(BFM Bourse) – Edenred landed on the CAC 40 several years after its former parent Accor left the Parisian index. It is not uncommon for former divisions of large conglomerates to end up achieving a higher valuation than their former owner.
Edenred now finds itself in a very select club, from which its former parent company was kicked out just under three years ago. The specialist in payment solutions in the working world joined the CAC 40 on Friday at the close of the market, a few years after Accor left it.
The group known for its Ticket Restaurant brand is, it must be remembered, the result of a split in the hotel group, which resulted in the stock exchange listing in 2010. Since then, the two groups’ IPO journeys have had very different destinies. Edenred’s share price was multiplied by more than 5.5, while Accors rose by almost 40%.
Edenred experienced high-flying growth, taking full advantage of underpenetrated markets and successful diversification. Accor, for its part, was punished by the pandemic, from which the hotel group only began to recover a little less than a year ago. So much so that Edenred is today worth almost twice as much on the stock market as its former parent company (15.4 billion euros against 8.8 billion for Accor).
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Create value by dividing activities
The case of Edenred is not isolated because there are numerous examples of large groups that decide to split part of their activity in order to create value to the point that the created company ends up exceeding the market value of its former owner .
Remember that a spin-off is generally valued by the market because investors very often value separate operations better than a set of companies to which they apply a holding company discount. These operations can sometimes reveal the value of an asset hidden in a company.
“Although the sum of the parts, from a mathematical point of view, is not always worth mentioning, the valuation of a pure player [une entreprise évoluant dans un secteur d’activité unique, NDLR] is often superior to a group with often different business models”, explained Nisa Benaddi, partner at EuroLand Corporate in an article on this topic.
Worldline, which supplanted Atos
In addition to Edenred, there is another recent example with Worldline, a company specializing in payments that was listed in 2014 by Atos and whose digital services group left the capital entirely in 2022. Atos left the CAC 40 in 2021, while its ex-subsidiary entered that in 2020, as the cohabitation has therefore only lasted a few months.
Worldline currently weighs 10 billion euros on the stock market and Atos… 1.5 billion. The difficulties have accumulated for the group previously led by Thierry Breton, with several warnings about results, reservations issued by the auditors for the 2020 accounts (and lifted, of course, a few months later), three managing directors who have replaced each other since 2019, or even a strategic plan that worried the market with questions about its execution and funding last year.
That said, while Worldline has far from experienced the same problems as its former parent company, since the end of 2021 the group has suffered from a perception problem on the part of the market, which fears that traditional payment players (such as Worldline but also the Italian Nexi) is suffering significant loss of market share with the arrival of new players such as the Dutch Adyen. Although this fear has not really materialized, this market perception is struggling to disappear.
The beautiful story of Dassault Systèmes
Vivendi is a somewhat special case. The group has chosen to separate from Universal Music Group (UMG), its jewel, in order to crystallize value, by listing the label on the Amsterdam Stock Exchange in autumn 2021 and distributing its capital to its shareholders. This benefited its holders but had the effect of dividing its market value by three. This is one of the reasons why Vivendi was removed from the CAC 40 last Monday. Currently, the valuation of UMG represents 35 billion euros against 8.8 billion for Vivendi, which still owns about 10% of UMG.
We can also cite Dassault Systèmes and Dassault Aviation, although the picture should be nuanced somewhat. Strictly speaking, Dassault Systèmes was not really a subsidiary of Dassault Aviation. But it is thanks to the work of a team of engineers from the aircraft manufacturer specializing in the design of 3D products that the company was born in 1981.
Positioned in the promising niche of computer-aided design and manufacturing, Dassault Systèmes has had a good stock market history since its listing on the Paris Stock Exchange in 1996 (and also on the New York Stock Exchange at the time) with a multiplied share price. with close to 40 ago.
His career opened the doors to the CAC 40 for him in 2018, while Dassault Aviation, which suffers from a limited free flight on the stock market (27%), develops on the lower floor, on the SBF 120. If Dassault Systèmes shows a capitalization stock market of 54 billion euros, almost four times higher than that of the aircraft manufacturer, the capitalization of Dassault Aviation is far from ridiculous (14.14 billion) and is even on paper the 33rd of the Paris Stock Exchange. But as said before, its lack of free float represents a major obstacle to bringing value into the CAC 40.
However, the absence of a significant float did not prevent the success of the last example, which we kept abroad. In Germany, Volkswagen chose to list its subsidiary Porsche AG on the stock market last fall, sparking market enthusiasm and achieving the largest IPO in ten years.
So much so that Porsche joined the DAX 40 in December and its market capitalization quickly surpassed Volkswagen’s. Porsche thus weighs 107 billion euros on the Frankfurt stock exchange, while the “mass market” manufacturer is “only” worth 78 billion euros. Yet Volkswagen still owns 75% of the capital in its former subsidiary…
An analyst specializing in the automotive sector points out that a phenomenon of “cannibalization” has been observed, namely that investors have settled the two values by selling Volkswagen shares to buy those from Porsche AG. Let’s hope that Renault does not suffer the same fate with the IPO planned for the second half of this year of its subsidiary dedicated to electricity, Ampère.
Julien Marion – ©2023 BFM Bourse