Rexel’s Largest Holder Cevian Backs Firm in Spurning QXO Bid

(Bloomberg) -- Activist investor Cevian Capital AB — Rexel SA’s largest shareholder — supported the French electrical equipment supplier’s decision to rebuff an unsolicited takeover attempt from billionaire Brad Jacobs’ QXO Inc., saying the bid undervalued the company. 

Rexel on Sunday said its board rejected QXO’s non-binding bid of €28 to €28.40 per share on the grounds that it “significantly undervalues” the company. Cevian Managing Partner Christer Gardell said Monday that Rexel has a strong outlook for further value creation, backed by trends such as electrification, energy efficiency, reshoring and automation as well as consolidation opportunities. 

“We support the decision of the Rexel board to reject QXO’s proposal,” Gardell said in a written statement to Bloomberg News, adding that QXO’s indicative bid “fails to reflect the value of Rexel.”

Rexel distributes electrical products and other equipment across industries ranging from utilities to builders and automobiles. Its shares were up 9.1% to €25.05 at the close Monday in Paris, valuing the firm at €7.6 billion ($8.4 billion). 

Cevian first invested in the company in 2016 and now owns a 23% stake, according to data compiled by Bloomberg. Marcus Alexanderson, a partner at Cevian, sits on Rexel’s board.

QXO, founded by serial company-builder Brad Jacobs, aims to become a leader in building products distribution through acquiring and rolling up existing players in the industry. Jacobs followed a similar playbook to build companies including United Rentals Inc. and XPO Inc. Shares of QXO dropped as much as 9.5% on Monday in their biggest intraday decline in almost seven weeks. The company has a market value of about $5.5 billion.

Some analysts said Rexel management was right to reject what they see a lowball bid. Rexel is “worth more” as the company has changed and is well-positioned to capture energy-transition trends, according to CIC Market Solutions analyst Eric Lemarie.

“We see significant runway for growth at Rexel, both organically and through M&A, especially in the US, and we think that Rexel is well positioned to capitalize on this growth,” Citigroup Inc. analyst Martin Wilkie wrote in a note to clients. QXO’s bid gives the company an enterprise value of about 9.2 times its earnings before interest, taxes, depreciation and amortization, while a valuation at more than 10 times could be justified, he said.

Cevian manages a portfolio of ownership positions in 10 to 15 publicly-listed European companies at a time, according to its website. It’s usually the largest or the second largest owner of its portfolio companies and often remains invested for more than five years.

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