- 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:
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.
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.
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