Eutelsat shareholders had a prosperous day on September 30th when the company’s share price rose dramatically by an initial 15.6 percent (to 11.97 euros), just below Patrick Drahi’s reported 12 euros per share bid.
Eutelsat confirmed receipt of the bid and rejected the approach. This suggests either Drahi doesn’t have the backing of state-backed BPI or else – naturally – Eutelsat wants more cash on the table.
For shareholders, this is a dilemma. They will receive their annual dividends from Eutelsat in November (currently at 0.93 euros and above 2020’s 0.89 euros) and a solid return that is well covered by revenues and likely to continue. In other words, Drahi might be expected to place more cash on the table to tempt institutional investors to take up any final offer.
Indeed, investment bank Exane/BNPP, in a note to clients, said, “It might simply be that shares are near all-time lows and he sees value (we see ETL as under significant structural pressure). Given the nature of the potential acquirer, we believe that the French government could be amenable to such a deal.”
However, set against this pretty picture is the fact that, back in October of 2019, Eutelsat shares cost 18 euros. In October of 2018, they were valued at 22 euros. In September of 2017, they were a thumping 24 euros per share.
Longer-term investors might want to see these levels achieved again and they must ask themselves whether this prospect can happen under Eutelsat’s current management or would Drahi make a better manager? Of course, the larger question is whether Eutelsat will stay as a public company.
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