Dufry and Autogrill Merger: Story Structure In European Event-Driven Equities

11 July, 2022

Story Structure

Best investments are just like good stories or movies: with a three-part story structure (complication, development, resolution), important turning points, intrigue, drama, and surprises.

Strictly analytical approach to investment management does not provide us with tools for dealing with uncertainty.

The closed and fixed form of analytics leaves no place for imagination.

And without imagination, we are just not capable of fathoming uncertainty, fathoming the future.

Narrative, by its nature, allows us to understand the time dimension better: order of events, their length, and different time periods.

For example, George Soros, in his book “Alchemy of Finance” describes how he analyzed certain investment situations.

In order to see the big picture and analyze the case he uses terms borrowed from the world of literature, movies, and theatre. He calls the overall cycle “scenario” and different stages of the cycle “act one”, “act two”, “act three”, “act four”, and puts an emphasis on main “actors”: the shareholders.

I think that the use of such terms is not a coincidence: it serves well the purpose of looking at how the situation develops over time.

M&A Situations

Some M&A transactions present opportunity to develop a good investment thesis.

Large merger is an important, transformative corporate event.

It can change investment thesis and story of a company.

It just takes time for company’s story structure to develop and for share prices to reflect fundamental changes and developments.

As a result of this, shares can decline or trade sideways despite the fact that transaction has great fundamental logic and benefits for shareholders.

All of this creates opportunities for investors. After a certain period of time, it is easier to take a step back and look at the company’s story and story structure.


The covid period certainly was not easy for the entertainment, travel, and restaurants industries.

Today, July 11th, 2022, Dufry announced that it will merge with Autogrill to create a new, integrated global Travel Experience player.

As a result of a transaction, Autogrill’s controlling shareholder Edizione will become a major shareholder in the combined entity.

The combined company will have a market capitalization of approximately CHF 5,015 million (based on Dufry’s recent share price of CHF 33.07 and assuming the acquisition will consist of a 100% stock component).

Net debt (excluding leases) is estimated to be CHF 3,378 million, making an Enterprise Value of about CHF 8,393 million.

Based on Dufry’s presentation, the combined company had a FY 2021 EBITDA of CHF 595 million. This means that based on current Dufry’s share price the combined company is valued at an EV/EBITDA valuation multiple of x14.1.

The essential story and investment thesis both companies “request” investors will buy is the recovery of the travel industry post covid.

Based on the same presentation, the combined company is estimated to have combined pro-forma FY 2019 revenues of CHF 13.6 billion and an EBITDA of CHF 1.4 billion.

This, of course, makes it much more attractive valuation-wise: based on these numbers the combined company is currently valued at an EV/EBITDA valuation multiple of x5.97.

This of course might be attractive, but the question is how responsible such a step is given a very hard covid period. Yes, the recovery story might very well play out, but do you want to invest in a company where management is taking rather aggressive steps. They cannot leverage it anymore, so they do it through a merger. By the principle “In for a penny, in for a pound”.