Tellimer

ETRS acquisition of Ostool: Value is in expansion locally and regionally

  • ETRS presented an offer to acquire Ostool Transportation Company, in Favour for an Ownership Stake in ETRS
  • Possible Transaction Scenarios Are Non-Dilutive to Existing Shareholders
  • Value is Expansion Locally and Regionally

ETRS presented an offer to acquire Ostool Transportation Company, in favour for an ownership stake in ETRS

ETRS received a letter from Paradigm Logistics Ltd, the owner of a controlling stake in “Ostool Transportation Company”, that operates in the field of transportation and logistics and is considered a leading company in ground transportation, freight and unloading, storage, logistics management and trade in Egypt, offering a partnership/integration opportunity with ETRS, aiming to expand locally and regionally.

Paradigm Logistics Ltd, owner of 73.3% stake in “Ostool,” sent a partnership/integration offer to ETRS with the following items:

  • ETRS will acquire 100% of Paradigm’s share in Ostool through an issuance of new ETRS shares in favour of Paradigm at a fair value determined by a financial advisor.

  • Paradigm Logistics Ltd. values ETRS at an average Fair Value of EGP14.70/share, translating into a market value of EGP460 million (ETRS has a current market cap of EGP395 million). This valuation is at a premium of around 32% to the weighted avg.6 months prices, and implies a valuation gap of 16.4% to the current market cap.

  • Paradigm Logistics Ltd. values Ostool at EGP395-640 million, which is 1.1-1.4x the value of ETRS.

According to our estimates, and based on the mentioned/proposed valuations, if ETRS were to acquire Ostool, ETRS should issue between 27-43 million new shares, representing ownership of 46-58%, and blended valuation came in at the range of EGP855-1,100 million, resulting in a post-transaction FV of EGP14.70.

Possible transaction scenarios are non-dilutive to existing shareholders

Based on the proposed valuations, the transaction has 2 possible scenarios:

  1. Lower valuation end of Ostool with ETRS, which results in a new number of shares issued equivalent to 27 million shares to Paradigm Logistics Ltd, implying a total number of shares of 58 million shares post acquisition and Paradigm ownership in ETRS of 46%. This scenario results in a blended valuation of EGP855 million and translates to a FV per ETRS share of EGP14.70.

  2. Upper valuation end of Ostool with ETRS, which results in a new number of shares issued equivalent to 43 million shares to Paradigm Logistics Ltd, implying a total number of shares of 75 million shares post acquisition and Paradigm ownership in ETRS of 58%. This scenario results in a blended valuation of EGP1,100 million and translates into FV per ETRS share of EGP14.70.

Value is expansion locally and regionally

The FV reached across both scenarios of EGP14.70/share showed that the transaction will not have a dilution effect on the current shareholder. However, the benefit of this transaction lies within the expansion of business locally and regionally, which will provide better market exposer.


Most Viewed See latest
Disclosures

This publication is being distributed by Tellimer solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not con...

Full Tellimer disclaimers