SKAGEN Focus has had an October boost with news that Vitesco Technologies, a 1.6% holding in our global small and mid-cap fund, has received a bid from compatriot Schaeffler AG. The cash offer of €91 per share represents a 20% premium for shareholders in the electric vehicle (EV) component specialist. This week the Vitesco Board said that it was evaluating the bid which values the company at €3.6bn and would see it merged into the Bavarian car parts maker.
Holding companies controlled by the billionaire Schaeffler family already own 49.9% of Vitesco making it unlikely that any rival bidders will emerge. The deal is expected to close by January 2024 and Vitesco shares are currently trading at the offer price.
SKAGEN Focus has been a shareholder in Vitesco since it was spun off from Continental AG in 2021. It is the fund’s top contributor in 2023 – helped by Schaeffler’s offer announcement, Vitesco’s shares are up 60% this year – as the market has begun to understand the company’s vast order book. Combustion-engine components currently provide the majority of Vitesco’s business, but it has collected new orders mainly for its electric-drive division as car makers increasingly switch to EV production.
Spin-offs have been a lucrative hunting ground for SKAGEN Focus in recent years with unwanted business units or assets often available at bargain prices. In addition to Vitesco, unitholders have benefitted from our holdings in Accelleron, a Swiss-based turbocharger producer spun off from ABB, and the Italian truck maker Iveco sold by CNHI Industrial, with both companies delivering significant shareholder value.
The Vitesco bid is also the latest in a long line of M&A successes that stem from the portfolio managers’ private equity-based approach to valuation which has led them to attractive small-cap companies. Three holdings (Stagecoach, First Horizon and Albertsons) were taken over last year at generous premiums, following six portfolio acquisitions in 2021, generating huge gains for Focus unitholders in the process.
You can find out more about the fund's recent activity as well as the team’s thoughts on the equity market outlook more generally by watching our latest webinar.
NB: All information as at 30/09/2023 unless stated.
 As at 20 October 2023.