BOL.PA - Bollore

[no_free_lunch]

..Francois Fillon to emerge as her top contender, a candidate whose policies look much more similar to Trump’s than any other in France. And he’s not just a top contender, but has opened up a commanding 32% lead in recent polls.
..
France’s Fillon has a free-market agenda that would unlock a stagnant French economy by reducing regulations, promoting longer work weeks, lowering entitlements, reducing the importance of unions, and lowering French government spending outside of defense. Proposed policies include a reduction in numerous taxes, including corporate taxes, and a complete re-writing of labor laws. Yet the market is largely unaware of such a positive outcome being remotely close to possible.
..
Bolloré is one of our favorite Franco-Italian stock picks and we think it’s particularly a well-timed bet heading into 2017 for more than just French electoral and market reasons. We think most of its units that have faced tough 2016 trading conditions are poised to significantly recover in 2017, and the discount to net asset value has rarely been wider.

http://www.valuewalk.com/2016/12/bollore-greenwood-investors/

[awindenberger]

Thanks for throwing this up again, I think I'm going to take a bite. I like the fact that the company is spending big on battery tech, although its still not clear if their technology is better or not. While currently we should assign $0 or even negative value to that part of the biz, it has the potential to be the long term growth catalyst.

[no_free_lunch]

I have only had a superficial look at the operating businesses but they seem of reasonable quality.  Ports, railways, energy transport, mostly industries I could see a company like brookfield investing in.  Definitely some risk with the africa tilt.   Not so sure about the electric car company but perhaps the ride ownership has legs.  Vivendi is interesting.

The muddy waters thesis is where I have been spending my time.  It appears mostly correct although I can't match all of their numbers.  There is a chart on the last page of their financials which clearly breaks out the ownership and you can see on it the ownership loops.   Basically you have the parent of Bollore being fractionally owned by subsidiaries of Bollore.  It is the most nutty thing I have ever seen.  Crazy that there is a thesis involving the number of outstanding shares!   However, so far it appears they are correct, just a question of how many shares there really are.

The one thing I can't verify from MW is the ownership of parents by bollore itself.  Does anyone have any data to back that up?

[mateo999]

I have only had a superficial look at the operating businesses but they seem of reasonable quality.  Ports, railways, energy transport, mostly industries I could see a company like brookfield investing in.  Definitely some risk with the africa tilt.   Not so sure about the electric car company but perhaps the ride ownership has legs.  Vivendi is interesting.

The muddy waters thesis is where I have been spending my time.  It appears mostly correct although I can't match all of their numbers.  There is a chart on the last page of their financials which clearly breaks out the ownership and you can see on it the ownership loops.   Basically you have the parent of Bollore being fractionally owned by subsidiaries of Bollore.  It is the most nutty thing I have ever seen.  Crazy that there is a thesis involving the number of outstanding shares!   However, so far it appears they are correct, just a question of how many shares there really are.

The one thing I can't verify from MW is the ownership of parents by bollore itself.  Does anyone have any data to back that up?

You can look in the Odet annual report for some additional (but not complete) clarification. 

[no_free_lunch]

Thanks mateo.  Indeed Odet's financials make things much clearer.  Still much work to be done here..

[no_free_lunch]

I have had a look through Bollore's ownership chain and have a rough calculation of the shareholders true ownership. 

The way I see it, if you follow the ownership structure starting at bollore and working up, there are sporadic claims by true shareholders of the parent companies at perhaps 3 points on the chain with everything else going to the subs.    I see the following:

 1) Public shareholders of Bollore own 35.7% of Bollore.
 2) Public shareholders of Odet own 5.9% of Bollore.  I calculate this starting with the public shareholders of Odet ow 9.2% of Odet, Odet owns 63.8% of Bollore.  If you multiply the 2 fractions you get 5.9% of Bollore owned by Odet.
 3) Bollore Participations shareholders own 4.55%.  There are a series of parent of Odet, ultimately it is owned by Bollore Participations.  I assume that BP is 100% owned by the family but it doesn't really matter.  If you follow the fractions of ownership you end with the Bollore Participations shareholders or the parent if there is another parent, this entity owns 4.55% of Bollore.
 4) The remainder is owned by subsidiaries, this amounts to 53.8%.

However, the subsidiaries are then ultimately owned by Bollore itself. 

I think there might be a small amount of leakage in the subs due to small fractions being owned outside the group but I can't verify the exact number.  It looks like it would be small, 2 or 3% might leak out.  The majority of that 53.8% goes back to Bollore and gets redistributed out.   However the redistribution just goes along the same ratios as the first round.

If you work it out and follow the ownership chains, it appears that in the end the ownership works across the original bollore/odet/BP ownership ratios.

So:

1) Bollore public shareholders owns 35.7% / (35.7 + 5.9 + 4.55) : 77% of Bollore.
2) Odet public shareholders owns 5.9 / (35.7 + 5.9 + 4.55) : 12.7% of Bollore.
3) BP owns 4.55 / (35.7 + 5.9 + 4.55) : 9.9% of Bollore.

The numbers above are probably a bit overstated as I didn't take into account leakage from the subs.  Still each of these entities should own more than double what is attributed.

It appears that BOL publicly listed shares have bvps $7.5-$8 vs a bvps of roughly $3.50 using simple book value divided by shares outstanding.  So it is roughly a 50 cent or maybe even 45 cent dollar.

