Top Tarkett Shareholders Rebuff Family’s ‘Opportunistic’ Bid

Two of Tarkett SA’s largest investors said an effort to delist the French floor maker by its controlling family is opportunistic and undervalues the company, raising questions about whether the move will succeed.

Investment firms Magallanes Value Investors SA and Tweedy Browne Co. told Bloomberg News they would not support the Deconinck family’s April offer to buy the shares it doesn’t already own for 20 euros each and withdraw it from the Euronext Paris exchange.

“This offer is very opportunistic, and the controlling family’s lack of engagement on the terms is shameful,” Ivan Martin, chief investment officer at Magallanes, said by phone. The fund has been invested in Tarkett since 2015 and holds a 3.9% stake, he said.

The Deconinck family is Tarkett’s largest investor with a near 51% stake, according to data compiled by Bloomberg. It’s planning a tender offer to buy out minority shareholders with financing from French investment firm Wendel SE. The family will need to boost its stake to at least 90% if it wants to squeeze out any dissenting shareholders and delist the company.

“We would like a fair offer, and we don’t believe what’s been offered is fair,” said Andrew Ewert, an analyst at Tweedy. “We are getting an opportunistic offer on depressed earnings as a result of the pandemic. We estimate the intrinsic value of the company to be much higher than it is today.”

A reasonable proposal would lie in the high 20-euros range, according to Ewert. Tweedy has been invested in Tarkett for about three years and holds a 6.7% stake. It has raised its concerns in a letter to the Deconinck family, Ewert said.

Tarkett put Tweedy’s concerns to independent adviser Finexsi SA, which addressed all of the points in detail, according to a representative for the French group.

“All answers concluded to the fairness of the offer price,” the Tarkett representative said. A spokesperson for Wendel declined to comment.

Expected Recovery

Shares of Tarkett have risen 42% this year to 20.40 euros, giving it a market value of 1.3 billion euros ($1.6 billion). It’s been more than three years since the company traded above its 2013 IPO price of 29 euros.

Tarkett, which traces its roots back to 1880, manufactures a range of floor coverings for homes and offices, including wood, tiles and carpets, as well indoor and outdoor sports centers. The global construction industry was badly knocked by the coronavirus pandemic, which led to nationwide lockdowns and caused delays to new developments.

Tarkett recorded a net loss of 19.1 million euros in 2020. To be sure, the construction industry is expected to play an important role in the post-pandemic global economic recovery.

One smaller shareholder unhappy with the Deconinck family’s plans is Berry Street Capital Management, a hedge fund run by former Paulson & Co. executive Orkun Kilic that owns 1.4% of Tarkett.

“We see the timing and the value of the offer as opportunistic taking into account the expected recovery in the sector,” a representative for Berry Street said by email. “Given Wendel’s involvement in the financing of the bid, they would appear to share this view.”

Activist investors have also been getting more involved in European deal situations this year. Billionaire Paul Singer’s Elliott Investment Management recently disclosed a stake in medical services firm UDG Healthcare Plc, the subject of a private-equity takeover bid that’s drawn shareholder criticism. Bluebell Capital Partners called last month for Vivendi SA to pay billions of euros in cash to shareholders when it spins off Universal Music Group.

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