AvH acquired a major stake in UK-based wealth manager JM Finn & Co, while Van Laere acquired the construction activities from Antwerp-based Vooruitzicht. Both deals will be funded from the respective balance sheets, reducing excess cash and positively affecting our earnings estimates. Buy !
Bank Delen:
Delen Investments will purchase approx. 70% of JM Finn & Co, with the management and staff retaining the remainder and thereby staying fully committed to and engaged in the further success of the business. Despite Delen will fund the € 67m price tag out of its own balance sheet, its Core Tier 1 capital ratio should remain well above 15% by YE11. JM Finn & Co is a private client wealth management business that reported a 16.6% y/y hike in FuM (or advice) to L 6.3bn (€ 7.12bn) at YE10/11. About 54% of this is managed on a discretionary asset mandate basis. FY09/10 (ended April 2010) net profit (post-tax) was L 4.8m on revenues of L 37.1m with net equity of L 12.8m. JM Finn employs 279 and is HQ’d in the City of London. Post-acquisition, Bank Delen will manage over € 22bn of private client assets.
Van Laere:
The rationale behind Van Laere’s acquisition is Vooruitzicht's desire to play a more active role in project development, in line with Van Laere’s goal (the latter in 2011 teamed up with AG Real Estate for the joint development of large residential projects in Flemish cities as well as Brussels). The acquired activities will give Van Laere access to the prestigious Regatta project in Antwerp (€ 380m investment for 1.500 residential units and 40K sqm offices) and other Antwerp-based projects (de Veldekens and Den Bell). Vooruitzicht's construction activities encompass 80 personnel and generated FY10 turnover of € 13m. Van Laere at YE10 employed 466, generating € 116.2m (net result: € 0.45m). We expect this relatively modest acquisition to be funded out of Van Laere's own balance sheet (net financial position at YE10: € 10.1m). Lacking financial details, our earnings estimates -and consequently also the carrying value of Van Laere in our SOTP model -(€ 43.6m, 1.6% of NAV) remain unchanged.
Conclusion:
Similar to Breda having acquired ABK, we very much applaud this long-awaited Delen deal, which puts to use the bank’s excess cash (impacting positively our earnings estimates). We will upwardly adjust our carrying values (currently: € 981.3m, 35.9% of NAV) and meanwhile estimate adjusted equity value p.s. at € 81.57. AvH remains a Buy, as we believe the stock’s drop to current levels is unwarranted: we expect an increase of current earnings up until FY14 (+14.2% y/y to € 192m in FTY, +7% y/y to € 205m in FY12 and +6.5% y/y to € 219m in FY13). The portfolio’s heavyweight investments (DEME as well as the financial pillar comprising Bank Delen and Bank J. van Breda) are continuing to create value (both organically and externally), while we expect earnings contribution from the Real Estate and Private Equity pillars to surpass FY10 levels. Note that our model does not include any divestments of the Private Equity portfolio.