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BCA Marketplace PLC

BCA Marketplace PLC Approach from Apax Partners

Zeus Capital note the announcement made towards BCA Marketplace PLC (LON:BCA) this morning regarding a preliminary conditional approach from Apax Partners LLP on the 9th May and an all cash offer for the company at 200p per share and confirming that the board of BCA has rejected this proposal. In our view, this bid undervalues BCA’s current prospects. We believe BCA continues to offer an attractive mix of organic and income growth as it continues to leverage its unique market position on a Pan European basis executed by a proven management team.

Bid approach: We note the bid approach for BCA from Apax Partners for 200p on 9th May, which was carefully considered but rejected, the share price on that day was 193p. We understand Apax has until 8th July to make a firm offer or not. In the meantime, BCA will be reporting Final Results on 28th June, and have already indicated that they are trading ahead of market expectations at that time with net debt lower than our own and market forecasts.

Our thoughts on the bid: We have covered BCA since inception, and believe the current offer undervalues its prospects. We have always believed BCA offers critical infrastructure to the automotive market across Europe, and is therefore a desirable asset that should deliver >10% organic EPS growth for the foreseeable future. We also note the acquisitions BCA has made since IPO in (investing a cumulative c.£300m in Paragon Automotive, Ambrosetti and SMA vehicle remarketing) since 2015 to enhance this service. A Chief Digital Officer was also appointed last year, and we would expect to see the benefits of its BCA Dealer Pro product come through. In addition, we have also seen strong momentum in UK Buyer Finance, which is a >40% EBITDA margin business according to our estimates. WBAC continues to deliver attractive growth in a controlled manner with an increasing premium mix coming thorough, increasing revenue per vehicle and improving margins. We continue to believe the growth potential is significant from here across all divisions, with potential for further strategic acquisitions.

Valuation: Our current DCF model points towards a NPV of £2.3bn, which drives a valuation approaching 258p per share as per our last research note, albeit we will review our assumptions in detail post results. We believe this bid undervalues BCA and continue to see the company as attractive critical infrastructure as it now touches over 3.5m vehicles in the UK supply chain alone, and would expect to see continued growth under most post Brexit scenarios. Overall, we believe BCA continues to offer an attractive mix of organic and income growth as it continues to leverage its unique market position on a Pan European basis executed by a proven management team.