How does someone become a CMA

The drama about Ceva never ends

The French shipping company CMA CGM takes over Ceva completely. The debt burden that led the logistics company to the Swiss stock exchange is now putting pressure on CMA.

It was a short guest appearance on the Swiss stock exchange - and hardly anyone will miss the billionaire company. The logistics company Ceva will be fully taken over by the French CMA CGM for CHF 30 per share. Ceva will be delisted - although the stock market debut of the logistics company has not yet reached its end and the French never really wanted to take over Ceva in full.

Ceva's share price since IPO

For Ceva this means: After the takeover, before the resale - a merger or a new IPO.

Drivers: lack of capital

The reason for Ceva's IPO in May 2018 was capital shortage. Now the full takeover forces the new owner CMA to undertake a financial feat: credit ratings in the B range and a very high leverage (net debt to Ebitda of well over five) make it clear what effort it means for the French to get another annual Ebitda for the Paying out the remaining Ceva shareholders. In any case, investors currently demand a yield on maturity of more than 8% for the bonds from CMA.

What now weighs on CMA, had brought Ceva into existential difficulties before the IPO. As a company in the portfolio of US financial investor Apollo, Ceva had to shoulder a debt burden of more than seven times Ebitda. With the IPO proceeds of CHF 1.2 billion, the logistician has reduced this by a factor of three. Multiple sources confirm that this was vital to the running of the business. Because potential customers were reluctant to enter into long-term business relationships with the previously overindebted logistician.

Unfortunate story

Before the IPO, Apollo had tried unsuccessfully to sell Ceva for years: Several M&A processes failed, and an attempted IPO in New York failed. When the French SNCF Geodis, which had allegedly considered taking over Ceva for € 2.85 billion, finally canceled, the only option left was the IPO.

But even then, Ceva was spared nothing: no sooner had the IPO been announced than US President Donald Trump had torn the trade dispute with China off the fence. It did not help the valuation of the logistics company: Instead of the originally targeted company value of well over CHF 2.5 billion, Ceva was barely worth CHF 2 billion the day after the IPO.

It should come even thicker. From the issue price of 27.50 per share, which had already marked the lowest end of the issue range, Ceva sank to a low of 18.30 CHF in October - until the Danish logistics company DSV came up with a takeover offer for 30 CHF per share.

Ceva responded to the advance of the Danes with an "extended strategic partnership" with the existing major shareholder CMA, which in turn submitted a takeover offer for CHF 30 per share.

Clear interests

In a twisted statement, the Ceva board of directors considered the offer to be fair. At the same time, assumptions about the future course of business would show that shareholders who remained invested in Ceva could realize significantly more value in the medium term than the offer price reflects, the Board of Directors said. The resulting recommendation to the public shareholders was: Do not tender.

This recommendation coincided exactly with the interests of CMA: The French wanted to secure a dominant position in Ceva. However, they did not aim for a full takeover.

As is well known, things turned out differently: In view of the unpopularity of Ceva on the stock exchange, almost all shareholders took the opportunity to exit. On April 3, CMA announced that it held 97.89% of Ceva shares. For the investors, the issue is done.

Arguments that strike back

It remains to be seen how things will go on for Ceva. It is true that Ceva and CMA brought vertical synergies between the logistician and the shipping company into the field when they announced that they would deepen their partnership. However, this did not mean full integration.

CMA's customer base also includes competitors from Ceva, including DSV and Kuehne + Nagel. A high-ranking corporate source says a merger of Ceva and CMA would damage CMA's transportation business. Because the contracting logisticians would probably be reluctant to work with a shipping company that competes them directly with another line of business. Consequence: decisions on the future structure of Ceva and CMA are still pending.

Let's bet: it won't be long before Ceva becomes a topic again on the capital market.