September/October 2018
B ULK D ISTRIBUTOR
Tank & ISO Containers
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TG Aktiengesellschaft’s executive board and supervisory
board are recommending that the group’s shareholders
reject a takeover bid by Warwick Holding GmbH, a subsidiary
of Morgan Stanley Infrastructure Inc, as insuffi cient.
The boards published a joint reasoned opinion on 5 September
under Section 27 of the German Securities Acquisition and Takeover
Act concluding that the offer does not refl ect the fundamental value
of VTG.
Dr Heiko Fischer, VYG’s chairman of the Executive Board explained:
“We recommend to our shareholders not to accept the offer by
Morgan Stanley Infrastructure Inc as the consideration offered does
not refl ect the fundamental value and the future potential of VTG.
Nor does the offer contain an appropriate control premium – it is
substantially lower than for comparable transactions.”
The recommendation is based, in particular, on a number of other
considerations. For example, the offer price of €53 per share does
not refl ect the fundamental value that VTG can generate as an
independent company, the board’s reckon. “Thanks to its long-
standing experience and high-level technical expert ise, VTG is one of
the market leaders and at the forefront of innovation in the
European railcar leasing and rail logistics market,” the company
stated.
Due to an attractive market environment, the strengthening of the
business model by the proposed acquisition of the CIT Rail Holdings
(Europe) SAS ( the Nacco brand), and the digitalisation strategy
initiated by the company, VTG has “excellent growth prospects”, it
says.
This is also refl ected in analyst target prices published up to 3
September, which already take into account the fi nancial fi gures for
the fi rst half of 2018 and also the progress made regarding the
Nacco acquisition. On a trading basis and consequently subject to a
takeover/control premium, an average target price of €58.44 is said
to be more realistic. Furthermore, the offer price implies a signifi cant
discount to the net asset value of the wagon fl eet determined on
the basis of the discounted earnings method.
With a 4.3 percent premium on the volume-weighted three-month
average share price on 13 July 2018 – the last stock exchange
trading day prior to the publication of the decision to submit the
offer – the offer price does not contain an appropriate control
premium, the document continues. By comparison, the average
control premium paid over the past 10 years for German companies
with an equity value exceeding €1 billion was 27 percent.
Furthermore, the offer is signifi cantly lower than the EBITDA
multipliers achieved in comparable M&A transactions in the adjacent
European locomotive hiring business and for market-leading quasi-
infrastructure companies in the German-speaking markets in recent
years.
For the fi rst half of this year, VTG posted a 3 percent rise in group
revenue to €513.8 million (H1 2017: €498.8 million). Compared to
the same period a year ago, EBITDA – before one-time charges for
the ongoing Nacco takeover – increased by 8.3 percent to €177
million.
The railcar division saw revenue of €272.9 million in the fi rst half,
7.4 percent higher than in the same period a year ago (€254.1
million). The reason for this was an improvement in fl eet capacity
utilisation, which stood at 93 percent at the end of the fi rst half
against 91.2 percent last year. Demand for intermodal railcars in
particular made a positive contribution, while fl eet expansion in the
second half of 2017 also had a healthy impact.
Tank container logistics ended the fi rst half with revenue 6.5
percent higher than in the prior year at €83.1 million (H1 2017:
€78.1 million). Sustained high capacity utilisation in Europe’s
chemical industry in particular prompted growth in transport
VTG’s tank container logistics ended the fi rst half with
revenue 6.5 percent higher than in the prior year
volumes. Intercontinental transports to and from Asia likewise
experienced good progress. EBITDA improved faster than revenue,
ending the fi rst half at €5.9 million – 14.5 percent higher than in
the prior year. This gain was attributable to the gradual
replacement of more than 1,000 rented tanks with new owned
equipment, which reduced rental and maintenance costs. The
gross-profi t-based EBITDA margin accordingly improved by 10.3
percentage points to 45 percent (H1 2017: 34.7 percent).
However, revenue at the rail logistics division declined by 5.3
percent to €157.8 million, primarily because of project delays, the
loss of large orders and the rail strike in France. On the other hand,
lower transport costs led to a slight increase in gross profi t. Thus,
EBITDA, at €3.3 million, reached the previous year’s levels. The
EBITDA margin for rail logistics, based on gross profi t, was down
21.7 percent, after falling by 22.2 percent in the same period a year
ago.
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