Potential Takeover
Nic from Acid Investments has shared an interesting pitch on luggage maker Samsonite International. The company has recently received takeover interests from several PE firms, including Carlyle and KKR, and is now evaluating potential strategic options. The rationale behind a potential transaction would be similar to that of L’Occitane (covered on SSI here) – the company is trading at a depressed valuation due to its Hong Kong listing, which offers potential acquirers an opportunity to take the company private and relist it in another market (i.e. the US or Europe) where peers command higher multiples. Samsonite shares have jumped substantially since the recent media reports, however, there seems to be significant headroom for an offer above the current share price levels. The company is currently trading at 10x YTD run-rate EBITDA and c. 7% levered FCF yield. While there are no directly comparable publicly-listed peers, Samsonite’s key competitor Rimowa was acquired by LVMH in 2016 at c. 12x EBITDA, while Samsonite acquired Tumi in 2015 at 13.6x EBITDA. Even in a no-transaction scenario, the downside might be limited, given that Samsonite’s management has hinted that they might potentially pursue a secondary listing for the company.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring the attention of SSI subscribers. I might not actively follow the developments of these ideas, so there might be limited updates or follow-ups in the comments section.
The valuation doesn’t seem that depressed. The comps are a bit dated and include a buyout premium that wouldn’t necessarily apply if they did a secondary listing instead.
Correct me if I’m wrong but it seems to me that HK isn’t the ideal jurisdiction for speculating on potential buyouts. Doesn’t it have the rule that no more than 10% of disinterested shareholders can vote against a buyout (Rule 2.10 of the HK Takeovers Code)? And if they vote it down the offeror has to wait 12 months before trying again (Rule 31.1)?
Stock has already rallied a lot on literally no offer. Not a good risk/reward here.
Any thoughts back down to these levels?
I think the stock is quite interesting at these levels (8.5x TTM adj. EBITDA). The price might have fallen due to a lack of meaningful updates on the buyout interest. However, even if there’s no buyout, there catalyst of a dual listing is still there (yet no idea how long that might take). During the most recent conference call, management stated:
“Off the back of our March results or our March announcement, we clearly indicated we’re pursuing a secondary listing. The Board has authorized the management team to pursue that. We’ve hired advisers. We’re doing the preparatory work. There’s a lot of work to do to get ready. And I would say we’re in the early stages. We will provide a more thorough update as we progress and when appropriate. And so we’re — if you ride with us, we’ll keep you updated as we’re moving. But the work has started and we’re progressing in a meaningful way.”
Management also launched 4-5% buyback, stating that shares are trading below intrinsic value. They also guide for a 10-30 bps EBITDA margin expansion for the full year 2024:
” So looking ahead, outlook, one, we’re pretty excited about our results. And when I think and look forward, growth in global travel and tourism is expected to remain healthy throughout 2024. And as I said, I think it carries very nicely into ’25 and ’26, really sustaining demand for our products, which we’re excited about. “
Nic, any update on your side would be appreciated.
Anything fresh on Samsonite? Am struggling to learn the negatives on the company and stock. Both the fundamental valuation and the spec sit aspects seem appealing.
Glb
Check out the latest Guest Pitch on Samsonite here: https://www.specialsituationinvestments.com/2024/07/guest-pitch-samsonite-1910hk/