Axactor - Increasing firepower and simplifying structure
Simplifying structure: positive for equity and bondholders Earnings and EPS accretive transaction Valuation uplift of 20% following the transaction New equity, refinancing debt and roll-up of Axactor Invest Through the comprehensive refinancing transaction, Axactor significantly improves its financial position, removes the main source of complexity in its business (Axactor Invest JV) and enabling future growth. Main points: 1) new equity of EUR 50m through EUR 30m private placement and repair issue of up to EUR 20m (both issues at NOK 8 per share); 2) roll-up of Axactor Invest (acquiring Geveran’s stake in the JV for 50m Axactor shares) and mezzanine debt (now pari-passu with bond); 3) refinancing of RCF and EUR 200m bond, 70bp lower cost on RCF and same cost for bond. After the transaction, Axactor will not have any meaningful debt maturities before 2024 (“Transaction highlights” p. 3).
Significantly enhances its investment capacity Given EUR 50 in new equity and significantly better headroom to covenants, we estimate that Axactor will increase its investment capacity 30-50% for 2021-22e, without assuming any new debt beyond existing facilities. Estimated earnings contribution from Axactor Invest (previously Geveran minority interest) and 70bp lower funding cost on RCF (confirmed reduction) are calculated to increase earnings estimates by ~26% for 2021 and ~15% for 2022. Overall, accounting for the effect of increased capex and somewhat better scale, earnings (after minorities) increase 39% vs.
our previous estimate for 2021 and 45% for 2022. This also leads to EPS accretion when we account for ~66m new shares. DCF valuation uplift (20%), fair value range NOK 9.
3-28. 8 Based on the estimate changes outlined in this report, we estimate a fair value range (based on DCF) of NOK 9. 3-28.
8, previously NOK 7. 8-24. 2 in our last report.
Lastly, we point out that Axactor is still trading ~40% below peers on ’21e P/E and still lagging its Nordic peers. Note that pee.
