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21-12-2024 : The forthcoming IPO of Asmodée, European leader in board games

Benefiting from a low-concentration sector and its passage through the hands of several successive LBO funds (Montefiore, Eurazeo and PAI), Asmodée has been able, through internal and external growth, to increase its sales from €110 million in 2013 to €1,288 million this year, with operating income of €188 million. In 2022, Asmodée was sold to the listed Swedish video game group Embracer. But since this acquisition, Embracer's market value has fallen by a factor of 4 to €3.4 billion. In an attempt to remedy this fall in value, Embracer will split into 3 entities, including Asmodée, at the beginning of 2025.

As Asmodée's net bank and financial debt to EBITDA ratio is more than 4 times, Embracer will, prior to the IPO, inject an additional €400 million of equity into Asmodée to reduce its net debt to EBITDA ratio to a more normal level for listed groups of 2.2 times, and give it the financial resources to resume an external growth strategy. Indeed, the risk aversion of stock market investors is quite different from that of LBO funds, which are comfortable with 4 to 7 times debt on most of their portfolio companies.It's true that companies with net debt/EBITDA multiples of this magnitude can be found on the stock market, but this is usually the result of an accident where EBITDA has plummeted, propelling the ratio to heights worthy of companies under LBO.

As long as its indebtedness does not fall below 2 times EBITDA, Asmodée has no intention of paying dividends, which can only delight its future shareholders, since the company has demonstrated real know-how in acquiring competitors and bringing them up to its profitability standards, thereby making investments that yield far more than their cost of capital and creating value. In fact, shareholders are only thirsty for dividends when the company is no longer able to find and carry out investments that yield a return in excess of its cost of capital, in order to utilize all the free cash flow it generates. In this case, dividends enable the reallocation of equity from mature companies to others with better development prospects and the equity needs to finance them.

In conclusion, as Embracer is listed in Sweden, Asmodée will naturally be listed on the same market, in the midst of 1,140 other listed companies, and only 820 in Paris, whereas GDPs are in a ratio of 1 to 3, illustrating a true share culture in Sweden.

23-11-2024 : Robertet or the value of a voting right

There are times when we need to consider the value of a non-voting share, and the subject is not a simple one.

 

Last week's exit of Firmenich from the capital of Robertet, world leader in natural raw materials for perfumes and aromas, is illuminating. Robertet is the only one of the 818 companies currently listed in Paris to have both listed voting and non-voting shares.

 

In 1987, because the family's control over Robertet was fragile, the company had stripped ordinary shares into investment certificates (IC) and voting rights certificates (VRC): an IC is a share deprived of its voting rights. 

 

CIs were created in 1983 by the French government to finance nationalized companies. BNP, Saint-Gobain and others issued CIs to the public, without diluting the State's stake in their capital, as the State kept the associated VRCs. Private firms such as Bouygues and L'Oréal followed suit. But the innovation, at least for listed companies, didn't catch on, and soon all these CIs disappeared through redemption or conversion into ordinary shares with voting rights. 

 

All, that is, except those of Robertet, which now has 3 stock market quotation lines: ordinary shares, CIs and VRCs. The latter are very rarely traded, as they are mainly held by the family. The CIs are much more widely traded, but their liquidity is reduced by the fact that FirmeniSo the value of a voting right depends very much on the configuration of the shareholder base. Other factors come into play, such as the ability of a third-party purchaser of control to improve margins, or possible competition between several third-party purchasers. 

 

It's easy to see why it's hard to see a discount on Hermès shares, where the limited partnership structure leads to solid family control and it's hard to see how the current management can do better. Or why, in agricultural cooperatives, the principle of one vote per cooperative member, irrespective of the shares held, means that voting rights lose all value. As a result, all shares in a cooperative have the same value, whether or not they carry voting rights, since a voting right is worthless. In this case, the absence of voting rights does not justify any discount.