Adler/Aggregate - Having the cake and eating it?
All,
Please refer to our unchanged analysis of Adler here.
Like everyone else, we have been surprised by the Caner acquisition of Adler shares. Unlike everyone else, we like it. The market is not reacting kindly to the further increase in confusion and in transparency. But from our perspective, this increase could be at worst a non-event or even a positive development.
Who was the seller?
- Aggregate would hold enough to sell such a stake, but have written options over half and have pledged the entire stake to Vonovia. Aggregate have not made a reciprocal filing to inform us of any sale. We are also still waiting for comment from Aggregate, but the 26.6% shareholder is an unlikely seller here.
- Mezz IX could have contributed at least the first 4.78% and would not be required to inform the company as Luxembourg does not have a 3% rule (5% only). This would indicate a greater among participants in the Mezz IX structure, but it’s possible. Gerda Caner was one of the major investors in it and perhaps she is now just fronting those investors - and had some Adler shares lying around before. It could be Cevdet Caner’s idea of increasing transparency, or at least one of the steps he may (urgently) have to take before “increasing" it.
- According to Adler IR, the remaining institutionals (see below) who together at least would be large enough to furnish this kind of stake seem not to have sold.
- The average volume trading on the stock exchange is low and suggests the stake was not amassed in the open market. There was however a trading spike in early December and perhaps reporting time frames are longer than we think.
- According to Adler IR, Adler itself did not have any treasury shares and was not the seller.
Where does the money come from?
- First off, as with most transactions we observe in this segment, there may not have been any extra money. The reported position may be only the amalgamation of Mezz IX shares with other shares already held by Caner - now reported indirectly under his wife’s name.
- Our favourite theory is that - at least in part - the position could well be the result of a payment in shares for a recent transaction. The position was reported on the 30th of December - as if something still needed to be done/reported in Q4. Transactions with LEG for Brack incl. Gerresheimer and the sale of Aggregate 2’s stake in Corestate spring to mind. In theory, some of those holdings would be attributed to Günter Walcher, But has anyone ever heard from him at all? We are increasingly convinced he may only be yet another front for Caner’s dealings, just like we see it in other cases.
- We don’t think Cevdet Caner is the type to leave €100m lying around in a savings account to deploy on a random December 30th in a stock he is already hugely exposed to.
- Finally, there is also speculation that Caner is merely a front for Vonovia, who have staked him to buy the shares for them. Vonovia have security over Aggregate’s stake and buying this amount would possibly expose Vonovia to a mandatory bid (Note that because Aggregate hold the other side of the Vonovia deal, they, in turn, would not be required to make a bid - even if Gerda Caner would be found to be acting in concert.). But involving Cevdet Caner in such a move would be unusually messy for Vonovia who are only just digesting Deutsche Wohnen.
Why is it good news?
- For Caner this is a way of eating his cake and having it too. Supposing he “only" has €100m liquid or through some means is receiving the value already in Adler shares, by reporting this stake he is killing several birds with one stone:
1) He is demonstrating strength which should help appease those asking for more equity at Aggregate. He is effectively just tangling the value in front of them very visibly, but not putting it in until everybody comes down from their barricades and agrees to deals.
2) He is showing commitment, which should drive up the Adler share price (except he is not clean enough - but perception may change with Adler’s independent review due later this quarter),
3) Adler’s independent review and the transactions with LEG may drive the value of those shares,
4) He still has the €100m however flexible he really is with them.
- Better news would be if the cash were in Aggregate, but as a means to heard the cats and settle negotiations it probably first has to remain outside.
Positioning:
- We remain long the Aggregate 2024 SUNs for 5% of NAV and continue to hold our Consus 22 convertibles for 2.5%. The latter is not directly affected by this transaction. Aggregate SUNs have softened slightly since we bought our piece, but the additional liquidity we have seen Aggregate generate as well as (if it is not the same) the stake reported by Gerda Caner on Friday (to the extent it’s flexible) have us confident that the VIC refinancing albeit expensive, will work and that there will be liquidity to pay interest thereafter. We concede that for the latter to continue, the company needs to make good progress on its core assets.
Here to discuss,
Wolfgang
T: +44 203 744 7003