Compared to its peer group, Ordina’s shares seem undervalued by the market. But past acquisitions provided Ordina with an expensive cost structure. And historical performance proofs that Ordina is in a tough part of the market, so the realization of the improving forecasts is no given fact. The transition to higher value markets must be made fast: the economy is slowing down and Ordina’s traditional business would be the first to feel its impact, while the new higher value markets are less sensitive.
If in this situation a strategic buyer would approach Ordina, the supervisory board is advised to compare any bid received first to the stand-alone value that has been calculated in chapter 8 based on the management case and the base case. The board is advised to base any decision on the probability weighted derivative of these two valuations and compare a bid received to the calculated share price of €2,22. Bids that don’t exceed the calculated stand-alone value, don’t reflect the future earnings potential of Ordina. These bids can be obstructed with the priority share.
The supervisory board is further advised to aim for the calculated market expectation of €2,35 per share (based on comparable transactions), but to consider recommending any bid conform or above the stand-alone value or €2,22 per share to Ordina’s ordinary shareholders.
A bid including the full synergy potential of a strategic buyer would imply a premium of at least 53%, compared to the average trading price at the valuation date. The comparable transaction analysis made quite clear that such an offer is not to be expected. Communicating this value to shareholders would create unrealizable expectations and is unadvisable.
If nevertheless, shareholders decide to keep Ordina on a stand-alone basis, an accelerating way to transition to higher value markets would be to sell the business that’s currently value destructive. This part of the traditional IT-services business in the Netherlands could be carved out and sold to a strategic buyer with a lower cost basis: the Indian parties that want to get firmer foothold in the Netherlands. This would give Ordina the funding and the focus to accelerate its transition towards a value creating IT-company.