David Marcus presented his in-depth investment thesis on Bollore (France: BOL), Vivendi (France: VIV) and ING (Netherlands: INGA) at European Investing Summit 2014.
European macroeconomic and sovereign problems have created compelling stressed and distressed investment opportunities for the following reasons: 1) lending activity remains largely frozen across Europe, forcing equity and debt holders to sell at depressed prices; 2) bank deleveraging has added to the already growing supply of sellers; 3) the crisis has allowed select, well-managed companies trading at depressed valuations to right-size their operations in ways they may never have been able to previously accomplish (e.g., forcing unions to make major concessions); 4) strategic changes (e.g., spinoffs, breakups, consolidations, restructurings, new management teams) are underway across the region; and 5) potential boost to valuations from a European recovery. Three specific ideas:
Bolloré: Bolloré is a French conglomerate controlled by Vincent Bolloré that has a wide array of well-managed assets in Europe, Africa and Asia. These assets include batteries for electric cars, manufacture of shrink wrap films, railway transportation, port and logistics services, stakes in other undervalued companies (e.g., Vivendi SA), etc. They have compounded their NAV at close to 20% for over 20 years. Marcus views this holding as an excellent way to “sneak” into emerging markets like Africa, where the company owns valuable ports, logistics infrastructure, and other assets. CEO Vincent Bolloré is continuously acquiring synergistic assets, selling non-performing assets and restructuring operations, all of which has created substantial value for shareholders. Based on a sum-of- the-parts valuation, Marcus estimates intrinsic value at €540-925 per share.
Vivendi: Vivendi was viewed as a value trap for over ten years, but Marcus became interested in 2012 when Vincent Bolloré took a 5% stake in Vivendi and went on their supervisory board (he was recently appointed chairman). Marcus views Bolloré as the consummate catalyst for value creation, as he has a record of restructuring and growing multi-national businesses over the past three decades. Vivendi is selling its telecom assets for cash and securities in the new businesses, selling non-core assets, and will transition from over ~€13 billion in net debt to a net cash position. It has a 5% dividend yield and Marcus expects a special dividend to be paid by early next year as management executes the restructuring plan. Based on a sum-of- the-parts valuation, Marcus estimates intrinsic value at €28-31 per share with a timeframe of 12-18 months.
ING: This large Dutch-based banking conglomerate was bailed out by the Dutch government during the financial crisis. As part of the bailout, ING has sold its Asian assets, spun off its U.S. business (Voya Financial, which Marcus also owns), and spun off its European insurance and annuity business (NN Group, which Marcus also owns). ING will pay the government back the remaining bailout funds it was lent by year end. Marcus thinks as ING transforms itself back to a traditional Dutch commercial and investment bank, the market will continue to revalue it to trade more in line with peer banks. Based on a sum-of- the-parts valuation, Marcus estimates intrinsic value at €14.50-16.50 per share with a timeframe of 6-12 months.
About the instructor:
David has more than 20 years of experience in the investment management business. He began his career at Mutual Series Funds, mentored by renowned value investor Michael Price, and rose to manage the Mutual European Fund and co-manage the Mutual Shares and Mutual Discovery Funds. He also served as director of European Investments for Franklin Mutual Advisors, LLC. After leaving Franklin Mutual, David founded Marcstone Capital Management, LP, a long-short Europe-focused equity manager, largely funded by Swedish financier Jan Stenbeck. When Mr. Stenbeck passed away in 2002, David closed Marcstone and then co-founded a family office for the Stenbeck family; as an advisor to the family, he advised on the restructuring of a number of the public and private companies the family controlled. He later founded and served as managing partner of MarCap Investors LP, the investment manager of a European small cap special situations fund, which he managed from 2004 to 2009.
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