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MÁSMÓVIL: POSSIBLE INCREASE IN THE TOB PRICE OR POSSIBLE COUNTER-BID (ANÁLISIS BANCO SABADELL)

We maintain our positive view on MAS and reiterate our BUY recommendation and T.P. of € 26.00/sh., as we believe that the company is worth more than the price of the TOB from KKR, Cinven and Providence (€ 22.50/sh.) due to the company’s positive operating results on a sustained basis and its latest network transactions (with Telefónica, Orange and sale of infrastructure to the fund). This would back either an increase in the TOB price or a counter-bid.

The reasons that would back an improved TOB price would be:
1. The TOB needs the endorsement of at least 50% of its shareholders and, for the time being, it only has the support of shareholders representing 29.56% of the share capital (José Eulalio Poza, 5.4%, Providence, 9.15%, Carmen Ybarra, 13.3%, Estiriac XXI, and the management team).
2. Relevant shareholders such as the Mayoral family (8% stake), Allianz Bernstein (2.2%) and Polygon (1.1%) would have opposed the current TOB price, as they believe it is too low.
The reasons that would back a counter-bid would be:
1. Taking a position in one of the major assets that will take part in the consolidation process of the Spanish telecoms sector, in which there are currently too many players. We estimate that this process of consolidation will materialise in the medium-term.

In our view, the risks weighing on our recommendation are limited:
1. If no counter-bid is made/the TOB price is not improved, we do not see a risk of a drop, given that the price offered is € 22.50/sh. and the stock is currently trading at € 22.44/sh. (+0.27%).
2. The intention of the investment funds as regards the current TOB is to delist the company, and thus, we believe that it would be in their interest to reduce the weight of minority shareholders not willing to accept the TOB by offering them an exit opportunity at the same price (€ 22.50/sh.). If the funds obtain a 50% stake in MAS, then a simple majority at an AGM would be sufficient to exclude the company from trading.
3. In our view, the final objective of the funds that have launched the TOB on MAS is to participate in the sector consolidation process, and thus, it is in their interest that the TOB price is as high as possible to benefit from future swap equations, which would limit a possible drop in the share price after the TOB process is completed, even if the company was not delisted.

While the stock’s upside potential is +15.5%, if there was a counter-bid or the current TOB price was raised to € 26.00/sh., these levels would be in line with our valuation and should be reached in order for the shareholders that have already accepted the current TOB to sell to a third-party.
We recall that the deadline to accept the TOB is 11 Sep 2020. Competing offers should be presented at least 5 working days in advance of that day, meaning that the period would expire between today and Monday.