Updates: October 16, 2023
Hello Ultimate Value readers!
I am back with some really good news on two of our positions.
First, The Restaurant Group, which I wrote up back in March, received an offer to be acquired by the PE firm, Apollo, for 65 pence per share. I wrote this up at 42 pence/share. See the original write-up below.
While the offer is not terrible (9x EBITDA, although on trough FY23 numbers), I think it’s still a good outcome, especially considering the short time frame. There’s been a few stories in the news suggesting that some of the activists (RMR Capital) are not happy with the price. I will likely give this another week or so to see if anything develops, but if not, I plan on selling down my shares and recycling some of the capital into other situations.
I wrote up CBD pre-spin back in April with the shares are $3.03. It’s been a long saga thus far.
But finally, some good news. Casino Group has reached a “pre-agreement” with Grupo Calleja to sell its stake in Exito. Grupo Calleja will also tender the remainder of the shares in the public market at a price of $7.24 per ADR (8 shares per ADR) or COP 3,840 per share.
This is also good news for CBD, as they hold 13.3% of Exito. This will net them an additional $156m USD. This sets a marker for the value of these shares.
I think this makes both Exito (EXTO) and CBD interesting here, and I have added to both positions this morning. First, Exito is trading at $6.75, below the offer price; or at a ~7% spread. For Exito, I think there is a good likelihood that: 1) the deal closes and you earn the spread, or 2) another higher offer is flushed out. Recall that Gilinski made an offer not that long ago at the equivalent of COP 3,600 or so. This offer is only a 6% premium. In a way, I think this offer likely sets a near-time floor for the stock and a compelling risk/reward.
As for CBD, I might be the only person in the world that likes this. Ok, maybe not. But I still think CBD is compelling. Casino Group is clearly still in charge here and they want to clean things up for a sale. They have been quite active in the last few months: sale-leasebacks, selling non-core assets, negotiating the sale of Cnova shares, and now Exito. Yet they still have their Pao de Acucar grocery operations, which would be a nice target for an acquirer.
I think there is a pathway for the shares to be worth $2 per share or so. I think Casino is in a hurry to sell off the pieces, so I think we should see a favorable outcome sooner rather than later. LONG.
Alright, those are my quick updates on RTN and CBD/EXTO. Hope these are helpful.
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