Business by Murilo Melo 04/19/2024 21:47 Updated on: 04/19/2024 22:12
A Pet (PETZ3) managed to reverse a season of lows on the Ibovespa and emerged, this Friday (19), at a high in the trading session, trading at R$ 4.76, an appreciation of 36.29%. Until reaching the top of the main highs of the day, the pet shop chain suffered successive drops since March 25th of this year. Today’s jump on the Stock Exchange has an explanation: investors started to see Petz with different eyes after the company and Cobasi signed a memorandum for merger. Added to this is the company’s announcement that it intends to become the largest pet chain in the country.
Petz (PETZ3). Photo: disclosure.
Bradesco BBI highlights, in a report, positive aspects in the merger of the two companies, especially in relation to the Petz share price. According to an analysis by the bank’s experts, the established value of R$7.10 per share represents an increase of approximately 100% in relation to the previous day’s closing value. This data caught the attention of experts, who see it as a promising sign for the business in question.
BBI strategists say the market value attributed to the business indicates a possible significant capital injection, as a Cobasi demonstrated interest in paying around R$450 million to Petz shareholders, which could result in extraordinary dividends for the investors involved.
However, the team of experts also made a point of emphasizing that the price of Petz shares on the Stock Exchange may not directly reflect this established value. They argue that the Cobasi It is not listed on the stock exchange and its value is not “marked to market” as is the case with Petz. Therefore, the assessed values for the deal terms are important primarily for the post-merger ownership structure, but do not necessarily indicate the combined market value after the deal is completed.
New post-merger company should generate cash of R$6.9 billion, estimates Genial Investimentos
For Genial Investimentos, the merger between Cobasi and Petz promises to create a true giant in the pet market, consolidating almost 15% market share. Based on projections for the year 2023, the new combined company should have a robust portfolio of 480 stores and annual gross revenue of R$6.9 billion. Furthermore, thanks to Petz’s low debt and Cobasi’s net cash position, the new company should enjoy net cash estimated at more than R$200 million, according to analysts.
The new company resulting from merger between Petz and Cobasi is being valued at approximately 11.6 times its Ebitda (earnings before interest, taxes, depreciation and amortization) in relation to the company’s total value (Enterprise Value). This means that, for each unit of Ebitda generated by the company, the market is willing to pay 11.6 times the value of that unit.
In practical terms, this multiple is a measure of the relationship between the company’s market value and its ability to generate operating profit. In the context of operation between Cobasi and Petzan 11.6x Ev/Evitda multiple suggests that the market is assigning a relatively high value to the new company relative to its operating profits.
However, strategists say it is important to note that this valuation did not consider any synergies resulting from the merger, which could potentially further increase the value of the new company in the future. They also state that among the main merits highlighted by Petz are the gain in scale, the strengthening of omnichannel presence, the improvement of commercial and negotiation strategies with the industry, in addition to the creation of value through the sharing of skills and synergies.
Genial pointed out that during the conference with analysts and investors, the Pet admitted that it has not yet mapped and quantified all the potential synergies arising from the transaction. Even so, the company highlighted the significant potential for synergy, especially with regard to the cross-selling of its own brands and services, the optimization of logistics, the store expansion plan and the reduction of expenses through the use of corporate structures shared.
Petz and Cobasi sign memorandum for merger
After several previous unsuccessful attempts to approach, pet product retailers, Petz and Cobasi, announced the signing of a non-binding memorandum of understanding for a possible merger. If the operation is completed, it will result in the creation of the largest pet products business in Brazil.
According to the material fact released this Friday (19), the combined retailer will have a comprehensive network of 483 stores, with an estimated annual gross revenue of around R$6.9 billion. Furthermore, earnings before interest, taxes, amortization and depreciation (adjusted EBITDA) of the new entity are projected at R$464 million, based on 2023 figures.
It is worth highlighting that Petz’s annual adjusted EBITDA is 35% higher than that of Cobasi, with R$267 million and R$197 million, respectively, in 2023. While Cobasi has a net cash of R$232 million, Petz has a net debt of R$23 million.
Previous attempts at rapprochement between the brothers Paulo, Ricardo and João Nassar, from Cobasi, and Sérgio Zimerman, from Petz, in recent years have not been successful, facing difficulties in reaching an understanding, especially given the recent drop in share prices from the Pet and the slowed environment of the pet sector.