The private-equity interest rumour in Arseus of 6 months ago is now confirmed by leading Belgian business newspaper De Tijd: European PE-player Cinven is said to have made a bid of € 15/sh (share price then was € 10.5/sh). The CEO now confirms to the journal there was indeed an offer, but it was never officially discussed at a board meeting.
Our View:
For background information on the above-mentioned rumour, we refer to our morning note of 12 October 2011. Management has always declined to comment on that rumour,but never denied it either. Now they confirm that there has been an offer.
Cinven in an important European private equity player. Their 4th fund has € 6.5bn under management and healthcare is one of their main focal areas.
We have stated before the Arseus’ profile is attractive for private equity given its buy&build growth ambitions and recurring cash flow generation. However, with Waterland Private Equity holding 26% and Omega Pharma founder Mr Coucke another 11%, no competitive bid from another privateequity group makes sense if these parties are not in agreement. Waterland has been buying most recently a total of ~80-90k shares in the market. We believe this could be related to their strategy of reinvesting the dividend into the company. As they are insiders, the later also implies that no buy-out transaction is imminent.
Furthermore, according to today’s article, the CEO denies there are currently plans to divest one of the four divisions. Previously, management indicated that especially Dental or Medical could be divested in order to free up cash to support the buy&build strategy of star-division Fagron.
Conclusion:
Today’s newspaper article now confirms previous rumours and strengthens our view on the attractiveness of Arseus’ investment profile for a variety of reasons. Refusing to consider the € 15/sh offer by the board is exemplary for the trust the reference shareholders have in long-term potential of Arseus’ strategy.