Prologis REITPLD$121.53Buy
Duke Realty REITDRE $51.07 Buy
AmphenolAPH $67.59 Buy
Switch IncSWCH33,30 $
Failed deal of two REITs, power engineering business refuses automation, a consortium of high-tech investors plans to buy data centers.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
Logic PRO Edition: how Prologis tried to buy another REIT
Logistic REIT Prologis (NYSE: PLD) tried to buy another logistics REIT Duke Realty (NYSE: DRE).
PLD wanted to buy Duke for 23.7 billion - with a premium 29% to Duke's price at the time of the news. Duke cost, thus, should have made 61,88 $ per share. PLD was going to pay for the entire deal with its shares - each shareholder of Duke was to receive 0.466 shares of PLD for each share in his possession..
Maybe, you already noticed, what i say about everything in the past tense: "was trying", "should have", "Hotel". And all because, that Duke turned down the PLD offer, calling it "insufficient". Let's figure it out, Is it so.
Duke controls over 160 million square feet of space, of which 153.7 million square feet are currently in operation. In general, it turns out, that PLD wants to buy Duke at a price 147,2 $ per square foot. It's about 14,87% cheaper, than the price, under which PLD is trying to buy European warehouse assets from Blackstone.
But the purchase price of Duke was very close to the historical highs of these quotes., and you can't say, that PLD is too cheap. After all, the main incentive for the development of the logistics industry is the constant expansion Amazon - already declining. The e-commerce giant has decided to suspend investments in warehouse expansion after another loss of its retail business.. And this may limit the growth rate of rental prices in this industry..
Technology - from the train: Schneider Electric sells automation
French power engineering company Schneider Electric wants to sell its industrial automation and control division, it was previously called Telemecanique.
Let's take a look at Telemecanique's key figures, based on the annual report of its current owner:
- Telemecanique makes sensors, switches and devices for signal transmission;
- Schneider division gives 23% proceeds;
- the division's annual revenue is 6.726 million euros. Segment Adjusted EBITDA margin - 18,5% from its proceeds;
- the possible cost of Telemecanique is a billion dollars.
Negotiations are underway with various potential buyers, but the favorite so far is the American manufacturer of sophisticated electronics Amphenol (NYSE: APH), who is actively engaged in high-tech production. Considering the extremely low possible purchase price, I would consider this a very promising acquisition for APH. And it baffles me.
If Telemecanique has such good performance, why is the company being sold so cheaply? There is an official explanation: Schneider wants to focus on its core business. In this case, it would be possible to release it on the stock exchange as a separate issuer - and at the same time hang a significant part of our own debts on it.
Also among the possible buyers are private funds Cerberus Capital Management, Lone Star Funds, KKR и PAI Partners. And it could be a problem for APH: if the company has to compete with funds and bargain for Telemecanique, then, maybe, it will have to spend a significantly larger amount to purchase the unit. APH Shareholders Should Keep This in Mind.
What dates, such a center: purchase Switch
Consortium of investors, Led by technology-focused fund DigitalBridge, plans to buy Switch (NYSE: SWCH), data center manager.
Here's what investors need to know about this deal:
- Switch buy for 8.4 billion, or by price 34,25 $ per share;
- premium to the price of the company at the time of the news was 19%;
- the company is bought not just at the price of historical highs, but with P / E under 730 and P / S 8,1;
- also, new Switch owners will receive almost 2.5 billion of the company's debt along with it;
- from 2023 the company would have to turn into a REIT.
I think, buyers bought on two key circumstances: Switch orientation to perspective, the growing cloud computing sector and the fact, what is over 95% of the company's revenue is attributable to renewable, which gives her business a pleasant predictability.
Having a stable cash flow will allow new owners to experiment with the business. so or, maybe, there were other considerations.
In my investment idea for the company, I wrote, that it can be bought in light of the growing rivalry between the main cloud players: Amazon, Google, Alibaba and Microsoft. But I still thought, that Switch will be bought by one of the listed giants, and did not expect, that it will be bought by a small and unprofitable DigitalBridge.
It gives hope, that more attractive and moderately priced cloud companies can also find a buyer.
