Adler Pelzer, Antolin - comment

The Apolo acquisition (agreed) of Forvia’s interiors business is insightful. Forvia (Faurecia) is struggling with its margins, like most auto suppliers, and Apollo is buying the division for a low price. Its largest clients are the same as for the other two interiors businesses that we cover, VW and Stellantis. - the latter struggling even more than the former. At just under €5bn revenue, and a mere €110m EBIT, the business is a drag on even Forvia’s low average margins, and its published €582m EBITDA does little to convince us, considering the purchase price is a mere 3.1x of that. A more conservative guess arrives at €300m EBITDA, a margin incidentally not far off Antolin’s, but below Adler Pelzer’s, despite being in a higher (just higher, not high) value-added segment with more dashboard exposure than the other two. On a revenue multiple, Apollo seems braver than us, paying 0.4x for the business, where in the absence of any DCF, we assume a distressed price of a mere 0.25x for Antolin. The transaction, therefore, raises the best-case for both companies and should mildly propel their securities.