Vestjysk Bank - AL bid not recommended by the VB board
VB board: AL bid is not financially attractive DKK 3. 45 bid is in the low end of our fair value range Bid PE of 8x 2022e looks low vs. recent transactions VB board cannot recommend the mandatory bid from AL This morning, Vestjysk Bank announced that the board of directors of Vestjysk Bank does not recommend that the shareholders accept the takeover bid from Arbejdernes Landsbank (AL). The board does not view the DKK 3.
45 per share bid from AL as financially attractive, a view which is supported by a fairness opinion obtained from its financial advisor Deloitte. The mandatory bid follows AL increasing its stake in Vestjysk Bank to 61% on May 31 by acquiring 28% of the shares from Nykredit and AP Pension paying DKK 3. 45 per share.
The AL bid expires on July 6. AL bid in the low end of our fair value range of DKK 2. 7-5.
5 AL’s bid of DKK 3. 45 per share is in the low end of our fair value range for Vestjysk Bank of DKK 2. 7-5.
5 with the high end including 50% of the annual synergies of DKK 200m we believe that AL could harvest in a merger with Vestjysk Bank in the long run. We do not believe running two separate banks in the long run makes sense. At the same time, we note output prices for milk (global prices) and pork meat in a significant rebound potentially indicating upside in the DKK 3.
1bn writedown account of Vestjysk Bank, of which a significant part is reserved for pork and dairy farmers. A potential upside from the agricultural writedown account comes on top of our fair value range. Sensitivity: Assuming DKK 1bn being excess writedowns would lead to an add-on of DKK 0.
7 per share to our fair value range. Bid does not seem to reflect synergies With a bid PE for 2022e of 8x we believe AL is bidding a price below the level of recent Danish banking transaction of 12-13x next year’s PE and we do not believe the AL bid contains payment for potential synergies ahead. Thus, we did struggle to see the board of Vestjysk Bank recommend the bid ahead of this morn.
