Is a new shining CEVA emerging?

At last it appears that CEVA is about to heave itself over the finish line that is the flotation on a public stock market, in this case the SIX Swiss Stock market in Zurich. The company has made a statement that a listing will take place in the “second quarter of 2018, subject to market conditions.”

The flotation is hoped to raise CHF1.3bn in capital for all of the equity of the business. Of course, CEVA’s total debts are considerably more than this number and this new company will emerge complete with a new tranche of senior bonds just negotiated, paying 9% and worth US$50m.

The great hope of the IPO will be that the reduced debt servicing will improve the company’s bottom-line. Still, at 9% there will be a considerable bill to pay. Nonetheless CEVA states that its new net debt to ‘adjusted’ EBITDA will be just a multiple of 3. It even plans to issue a dividend.

The ‘new’ company will have a new board structure. No longer the province of the private equity company Apollo and partner hedge funds, the new Chairman will be a Swiss lawyer, Professor Dr Rolf Watter. The present CEO, Xavier Urbain, will remain. It is unclear who else will sit on the board but the big change will presumably be that Apollo will no longer be the dominant force.

However, the statement from CEVA asserted that the “current three largest shareholders of CEVA – investment funds managed by affiliates of Capital Research and Management Company, Franklin Advisors, Inc. and Apollo Global Management LLC – will remain invested in the company after the IPO and have agreed to a lock-up period of 180 days.”

Apollo may strive to support the share price in the short-term but for a company that said in 2007 that it was aiming to sell the company after five years a longer presence on CEVA’s share register would not be welcome.

CEVA’s future is unknown. The company still has significant debts but before interest payments it has been consistently profitable, even if its “adjusted” numbers are on the optimistic side. Acquisition by another LSP is a possibility although Apollo tried this path with no luck, although it may have just been asking too high a price. The path of growth by acquisition has been demonstrably successful for DSV but the Danish company has had to work over many years to create its integration machine. Either way it is these strategic questions that have to be answered by the ‘new’ CEVA.

Source: Transport Intelligence, April 10, 2018

Author: Thomas Cullen


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