Anyone see any holes in this?

[awindenberger]

I have had a look through Bollore's ownership chain and have a rough calculation of the shareholders true ownership. 

The way I see it, if you follow the ownership structure starting at bollore and working up, there are sporadic claims by true shareholders of the parent companies at perhaps 3 points on the chain with everything else going to the subs.    I see the following:

 1) Public shareholders of Bollore own 35.7% of Bollore.
 2) Public shareholders of Odet own 5.9% of Bollore.  I calculate this starting with the public shareholders of Odet ow 9.2% of Odet, Odet owns 63.8% of Bollore.  If you multiply the 2 fractions you get 5.9% of Bollore owned by Odet.
 3) Bollore Participations shareholders own 4.55%.  There are a series of parent of Odet, ultimately it is owned by Bollore Participations.  I assume that BP is 100% owned by the family but it doesn't really matter.  If you follow the fractions of ownership you end with the Bollore Participations shareholders or the parent if there is another parent, this entity owns 4.55% of Bollore.
 4) The remainder is owned by subsidiaries, this amounts to 53.8%.

However, the subsidiaries are then ultimately owned by Bollore itself. 

I think there might be a small amount of leakage in the subs due to small fractions being owned outside the group but I can't verify the exact number.  It looks like it would be small, 2 or 3% might leak out.  The majority of that 53.8% goes back to Bollore and gets redistributed out.   However the redistribution just goes along the same ratios as the first round.

If you work it out and follow the ownership chains, it appears that in the end the ownership works across the original bollore/odet/BP ownership ratios.

So:

1) Bollore public shareholders owns 35.7% / (35.7 + 5.9 + 4.55) : 77% of Bollore.
2) Odet public shareholders owns 5.9 / (35.7 + 5.9 + 4.55) : 12.7% of Bollore.
3) BP owns 4.55 / (35.7 + 5.9 + 4.55) : 9.9% of Bollore.

The numbers above are probably a bit overstated as I didn't take into account leakage from the subs.  Still each of these entities should own more than double what is attributed.

It appears that BOL publicly listed shares have bvps $7.5-$8 vs a bvps of roughly $3.50 using simple book value divided by shares outstanding.  So it is roughly a 50 cent or maybe even 45 cent dollar.

Anyone see any holes in this?

Very interesting way to approach this. I think its cleaner than what I was trying. When I get a chance I want to try to figure out what the leakage is, since it is going to be at least a few percent, but overall this definitely looks like a 50 cent dollar deal. Of course the question is, will that ever change?

[no_free_lunch]

awindenberger,

Have a look at the havas deal, it shows how they can convert the ownership loops into capital.  In that deal they traded some of the Bollore shares held by subs (this is a detail I can't verify but you can see the boost in public shares of Bollore between the 2013 & 2014 annual report with a corresponding drop in shares owned by the subs) for shares of Havas.  Or at least for a portion of the Havas shares they acquired.

If you think about what happened, Bollore ended up with about $1.2B (this is a rough estimate, don't have notes handy) of Havas stock vs a cost of what?  They didn't issue any new shares, they didn't pay anything, they didn't issue any debt.  They just took the Bollore shares from the subs and moved them to the Havas public shareholders in exchange for ~40% of the Havas shares.

Technically they did dilute the Bollore shareholders in that there are more shares owned by the public which impacts the calculations I would do.  However, from a simple book value or book value per share point of view, the entire $1.2B (or whatever portion came from swapping sub shares) would have just been added to equity.   

It seems like the Havas deal showed how they can unlock the value in the chain.  However, they cannot have more than 49% of the Bollore shares owned by the public as they want to retain control.

[awindenberger]

awindenberger,

Have a look at the havas deal, it shows how they can convert the ownership loops into capital.  In that deal they traded some of the Bollore shares held by subs (this is a detail I can't verify but you can see the boost in public shares of Bollore between the 2013 & 2014 annual report with a corresponding drop in shares owned by the subs) for shares of Havas.  Or at least for a portion of the Havas shares they acquired.

If you think about what happened, Bollore ended up with about $1.2B (this is a rough estimate, don't have notes handy) of Havas stock vs a cost of what?  They didn't issue any new shares, they didn't pay anything, they didn't issue any debt.  They just took the Bollore shares from the subs and moved them to the Havas public shareholders in exchange for ~40% of the Havas shares.

Technically they did dilute the Bollore shareholders in that there are more shares owned by the public which impacts the calculations I would do.  However, from a simple book value or book value per share point of view, the entire $1.2B (or whatever portion came from swapping sub shares) would have just been added to equity.   

It seems like the Havas deal showed how they can unlock the value in the chain.  However, they cannot have more than 49% of the Bollore shares owned by the public as they want to retain control.

Thanks for pointing out that transaction, I'll have a look at it.

BTW for those interested in this, Sardar Biglari executed a much simplified version of this at Biglari Holdings (BH). Investment funds managed by him own close to 50% of the shares of BH, yet BH owns 61% of one fund and 95% of the other, so in effect BH's public shares outstanding are 40% lower than stated.

After looking at Bollore, the BH setup is as easy as eating a cupcake.

[Phaceliacapital]

FYI: Sumzero winner:

https://www.youtube.com/watch?time_continue=1&v=EbHYm0pa_P8