M&A Activity - Benchmark transaction

Today DXS made a takeover offer for APD (50% premium to last closing price and 64% premium to 30-day VWAP).

APD is similar to BWF (although it is a much larger business - valued at $300m at the takeover price, compared to BWF's $32m Market Cap): both are commercial property fund managers and both have direct investments in listed property funds they manage.

Before the takeover offer for APD, the bulk of its value was derived from direct co-investment in some of the assets which it manages, with the Funds Management Business only having been implicitly afforded a modest valuation (around $35m to $40m).

But after today's takeover, APD's Funds Management business was re-rated from sub-$40m, to almost $150m (!)


Looking at the see-through valuation for BWF's Funds Management business:

$20m of BWF's $32m Market Value is backed by the 8.7% interest in WOT (BWF's Cash is equal to Total Liabilities).

Which means the BWF Funds Management business is effectively being valued at a mere $12m, compared to the $145m ot $150m which today's takeover bid effectively values APD's Fund Management business.

But BWF's Fund Management business is sub-scale, and is basically breaking even; while APD's made around $4m in PBT for FY2020, and a similar amount in DH2020, so running at $8mpa annualised.

However, with Revenues from BWF's Fund Management business being around $5.5m pa to $6.0m pa (around $5m pa in management fees and maybe $0.5m pa to $1.0m pa in performance fees) being around one-third of the Revenues of APD's Fund Management business, one might reasonably say that BWF's business should be worth a bit more than a mere 8% of APD's.

Maybe 15%, or 20% even.
(So not an overly hairy chested assumption)

Suggesting between a $23m and $30m  valuation, so say $25m, for BWF Funds Management.

The valuation breakdown for BWF the company is relatively simple:


Funds Management Business = $25m
8.7% Interest in recently-listed WOT = $20m
Cash = $3.9m
Receivables = $0.4m
PP&E = $0.2m
Current Liabilities = $0.9m
Non-Current Liabilities = $3.3m

=> Net Asset Value = $45m

Which is around 45% higher than the current Market Value.


(Because directors and management speak for ~45% of the issued shares of BWF, I think it is unlikely that BWF will be subject to a takeover bid, so this exercise was mainly intended to highlight the limited downside risk of BWF based on the APD bid as a benchmark.)

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