Disclaimer: This isn’t funding recommendation. PLEASE DO YOUR OWN RESEARCH !!!
- Introduction
- “Catalyst”: Lowball bid from Majority shareholder
- Delisting in Denmark – what I discovered to this point
- Majority Shareholder Thornico
- What’s Thornico’s final aim ?
- Situation Evaluation, Dangers & Abstract
- Introduction
Broeder. Hartmann (to not mistake with Paul Hartmann AG) is an organization I checked out throughout my All Danish Shares collection in final July. I feel it will be honest to name it a “hidden champion”. Their enterprise mannequin is concentrated virtually 100% on egg packaging which as such is already one thing I like quite a bit. Their most important product appears to be like like this (solely the field, not the content material):
Or this:
Extraordinarily horny product, isn’t it ? In actuality, in addition they appear to supply paper based mostly apple packaging in Brazil and India, however egg cartons are their most important product.
In Mid 2022, after I checked out them first, the corporate was nonetheless struggling. That is what I wrote then:
From the basic facet, issues appear to look quite a bit higher nowadays. In 2023, they’ve up to date the steerage already 2 instances as might be seen on this desk from the half yr report:
The share worth has principally not reacted to this and continues to be ~-50% in comparison with the height:
As of now, they commerce at a 6,7x EV/EBIT (2023) which is kind of low-cost for a enterprise that has first rate margins and returns of capital and is globally diversified regardless of its small dimension. Right here a fast overview on some indicators:
TIKR to this point has not up to date estimates for 2023, so in TIKR the inventory appears to be like dearer for 2023 than the up to date Steering signifies..
Money Movement has additionally recovered properly. It’s onerous to foretell this however taking a look at this chart from the 6M report, I’d guess that at present they commerce at no less than 10% FCF/EV yield:
I’m not certain if that stage is sustainable. By the best way, reporting is kind of good for a small firm.
- “Catalyst”: Lowball bid from Majority shareholder:
The bulk investor (Thornico Holdings, 69%) simply has launched an opportunistic low ball bid at DKK 300 and needs to delist and squeeze out minority shareholders. This has been preceded by one other particular board assembly, the place Thornico exchanged just a few of its board members with a view to “align higher with the Technique” of Hartmann. A couple of weeks later, Hartmann’s CFO resigned and was changed.
To provide credit score the place it’s due: I used to be alerted to this by a Twitter thread from a younger (native ?) investor:
Though I’d not see it as a “scandal”, it’s clearly an opportunistic lowball bid. They justify the quantity within the supply by stating that that is above the typical as lined out within the firm communication:
3) Delisting in Denmark – what I discovered to this point
In response to a number of sources, a Delisting in Denmark must be permitted by 90% of all shareholders. This appears to have been applied solely in 2020, earlier than it was simpler to delist (solely ⅔ vote required).
It appears to be that the Inventory trade (not the regulator) is allowed to determine if a suggestion is cheap or not. Nonetheless, in line with the unique doc, they’d not choose the valuation, simply whether it is completely unreasonable or not:
With their present 69%, there appears to be little likelihood that they may get even near the 90% required. Loads of traders may be anchored on the upper costs from 2-3 years in the past and may (rightfully) contemplate this as a lowball bid.
The particular shareholder assembly is scheduled October sixteenth. If 90% of the shareholders settle for and the inventory trade doesn’t reject the supply, sharholder can have 4 weeks to promote the shares to Thornico at 300 DKK.
4) Majority Shareholder Thornico
The primary shareholder, Thornico is a holding firm owned by Father (Thor) and son (Nicholas) Stadil. Here’s a image of those 2 Gents:
The Group is energetic in Meals, packaging, Sports activities gear and actual property. Inside packaging, there are two different corporations, one in China and one in Malaysia.
Nonetheless, essentially the most related Group firm that pertains to Hartmann is Sanovo, an organization that gives each conceivable expertise round egg manufacturing, together with packing machines. I might think about that combining Hartmann and Sanovo might make a variety of sense. Curiously, Hartmann purchased a packaging firm from Sanovo referred to as Sanovo Greenpack in 2014.
Lately, there appeared to have some troubles within the empire, particularly within the now discontinued transport phase the place they needed to undergo a chapter.
