EXO.MI - EXOR

[TwoCitiesCapital]

Sure.  But that’s priced in.

 

Honestly, a company that trades at a massive discount to NAV, with assets that trade at massive discounts to IV, with a long-term track record of excellent capital allocation, is about to have a liquidity event of $9 billion to put to work in this chaos as they see fit.

 

It's hard for me to come up with something that would be a better buy at this time.

 

IF they have a liquidity event.

 

Also WHEN.

 

It could be cancelled or delayed, so they don't get 9B to spend "in this chaos".

 

Yes, that's possible. Certainly something to keep an eye out for. But then they own a massive reinsurer who can roll some of their gov bonds into corporates and HY and capture the spread exposure and still do well. There are also liquidity events at Fiat for hundreds of millions of dollars that weren't included in the assumption above which could come through as well.

 

Also, if any of the Fairfax threads are to be believed, we're about to see a sustained hard market (though I'm less certain).

 

Regardless, it's phenomenal if the sale goes through - if not, it's not terrible. Heads I win, tails I don't lose.

[TwoCitiesCapital]

Exor should still have another EUR 30 million left on the EUR 300 million buybacks they announced last year - I wonder if they restart that at these prices?

[BroKon]

The program expired on 29th of Nov 2019, so my understanding is that they would need shareholder approval to restart it.

[TwoCitiesCapital]

The program expired on 29th of Nov 2019, so my understanding is that they would need shareholder approval to restart it.

 

Ah - thanks for the heads up. Didn't pay attention to an expiration date.

[BroKon]

Page 7 of today's press release (https://www.exor.com/sites/default/files/press-releases/2020-03/25_03_2020_Pr_%20EXOR%20Board_%20FY2019_V18.pdf). They are asking the shareholders again, but they need to wait until May. Even if they would not have bought any shares in these past two weeks, its still a mistake to have let the ability to do so lapse, an error I assume Elkann will not make again.

 

Treasury Stock Resolutions

The Board of Directors resolved to propose to the Annual General Meeting of Shareholders

(“AGM”) in May to extend the authorization to the Board of Directors to acquire ordinary

shares in the company’s capital. Under the authorization, the company may purchase on the

market, for 18 months from the date of the AGM, its fully paid-up ordinary shares for a

maximum number up to 10% of issued shares, for a maximum disbursement of €500 million.

 

[TwoCitiesCapital]

https://www.wsj.com/articles/exor-nears-200-million-investment-in-ride-share-company-via-11585582200

 

Exor invests $200 million in ride-sharing company Via valuing it roughly $2.25 billion

[fareastwarriors]

https://www.wsj.com/articles/exor-nears-200-million-investment-in-ride-share-company-via-11585582200

 

Exor invests $200 million in ride-sharing company Via valuing it roughly $2.25 billion

 

Via? Ridesharing? ugh

[BroKon]

Agreed, feels a bit like a stretch, especially when until now Seeds investments were worth $64m, and its not as if there are not other opportunities around.

[thowed]

Given he doesn't appear to be a mug, I'm going to hazard a guess that this is about other parts of the business e.g. the SaaS technology that can be licensed to others.

[colinwalt]

https://en.globes.co.il/en/article-smart-ridesharing-co-via-raises-400m-1001323953

 

"Via has developed a dynamic transportation system, which uses algorithms to adapt ridesharing routes to passenger needs. Minibuses or large shared taxis which use the company's technology collect passengers from pre-arranged stops. Passengers order the ride via an app and are told where to catch the vehicle from a nearby point. Routes are adjusted in real time according to passenger demand, traffic congestion and other factors.

 

Via already operates in 100 cities worldwide using various business models. In some cities Via offers its technology as happens in Tel Aviv with the Bubble service - a collaboration between Dan and Israel's Ministry of Transport. In other cities, Via wins tenders to operate bus routes and in other locations Via acts as a private operator which leases vehicles and runs a network of smart minibuses. Profitability varies from model to model."

[TwoCitiesCapital]

Haven't seen anything confirming, nor denying, the closing of the $9 billion sale of Partner RE so hopefully that is still on.

 

In other news, they just raised EUR 500 million in 10-year money at a decent rate. Hopefully this goes into the warchest of 9+ billion to put to work in the global chaos.

 

https://www.exor.com/press-releases/2020-04-27/exor-announces-private-placement-eu500-mn-notes-maturing-2030

[BroKon]

Partner Re deal is off. From Exor:

 

"Exor Board acknowledges Covéa’s refusal to finalise Agreement to acquire PartnerRe

Exor communicates that its Board of Directors, meeting under the Chairmanship of John Elkann, has acknowledged Covéa’s notice that Covéa will not honour its commitment to acquire PartnerRe in accordance with the terms of the Memorandum of Understanding (“MOU”) announced on March 3, 2020.

The Board noted the positive outlook for PartnerRe, which enjoys one of the highest capital and liquidity ratios in the global reinsurance industry and is not expected to be significantly affected by the Covid-19 outbreak. The Board therefore reiterated its strong belief that a sale of PartnerRe on terms inferior to those established in the MOU fails to reflect the value of the Company.

In attempting to renegotiate the agreed deal terms, Covéa has never suggested the existence of a material adverse change, including pandemic risk, or any other issues at PartnerRe that would explain its refusal to honor its commitments under the MOU and Exor believes that no such basis exists."

 

Newspaper reports saying that the MOU included a small $175m breakup fee and specifically excluded "a pandemic" as one of the reasons that would justify one of the parties walking away. They are also suggesting that Exor is considering legal action, which I am not entirely sure I buy.

