WOOD Flash – Grivalia: to merge with Eurobank; 15.8x ratio implies c.17% discount to NAV

We turned positive on Grivalia recently (Greece_Real Estate_Grivalia_Upgraded to BUY_13Nov2018.pdf): following the recent correction, we viewed the company as an attractive defensive play on the Greek recovery. Instead, Grivalia’s minority shareholders are now likely to end up with shares in a bank, a significantly higher beta investment. Even though Eurobank rebounded in this morning’s trading (at the pixel time, the stock traded at EUR 0.50/share, up from Friday’s close of EUR 0.47/share), on the current share price, the proposed exchange ratio still represents a discount vs. both our price target and the NAV. With its strong NPE coverage ratio, clear path to lowering arrears and P&L stability, Eurobank is our preferred pick among the Greek banks; and its investment case should be enhanced substantially by the deal, in our view. As such, we expect Eurobank’s shares to rerate substantially going forward. If the upside is realised, there would be a direct positive read-across for Grivalia’s shareholders. That said, judging the deal on the current share price parity, Grivalia’s minority shareholders seem to be getting the short end of the deal, in our view.