Compa split - the most glaring discrepancy between net asset and company valuation

The valuation carried out for the division of Compa Sibiu (CMP) presents the most flagrant discrepancy in recent times between the net asset of a company and the price set by the valuer for the shareholders who would have exercised their right of withdrawal, if the operation had been carried out.

The company's Board of Directors wanted to transfer almost half of Compa's assets to another unlisted company with activities in the real estate field, with the idea of separating the production operations of auto components from the real estate ones, since the two activities require different resources, address different market segments, have distinct assets and liabilities, etc. In short, the streamlining and development of the two types of activities, as shown in the division project.

The Board announced that it is considering a potential division on November 10, 2023, and in the second part of the month it informed the market about the appointment of Value Management Consult SRL from Arad as an expert appraiser. The split announcement sent Compa's share price up more than 40%.

On December 21, the company publishes the division project, which involves the transfer to a new company called Compa SIB Imobiliare of 44.2% of the Compa's net assets which, at the end of 2022, the reference date for the division, amounts to 497, 1 million lei, the equivalent of an accounting value per share of 2.271747 lei. But the evaluator set a withdrawal price from the company for investors who would not have agreed to the split of 0.6001 lei per share, 74% lower than the book value and 32% below the CMP share price in the market before the publication of the project . At the level of the entire company, the value of the net asset that the management of Compa wanted to transfer to Compa SIB Imobiliare was 219.8 million lei, but which Value Management Consult had assessed at around 57 million lei.

Basically, Compa's management made investments in real estate assets in recent years from the company's money, i.e. all the shareholders' money, which they now wanted to transfer together with other assets to a new unlisted company, so which would not have been under supervision Financial Supervision Authority (ASF).

For example, the division involved the transfer of the assets of Arini Hospitality, a tourism company owned 100% by Compa. Arini was established in 2021, with the contribution of two million lei and an administrative building in Sibiu, the money and the real estate being owned by Compa. At the end of 2020, Arini Hospitality was valued at 19.7 million lei, according to the company's annual report.

Through the division, Arini and other assets would have been transferred to a company from which investors would no longer have been able to easily sell their shares and would no longer have had the protection of the ASF, and for those who would not have agreed to the operation, Compa would have paid them only a quarter of the net asset. This, following the withdrawal from a company that eminently transferred real estate assets.

• The company did not publish the valuation report, so we do not know how Value Management Consult estimated the value of the Company

In January, the company decided to interrupt the division process at the request of some clarifications received from the investors and to reanalyze the aspects of the proposed operation, including from the perspective of the evaluation elements. "It will come back later with a decision regarding the appropriateness of the parameters of the division and the continuation of this process," the company's report from BVB states.

So far, Compa has not announced anything about the split. BURSA newspaper recently requested more details about the company's management's intentions regarding the market operation, but we have not received any response.

Also, the company has not yet published the valuation report (which is not similar to the demerger project), so we don't know how it arrived at a value 74% lower than net assets. As early as two months ago, we requested valuation details from Value Management Consult, but the company did not respond to our request.

Instead, the Financial Supervisory Authority answered us, before the interruption of the Compa division process, that the authority able to issue a competent point of view regarding an evaluation report is ANEVAR. "Nevertheless, in accordance with the specific attributions and in compliance with the limits of competence held, ASF monitors the company's situation in the context of a potential division operation, the aspects associated with this operation will be analyzed and, as the case may be, specific measures will be ordered, including from the perspective of insurance respecting the rights of shareholders", ASF also sent us.

In a short time, Compa interrupted the division operation, perhaps because the company's shareholding includes the Pilon II pension funds managed by NN and Carpathia.

But the announcement of the intention to split created certain expectations among investors that were later, with the publication of the price that would have been received by those who would have withdrawn from the company, been shattered. There are investors who told us that, immediately after learning of the evaluation made by Value Management Consult, they sold their holdings in Compa. However, such situations can only destroy confidence in our small stock exchange platform.