V-Zug Spin-Off: Possible Preparation For Sale To Chinese Giants

18 September, 2020

In March of 2020, Electrolux completed a spin-off of Electrolux Professional, its Professional Products unit.

In January of 2020, Philips announced that it plans to sell its Domestic Appliances business. More recently it was reported that Philips has reached out to a number of companies, among them Chinese Haier Group and Midea Group, as well as private equity firms.

We think that recent spin-off of Swiss high-quality and premium household appliances manufacturer V-Zug Holding AG is part of the same trend and that V-Zug could be an attractive acquisition target.

V-Zug current market capitalization is CHF 479 mil, net cash is CHF 65 mil and Enterprise Value is CHF 414 mil. Company is currently valued at an EV/EBITDA valuation multiple of x7.2.

Philips division, according to reports, could fetch as much as $4 bil which reflects a x1.5 Price/Sales valuation multiple. Applying similar metric to V-Zug would value the company at CHF 137 per share. This would reflect an EV/EBITDA valuation multiple of x14 based on company’s FY 2019 results.

We think that this is not unreasonable given company’s resilient results during H1 of 2020 and significant growth potential in international markets.