(BFM Bourse) – Edenred landed on the CAC 40 several years after its former parent company Accor left the Parisian index. It is not uncommon for former divisions of large groups to end up obtaining a higher valuation than their former owner.
Edenred now finds itself in a very select club from which its former parent company was expelled just under three years ago. The specialist in payment solutions in the world of work 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 should be remembered, the result of a split in the hotel group which resulted in its IPO in 2010. Since then, the stock market journeys of the two groups have had very different fates. Edenred’s share price was multiplied by more than 5.5 while Accor’s rose by just under 40%.
Edenred experienced high-flying growth, taking full advantage of under-penetrated markets and successful diversification. For its part, Accor was penalized by the pandemic from which the hotel group only began to recover a little less than a year ago. So much so that today Edenred is 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 splitting activities
The case of Edenred is not isolated because there are several examples of large groups that decide to split part of their activity to create value to the point that the company created ends up exceeding the market capitalization of its ex-owner.
Remember that a split is generally appreciated by the market, because investors very often value separate activities better than a set of businesses to which they apply a holding company discount. These operations can sometimes reveal the value of an asset hidden within a company.
“Even if the sum of the parts, from a mathematical point of view, is not always worth listing, the valuation of a pure-player [une entreprise évoluant dans un secteur d’activité unique, NDLR] is often superior to that of a group with often different business models”, explained Nisa Benaddi, partner at EuroLand Corporate in an article devoted to this subject.
Worldline which supplanted Atos
In addition to Edenred, another recent example exists with Worldline, a company specializing in payments which was listed on the stock market in 2014 by Atos and whose digital services group completely exited the capital in 2022. Atos left the CAC 40 in 2021, while his ex-subsidiary entered it in 2020, the cohabitation having 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 formerly headed by Thierry Breton, with several warnings on results, reservations issued by the auditors on the 2020 accounts (and lifted, of course, a few months later), three managing directors who have succeeded each other since 2019, or even a strategic plan that worried the market with questions about its execution and financing last year.
That said, while Worldline is far from having experienced the same problems as its former parent company, the group has suffered since the end of 2021 from a problem of perception on the part of the market, which fears that traditional payment players (such as Worldline but also the Italian Nexi) are suffering significant market share losses with the arrival of new players such as the Dutch Adyen. Although these fears have 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, to crystallize value, by listing the record company on the Amsterdam Stock Exchange in the fall of 2021 and distributing its capital to its shareholders. This benefited its holders, but had the effect of dividing its market capitalization by three. This is one of the reasons that explained Vivendi’s ouster from the CAC 40 last Monday. Currently, the valuation of UMG represents 35 billion euros against 8.8 billion for Vivendi which still owns around 10% of UMG.
We can also cite Dassault Systèmes and Dassault Aviation, even if 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.
Located in the promising niche of computer-aided design and manufacturing, Dassault Systèmes has had a good stock market history since its listing on the Parisian stock market in 1996 (and also on the New York Stock Exchange at the time) with a share price multiplied by close to 40 since.
His career opened the doors of the CAC 40 to him in 2018, while Dassault Aviation, which suffers from a limited free float on the stock market (27%), evolves on the lower floor, on the SBF 120. If Dassault Systèmes displays 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 being 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 the value into the CAC 40.
Porsche-Volkswagen cannibalization
The absence of a significant float did not, however, prevent the success of the last example that we retained, abroad. In Germany, Volkswagen chose to list its subsidiary Porsche AG on the stock market last fall, sparking market enthusiasm and achieving the biggest IPO in ten years.
So much so that Porsche joined the DAX 40 in the process, in December, and its market capitalization quickly outpaced that of Volkswagen. Porsche thus weighs 107 billion euros on the Frankfurt Stock Exchange while the “mass-market” manufacturer is worth “only” 78 billion euros. Yet Volkswagen still holds 75% of the capital of its former subsidiary…
An analyst specializing in the automotive sector points out that a phenomenon of “cannibalization” has been observed, namely that investors have arbitrated the two values by selling Volkswagen shares to buy those of Porsche AG. Let’s hope Renault does not experience the same fate with the IPO scheduled for the second half of this year of its subsidiary dedicated to electricity, Ampère.
Julien Marion – ©2023 BFM Bourse
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