DEALTALK-Edenred takeover chances slim in short-term

* Analysts doubtful of Compass interest

* Private equity, banks, card firms expected to take a look

* Colony, Eurazeo shareholder lock-up expires Jan 2012

* Lock-up void in the event of a takeover bid

* Stock up 61 pct so far this year

By Dominique Vidalon and Noelle Mennella

PARIS, Dec 13 (BestGrowthStock) – Edenred, the French pre-paid meal
vouchers group, has attracted takeover speculation since its
float in July, but an expensive price tag and few credible
buyers make a quick sale unlikely.

Takeover talk has gathered momentum since French
state-backed investment fund FSI ditched its entire 6.8 percent
in Edenred in October for 227 million euros or 14.70 euros per
share. [ID:nLDE6960SP]

“The withdrawal of the FSI theoretically renders the group a
takeover target,” said Natixis analyst Andre Juillard.

Since it listed on July 2, Edenred shares have soared 61
percent, giving the company a market value of 4.1 billion euros
($5.4 billion).

Speculation that Compass Group (CPG.L: ), the world’s biggest
caterer, could be preparing a bid for Edenred, pushed the stock
to new heights last month. [ID:nWEA5049]

Edenred (EDEN.PA: ) trades at 22 times earnings forecasts for
2011 against 15 for Compass and 16.9 for Sodexo (EXHO.PA: ).

“What is rare and sought after…is expensive,” said
Juillard, who recently raised his target price to 24 euros from
19. The stock currently trades at around 18 euros.

Edenred offers prepaid services such as meal vouchers, plus
payment, insurance and travel cards for employees.

The company, which competes with catering services groups
Sodexo and Compass and card companies Mastercard (MA.N: ) and Visa
(V.N: ), was split from hotel group Accor (ACCP.PA: ) in July.

But analysts are sceptical of a scenario where Compass,
which has never been involved in vouchers, would blow at least 5
billion euros, including debt, to scoop up Edenred.

Edenred and Compass have both declined to comment on the

Oddo Securities analyst Guillaume Rascoussier saw limited
cost synergies for Compass from an Edenred deal.

At 21 euros, a deal would cut Compass’ 2011 earnings by 2
percent after synergies, but return on capital employed of 6.5
percent would make it hard to justify financially, he said.


Edenred’s strong cash flow is a potential draw for private
equity buyers, banks or credit card companies.

“Edenred is the ideal cash cow of private equity,” said

The FSI’s exit left Edenred in the hands of its two main
shareholders Colony Capital and Eurazeo (EURA.PA: ), which have 4
out of 12 board seats and together own 27.36 percent of the

The funds are seen as potential sellers. But they have a
lock-up agreement that covers 21.5 percent of the share capital
until January 1, 2012. The lock-up is void if there is a bid.

Eurazeo recently told analysts it was not seller at current
levels but that mid-20s would be a minimum price at which it
might consider it, several sources said.

“Maybe they will sell in 2012, it’s hard to know. Eurazeo is
in a mid- to long-term investment logic,” one source close to
the mattter said.

But there is nothing to stop Colony from selling its
Edenred stake of about 6 percent that is not in the lock-up.

“Colony in our view does not intend to stay on as an
Edenred’s reference shareholder,” Oddo’s Rascoussier said.

Both Colony and Eurazeo declined to comment on their plans.

Edered’s global market share of 35 percent and exposure to
fast-growing emerging markets could make it an attractive target
for banks or credit card operators Visa or MasterCard.

Analysts are uncertain though that card companies are
prepared to diversify into Edenred’s niche market.
“I see two natural predators, a large private equity…or a
bank….A large private equity could afford Edenred. It’s a
magical company for an LBO, provided you allow 12-18 months to
wipe out debt,” one sector analyst said.
($1=.7580 Euro)
(Reporting by Dominique Vidalon. Editing by Jane Merriman)

DEALTALK-Edenred takeover chances slim in short-term