Following the previously reported sale of the coatings business of $BAS (+0,54 %) it appears that the restructuring is continuing to move forward. Financial circles are currently speculating about a valuation of the $BAS (+0,54 %)agricultural division ranging from 20 to 30 billion euros. What is remarkable about this is that $BAS (+0,54 %) the company as a whole is currently valued at only about 45 to 50 billion euros on the stock market. In other words: A business unit that makes up only a portion of the conglomerate could, on its own, be worth nearly half of the current market capitalization.
In my view, this highlights a problem that many large conglomerates face. The stock market often applies a valuation discount (conglomerate discount) to them. Different business segments with varying growth profiles are often valued lower under one umbrella than they would be as standalone companies. This very point was discussed in the latest Handelsblatt podcast. An independently listed agricultural business could therefore command a significantly higher valuation multiple than it would within the $BAS (+0,54 %)group.
Of course, there are also risks. The agricultural division is one of the faster-growing and higher-margin segments of $BAS (+0,54 %) . A partial spin-off could lead to the remaining group being perceived as more cyclical. At the same time, $BAS (+0,54 %) the IPO would bring in fresh capital, while the group would remain the majority shareholder and thus continue to participate in the agricultural division’s future performance. It is precisely this mix of value unlocking and further upside that makes the move interesting, in my view.
Many are also wondering whether existing $BAS (+0,54 %)shareholders will automatically receive shares in the new company. As things stand, that is not planned. $BAS (+0,54 %) The group is planning a partial IPO, will remain the majority shareholder, and has not yet announced any allocation of shares to existing $BAS (+0,54 %)shareholders. Anyone wishing to invest later would likely have to purchase the new shares on the open market.
Personally, I view the planned IPO rather positively so far. If it $BAS (+0,54 %) succeed in reducing the group’s valuation discount while remaining the majority shareholder of an agricultural company valued higher on its own, this could also benefit us $BAS (+0,54 %)shareholders in the long run.
What do you think? Is the group divesting itself of one of its most attractive business units, or do we see a clever move here in the form of an IPO that could lead to a revaluation of both the individual division and the group as a whole?
~ Not investment advice ~
