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Italy’s billionaire Agnelli family, which built its wealth on carmaker Fiat, has embarked on a high-stakes bet on troubled Dutch medical technology firm Philips. While there is some logic to its opportunistic swoop, outside investors in family holding company Exor might have preferred a buyback.
Exor’s sudden acquisition of a 15 per cent exposure to Philips stock, worth €2.6bn, is not a complete surprise. It had alerted investors of its desire to reinvest €9.3bn of proceeds from the sale of insurer PartnerRe. The investment group identified luxury and healthcare as sectors where it could diversify risk.
Exor appears to have acquired what it describes as its “shareholding” via a deal with an investment bank. This may have side-stepped disclosure requirements, which in Holland kick in after the 3 per cent threshold has been breached.
With cash burning a hole in Exor’s pocket, Philips must have screened as cheap. The Dutch group’s stock is down some 60 per cent since it announced a recall of its sleep apnoea product in August 2021. It has embarked on a turnaround programme, appointing new chief executive Roy Jakobs in late 2022, cutting staff and setting aside €575mn for litigation costs.
Philips investors are going to be on tenterhooks for quite some time. As Lex has pointed out, legal liabilities are, by their nature, hard to quantify — and often larger than expected.
Nor was Exor short of alternative investment propositions. One above all: its own stock.
Exor — 53 per cent controlled by the Agnelli family — has valuable assets. It has stakes in listed companies including Stellantis, Ferrari and industrial machinery maker CNH. These are valued at some €29bn at market prices. Non-listed investments and funds might be worth €5.8bn, according to Bank of America.
Subtract €1.6bn of net debt, and net asset value would be just above €33bn. Exor trades at a discount of over 40 per cent to that.
A better opportunity than Philips lies closer to home.
The Lex team is interested in hearing more from readers. Please tell us what you think of Exor’s investment in Philips in the comments section below.