteries) in Spain and Portugal. The valuation totals € 600 M EV and € 387.5 M Equity Value. This means pre-synergies at around 13x EV/EBITDA and -20pp in S-II BS(e) (220% in December’21). In a very cautious scenario of synergies BS(e) the multiple to pay would be 10x BS(e), with an upgrade to T.P. of ~+9% (€ 46.00/sh. currently), which is totally appealing with a recurring floor EBITDA margin/Sales of 28%“without risk”. We welcome the deal, as it will enable to generate value in the demise business with an immediate accretive impact for shareholders (+6.5% BS(e)) given the cash payment. This also dispels the pressure of share price to materialize/distribute its excess capital. We reiterate our BUY recommendation.
Grupo Catalana Occidente is an insurance group based in Spain. Co. is engaged in insurance and reinsurance activities, including commercial, life, disability, and automobile insurance. Co. is also engaged in the sale of annuities and pension funds. Co.'s operations are organized along two businesses: Traditional business (insurance) and Credit Insurance business. Co.'s main markets are located in Spain, Germany, United Kingdom, France and the Netherlands. Co. maintains a presence in more than 40 countries.
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