Thornico has purchased its first stake in 2011 in line with the annual report and again then provided to purchase all shares at DKK 95:
In 2012 then, Thornico elevated its stake to 68,5% after buying the shares from the opposite two huge shareholders:
In 2013, Thonrico barely elevated their stake to 68,6%, however since then the stake has remained fixed, though in line with TIKR they’ve elevated their stake to 69% (Half yr report nonetheless says 68,6%).
In response to an article, D/S Norden paid ~60 mn USD to Thonrico for the transport actions, that means that they may have some money mendacity round to fund a rise within the Hartmann stake.
Christian Stadil curiously has his personal private web site the place he presents himself as a combination of visionary, artist and martial arts knowledgeable. He additionally appears to have created a Champagne label that needs to be drunk straight from the bottle.
Total, they appear to be fairly shrewed capital allocators.They purchased the preliminary stake in B. Hartmann at a really attention-grabbing time limit at round 100 DKK/Share and have recovered most of this already by dividend funds. I don’t suppose that they’re evil guys, however in addition they don’t appear to throw round cash both.
5. What’s Thornico’s final aim ?
- In the event that they actually wish to delist, they have to know that 300 is just too low as there isn’t any premium. So with a view to get extra shares they have to make the next bid
- Perhaps they wish to scare traders and simply wish to enhance their shares for affordable
- Perhaps it was a really opportunistic transfer and so they received’t pursue it additional if it fails
My present impression is that they actually wish to do away with minorities, particularly as a result of they began with a board reshuffle. Hartmann can also be their solely listed holding, so I suppose they like to have every little thing personal. As well as, I feel they may wish to hyperlink Hartmann nearer to their different “egg associated” actions as I suppose that clients do overlap quite a bit.
My guess is that they’re possibly afraid that the inventory will get too costly if the turnaround is confirmed and Hartmann would present an excellent FY 2023 outcome. 300 DKK per share may be the bottom worth they will bid as a starter, in any other case the inventory trade may instantly name this unreasonable. Shrewd as they’re, possibly they thought: I’ve to extend the bid anyway, so let’s begin with the bottom potential quantity to anchor folks on this.
If that’s true, I suppose they might want to give you a suggestion that’s clearly larger than the present 300 DkK at a later time limit.
6. Situation Evaluation & Abstract:
So in precept we now have 3 base situations:
- Provide will get accepted at 300 DKK by greater than 90%, Inventory will get delisted.
- Most shareholders don’t settle for and life goes on as earlier than
- Thornico will increase its supply to get above 90% after which delists subsequently
Personally, I feel 1) may be very unlikely. 2) is clearly extra probably. For 3) one might assume completely different costs at completely different possibilities.
That is my first try at modeling the case based mostly on a share worth of 310 DKK for a time of 6 months:
For a lapse of the supply, I assumed that the share worth goes all the way down to the bottom worth YTD 2023 which was 269 DKK, which I feel is conservative.
Summarized over my assumed situations, the anticipated return is ~18,3%. In fact, all or any of my assumptions might be utterly fallacious, however I do suppose that that is attention-grabbing as a particular state of affairs.
Personally, I do suppose the draw back is kind of restricted because the inventory actually appears to be like low-cost and engaging stand-alone, however one by no means is aware of. In concept, Hartmann would even be funding in the event that they don’t enhance the bid, however for now I solely see it as a Particular state of affairs with a time horizon of 6-12 months.
There are clearly dangers, as at all times. The worst case situation can be that the free float will get smaller, let’s say to twenty% and subsequently, the financial state of affairs once more will get dangerous for one purpose or the opposite. In such a situation, there might be clearly a draw back to the inventory which I attempt to seize within the “supply lapses” situation. Perhaps the chance is larger than 20%, however who is aware of ?
I due to this fact allotted ~2,5% of the portfolio into this Particular state of affairs. I’ve funded this through additional gross sales of Schaffner.
The sport plan is to revisit the case no less than after 6 and 12 months until one thing occur like the next bid or so.
Disclaimer: This isn’t funding recommendation. PLEASE DO YOUR OWN RESEARCH !!!
P.S.: I’d be very grateful for extra details about Danish regulation with regard to delisting
P.S.2: Though it doesn’t relate on to Hartmann, a publish about egg packaging should comprise this Video snippet from German aim keeper legend Oli “The Titan” Kahn:
Oliver Kahn finest second: Eier wir brauchen Eier!
P.S. 3: I additionally regarded on the Hafen Hamburg Scenario. Nonetheless I Like this one a lot better.