[TwoCitiesCapital]

Haven't seen anything confirming, nor denying, the closing of the $9 billion sale of Partner RE so hopefully that is still on.

 

In other news, they just raised EUR 500 million in 10-year money at a decent rate. Hopefully this goes into the warchest of 9+ billion to put to work in the global chaos.

 

https://www.exor.com/press-releases/2020-04-27/exor-announces-private-placement-eu500-mn-notes-maturing-2030

 

Well, there it is

 

https://www.wsj.com/articles/fiats-agnelli-family-sees-9-billion-sale-of-insurance-business-falter-11589315017?mod=lead_feature_below_a_pos1

https://www.exor.com/press-releases/2020-05-12/exor-retain-ownership-partnerre-reaffirming-its-commitment-support

 

 

Deal is scuttled and Exor won't have $9 billion in cash to work with. But they will have a portfolio of bonds that can be put to work and likely have been appreciating over this period of time given the 10-year treasury has moved from 0.99% to 0.66% since the deal was announced. Partner RE continues to serve as a counter-cyclical ballast even if it is no longer the source of $9 billion in liquidity.

[Jurgis]

Was expected.

[fareastwarriors]

Fiat Chrysler/Peugeot deal in spotlight after Exor setbacks

 

https://www.reuters.com/article/us-health-coronavirus-fca-exor/fiat-chrysler-peugeot-deal-in-spotlight-after-exor-setbacks-idUSKBN22Q1QI

[Xerxes]

https://www.wsj.com/articles/is-this-europes-berkshire-hathaway-11591098676

 

"For now, Exor remains mainly a play on cars. That explains why the stock has fallen 27% this year and stands 22% below book value—an unusually steep discount. Yet the company under Mr. Elkann is starting to look like a beacon of capital discipline in the sector, just as Fiat was under Mr. Marchionne. Exor could be one auto stock that takes investors to a better place."

[jfan]

A few of questions to those that are more familiar with this company:

 

1) How good an investor is Matteo Scolari, their investment portfolio manager?

2) How good a VC investor is Noam Ohana? Seems like their seed investment in Nikola has not turned out very well.

3) Is most of their debt at the level of their investment/subsidiaries and non-recourse to the holding company?

4) It seems that Vellano, Heywood, Scolari, and Ohana are key to this organization. I dug but could not find their ownership stake in Exor.

5) What happened to the former CNH Industrial CEO? (fired? resigned in March 2020 in the middle of the pandemic seems odd)

 

As an aside, it was interesting to find out about their loyalty program for being a shareholder at the 5 and 10 year mark. It probably is a non-issue, but its a nice touch to encourage a permanent capital base.

 

 

 

[BroKon]

I can't answer all of these but:

 

2) On Nikola, I think the CNHI cost basis is roughly $10, although I have no opinion on whether that will be a zero or not in the forseeable future. Also it has nothing to do with Ohana, Via is his big bet.

3) Debt: 4.451bn euros is at the holding level, rest is non-recourse

4) if any of those left, I can't imagine the investment thesis would change. The only people that are important are Elkann, and who he chooses to manage FCA (Tavares), CNHI (undecided), Ferrari (Camilleri for the moment) and Bonneau (Partner Re).

 

 

[TwoCitiesCapital]

From the Fairfax thread

 

Further evidence that the insurance industry is in the midst of a hard market. Looks like reinsurance is starting to participate.

 

January Renewals Saw Some of Sharpest Price Hikes in Recent Years: Howden

- https://www.insurancejournal.com/news/international/2021/01/06/596323.htm

 

Lower investment yields, adverse catastrophe loss development, higher loss cost trends, concerns over climate change, and, of course, the pandemic coalesced to bring some of the sharpest price increases in recent memory during the Jan. 1 reinsurance renewals, according to Howden, the London-based insurance broker.

 

“The result is not only significantly higher pricing, but also more restrictive terms and conditions,” said Howden in a report titled “Hard Times. How a pandemic, record low yields, and climate-driven cat losses have changed the (re)insurance market.”

 

The report’s key findings on reinsurance renewals include:

- Howden’s Global Risk-Adjusted Property-Catastrophe Rate-on-Line Index rose by 6% at Jan. 1, 2021. This was higher than the flat outcome of 2020, and the biggest year-over-year increase in over a decade. COVID-19 loss experience, along with yet another hyperactive natural catastrophe year, were key inflating drivers.

- Programs in North America led the charge at Jan. 1, 2021, with an average rate-on-line increase of 8.5%. Pricing pressure was more subdued outside the United States.

- A significant turning point was reached in Europe where with rate rises in the low-to-mid-single digit range were seen.

- Another year of constrained capacity in the retrocession market saw Howden’s Risk-Adjusted Non-marine Retrocession Catastrophe Rate-on-Line Index rise by 13%. Four consecutive years of price increases have seen the cost of retrocession protection return to levels last recorded in 2012/13.

- Casualty reinsurance rates-on-line, including adjustments for exposure changes and ceding commissions, rose by 6% on average at Jan. 1, 2021.

- Rising rates on underlying business, especially in the U.S., mitigated pressure on ceding commissions somewhat, although outcomes varied depending on book performance. Reinsurers were resolute in pursuing higher pricing for excess-of-loss programmes, although there was again some degree of differentiation to account for portfolio characteristics and profitability.

 

Relevant here due to Partner RE.

 

Maybe it was a blessing that they didn't finalize the sale just yet.

[John Hjorth]

EXOR N.V. Press Release [March 8^th 2021] : EXOR and Christian Louboutin partner to accelerate the development of one of the World's preeminent luxury brands.