AlphaValue Corporate Services
This research has been commissioned and paid for by the company and is deemed to constitute an acceptable minor non-monetary benefit as defined in MiFID II

IDI

CR
Bloomberg   IDIP FP
Holding Companies  /  France  Web Site   |   Investors Relation
Private equity players buffeted by macro-economic headwinds
Target
Upside 46.6%
Price (€) 67
Market Cap (€M) 485
Perf. 1W: 0.30%
Perf. 1M: 0.30%
Perf. 3M: 2.45%
Perf Ytd: -0.59%
10 day relative perf. to stoxx600: -0.31%
20 day relative perf. to stoxx600: -1.92%
M&A /Corp. Action28/09/2023

Masters the value creation playbook

IDI announced today that it has completed, alongside Andera Partners, the sale of Flex Composite Group to Michelin. This operation, unveiled in June, will enable IDI to realise a capital gain of around €255m and to pocket close to €278m, corresponding to an investment multiple of 12 times the initial €23.2m outlay. Not only will this deal fill IDI’s pockets, it also further demonstrates IDI’s ongoing ability to create value.


Fact

  • IDI made its first investment in Flex Composite Group for €23.2m back in 2015.
  • At the end of 2022, IDI held 63.39% of the group alongside Andera Partners – a minority investor.
  • IDI and Andera Partners announced an agreement to sell the entire Flex Composite Group to Michelin for an enterprise value of €700m on 18 June 2023.
  • IDI and Andera Partners completed the sale agreement on 27 September 2023.
  • With this transaction, IDI achieves a multiple of 12x and an IRR of 38%.

Analysis

A masterstroke which radically changes IDI’s investment power

After announcing an agreement to sell Flex Composite Group alongside Andera Partners on 18 June, IDI reported today that it has completed the transaction. Flex Composite Group will join Michelin’s portfolio for an enterprise value of €700m. As a reminder, IDI acquired a stake in the group back in 2015 for €23.2m and holds, as of December 2022, 63.39% of the group alongside Andera Partners as a minority shareholder. With this operation, IDI will complete a stellar cash-on-cash multiple of 12x its initial investment, i.e. around €278m, corresponding to a capital gain of €255m and an IRR of 38%. This deal will therefore significantly line IDI’s pockets, enabling it to finance new investments. We estimate that, after this transaction, IDI should have a net cash position of around €352m.

Back to Flex Composite Group

As mentioned in our last paper, Flex Composite Group is a European leader in the design, manufacture and distribution of advanced composite materials. The group is now made up of three divisions: i) Engineered fabrics, the technical coated fabrics division, ii) Carbon fabrics and technical composites Composite Materials, and iii) a thermoplastic films division, Technical Films, all of which have enabled it to achieve sales of c.€200m in 2022. Starting in 2015 up to 2022, through IDI’s support of its development, FCG has generated an operating margin of between 25% and 30% and average organic growth of 11%.

Michelin’s acquisition of FCG and integration into its High Tech Materials division is in line with Michelin’s ambition to create a world leader in advanced composite materials. Michelin aims to combine the strengths of FCG and Michelin in R&D, but also geographically.

FY 2023 outlook

Since 1 January 2023, IDI has completed or announced 14 transactions, including 5 disposals, 4 external growths and 5 acquisitions: the acquisition of a 40% stake in Omnes’ energy transition and innovation activities, the creation of 100% IdiCo (now fully consolidated), the disposal and subsequent reinvestment in Freeland, the investment in Natural Grass as well as in Prévost Laboratory Concept, and external growth transactions for Talis Education, CDS, and Groupe Positive.

With a net cash position expected to reach €350m or so, IDI will have considerable firepower to finance new investments, and who knows, maybe redistribute some of the money through dividends. This is not unlikely as IDI has a focused investment strategy (less than 20 lines) and prefers its assets to fund their growth autonomously with IDI’s support only for bigger strategic deals.


Impact

We will incorporate the capital gain from the sale of FCG into our estimates. Our model is currently being revised to incorporate the H1 23 figures.


Updates

28 Nov 23 Earnings/sales releases
Ending Q3 with firepower at its peak

28 Sep 23 M&A /Corp. Action
Masters the value creation playbook

26 Sep 23 Earnings/sales releases
Shielded against macro-economic turmoil

13 Apr 23 Earnings/sales releases
FY22: IDI in a solid stand amidst an adverse en...

14 Sep 22 Earnings/sales releases
H1 22: a new milestone for IDI

12Next
.