– PostNL (PNL NA): There were rumours in low quality source The Daily Mail last week on 24-Dec that Royal Mail was on the verge of bidding €5 a share for Dutch postal operator PostNL (or more than 50% premium vs previous closing price of €3.24), with Deutsche Post also said to be interested. Says it ‘could yet be a Christmas cracker, but word is it will now be rubber-stamped early in the new year.’
Despite company last week pouring cold water on that speculation, PostNL’s share price above €3.60 stubbornly has stayed up more than 10% vs pre-rumour pricing (most likely because of ‘cheap’ headline standalone valuation and/or presence of well-followed Dutch media tycoon John De Mol in shareholder register with 5% stake).
Although we appreciate that in the long-term, we could obviously see a trend of larger, more dominant pan-European postal operators where smaller country operators like PostNL would be first acquisition targets, we are highly sceptical of near-term M&A interest for PostNL because:
i) Fedex’ acquisition of TNT is still pending (any bidder needs to be 100% convinced on that deal to close as €645m proceeds from the sales of its 14.8% interest in TNT Express that need to be allocated for liability reduction represent at least 25% of PNL’s €2.3bn+ EV)
ii) questionable Dutch postal market dynamics with Dutch mail market, highly competitive and one of the fastest declining in Europe in terms of volumes (PostNL is guiding for Dutch postal volume declines of 9-12% in 2015 , 7-9% for 2015-17 and 5-7% for 2018-20)
iii) questionable synergies between different country operators (and hard to see very much further cost savings programs at PostNL as it has gone through many years of such cost cutting already – company achieved average annual cost savings of about €84m since 2009).
We would short PostNL as short-term trade in EUR 3.6-3.7 range or sell some OTM calls, playing some of the take over premium to fade over the next couple of days.