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One of Our High Yield Portfolio companies is being acquired - Argan SA.
What makes this deal especially interesting is the buyer: Warehouses De Pauw (WDP), a company I’ve highlighted in previous Best Buys articles.
Let’s dive in to the deal and see what it means for Argan SA shareholders like us.
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If you’d like to read the original Argan SA Investment Case, you can download it here:
The Merger Terms
WDP’s CEO Joost Uwents is calling this a blending of companies.
Argan’s CFO described it as the two companies “merging and combining” to create a win-win for both sides.
It’s obviously a friendly merger, here’s what we’re getting for our Argan shares:
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3 WDP shares for every 1 Argan share held.
€11.00 in cash per share, paid before the deal closes.
That a €79.22 total implied value per Argan share
A 21% premium over pre-announcement prices
Expected Dividend Step-Up: We’ll also get a 6% dividend increase based on forward management projections
My math says that should be a 12% increase based on current trailing payouts
Is It a Good Deal For Us?
Let’s look at why management thinks this deal makes sense.
They make 4 main claims:
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Strategic Fit
Both companies are still run by the founding families (the Le Lans for Argan, and the De Pauws for WDP) and both are entrepreneurial and growing.
Working together does seem to make some sense, so I’ll agree with them here.
Leadership and Scale
Scale matters in logistics real estate.
Big tenants like Amazon or Carrefour prefer to work with one company that can lease across multiple countries
Owning properties across multiple regions also creates more opportunities to lease additional properties to existing customers.
A larger portfolio also lets the company spread its fixed costs across more properties.
Generating more cash flow lets you grow with less debt or equity issuance
The merger will create a €13 billion portfolio across eight countries.
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