THR Marea Neagră division - the appraiser sets a withdrawal price 27% below the book value of the share

Turism, Hotels, Restaurante Marea Neagră (EFO) carries out an asymmetric partial division through which part of the company's patrimony is transferred to a new, unlisted entity, called Hotels Restaurante Sud.

According to the company's Board of Directors, the operation was motivated by the fact that, currently, THR-Marea Neagră carries out two distinct activities: one that focuses on tourist services provided in three or four star units, respectively the other that consists in renting two-three star tourist units, which address a low-cost market segment. Thus, the division was necessary because the two activities have different needs for investment, promotion, etc., the goal being the efficiency of operations to obtain sustainable long-term economic benefits. Through the division, the assets needed to provide tourist services for the medium-high segment remain in THR-Black Sea and the others are transferred to the newly established company, according to the evaluation report. Concretely, through the division, 43.48% of the net asset of THR Marea Neagră is transferred to Hoteluri Restaurante Sud, in compliance with the principle of proportionality.

• The price set by the appraiser for the withdrawal from the company is equivalent to 73% of the book value of a share

The evolution of the share price after the publication of the valuation report shows that, unlike in other cases, the tourism company's valuation is more decent. In addition, unlike Compa, the demerger provides that the minority shareholders, who are not included in the operation, remain in the listed company, which includes the higher quality assets. For the shareholders who did not agree with the division and opted to withdraw from the company, the Darian appraiser set a price of 0.4414 lei per share. The price was above the one in the market on November 9, 2023, the moment of publication of the division project, of 0.342 lei, leading to an increase in the following days to an intra-day maximum of 0.418 lei, after which the quotation remained for a long time in that area.

On the other hand, the price set by the appraiser for those who did not agree with the division is equivalent to 73% of the book value of a THR Marea Neagră share, of 0.607712 lei. "It is a valuation below that of the equity, for a company with eminent real estate assets", says Emil Ionescu, a long-time investor in stocks listed on the BVB. "For the division, the equity is used, but for the evaluation of the price paid to the withdrawing shareholders, they are no longer taken into account". At the end of 2022, the value of the company's tangible assets amounts to 406.3 million lei, equivalent to 97% of total assets, most of which are real estate investments.

The net asset was 350 million lei. According to the division project, from an accounting perspective, the operation is carried out using the accounting net asset method, according to the financial statements as of December 31, 2022.

• Marius Motogna: "There are assets taken out of operation and considered zero in an absolutely unjustified way"

For valuation, Darian develops the income and market approach. About the asset approach, it mentions that it is only recommended for investment or start-up companies. On the other hand, the cost approach (n.r. asset-based) was applied only to non-operating assets, for which no rental income was estimated in the forecasts. In the opinion of investor Marius Motogna, the appraiser reduced the value of the company's assets through various methods.

"For example, there are assets taken out of operation considered zero absolutely unjustifiably. Some are in protected areas, but even there you can build with special permits. In any case, the value of those lands and buildings is not zero!", the investor told us.

• Darian evaluează compania doar prin abordarea bazată pe venit, pentru care indică o precizie mai bună decât cea a abordării prin piaţă

Through the income-based approach, Darian obtains a valuation of THR Marea Neagră of 254.2 million lei, respectively a price per share of 0.4414 lei. Through the approach based on market multiples, it obtains a value of 297 million lei, respectively a price per share of 0.5156 lei.

Finally, the valuer chooses only the income approach for which it indicates better accuracy than the market approach, but without further details, according to the valuation report.

"The evaluator chooses the most disadvantageous method for minorities and which has no business logic for a company that, in recent years, has been selling from hotels", is the opinion of investor Dan Segal.

In April last year, THR-Marea Neagră sold the Venus complex in Eforie Nord for four million euros and put up for sale other accommodation and catering units in seaside resorts, according to BVB reports. Also, following auctions held in January last year, the assets of Grup Gospodăresc Eforie and Ateliere from Eforie Nord, as well as Grup Gospodăresc Jupiter, were sold, according to documents of the company published on its own website.

Investors who owned almost 48.8 million EFO shares, equivalent to 8.46% of the company's capital, exercised their right to withdraw from THR Marea Neagră, at the price of 0.4414 lei per share, the money to be paid by on April 12 of this year, according to information from BVB.

At the end of last year, Transilvania Investments had 78.8% of the company, a holding that decreases with the transfer of the assets included in the division to Hoteluri Restaurante Sud. In addition to the former SIF Transilvania, Mamaia North and Consulting & Construction are also shareholders in the new company.