Net Asset Value

NAV Methodology as of December 31, 2023

Listed and unlisted investments are valued according to IPEV guidelines.

1. Listed equity investments

Listed investments are valued based on the average closing price for the 20 trading days prior to the valuation date.

2. Valuation of buy-out unlisted investments

The preferred method for valuing unlisted investments is comparison with the multiples of listed peers. The latter valuation is corroborated by other valuation datapoints (transactions multiples, income approach valuation like Discounted Cash Flows, other valuation methods or indicative offer). If valuation by listed peer-group multiples significantly differs from other valuation datapoints, the sample is adjusted, or a non-representative year is discarded, or non-representative aggregates are discarded, or another method can be used (see below for more detail).

Valuation by listed peer-group multiples

The value of the equity of the companies in Wendel’s portfolio is determined as their enterprise value minus net financial debt of investments (gross face value of debt plus provisions for pensions booked in the balance sheet less cash) appearing in the most recent financial statements.

If net debt exceeds the enterprise value, the value of equity remains at zero if the debt is without recourse to Wendel.

Wendel’s percentage ownership is determined by the features of the equity instruments held by the Group, non-controlling interests and co-investor managers, if any (see note 5 “Participation of management teams in the Group’s investments” to the consolidated financial statements).

Enterprise Value is obtained by multiplying measures of each company’s earnings by stock-market multiples of listed peers.

The measures of earnings most often used in the calculation are recurring EBITDA (earnings before interest, taxes, depreciation and amortization) and recurring EBIT (before goodwill). The choice of earnings measures used can be adjusted depending on the sector in which the subsidiary operates or its business model. In this case, Wendel publishes an explanation for the adjustment. The enterprise value corresponds to the average of the values calculated using EBITDA and EBIT of two reference periods: the previous year and the budget (or budget update) for the current year. However, the previous year can be ignored if a change in financial performance and/or market conditions in the current year make the previous year irrelevant.

For NAV calculated at the same date as the closure of accounts, the budget for the coming year being available, the calculation is based on the latest estimate for the year just ended (or actual data if available) and the budget for the coming year.

Stock-market multiples of listed peers are obtained by dividing their enterprise value by their realized or expected EBITDA or EBIT for the reference periods, or in the case of fiscal years that are different from the calendar year, the closest fiscal year.

Enterprise value of listed peers is obtained by adding market capitalization (the average closing price over the last 20 trading days) and net financial debt (gross face value of debt plus pensions booked in balance sheet less cash) at the same (or similar) date as that applied to the net debt of the company being valued.

Listed peers are chosen based on independent data and studies, information available from Wendel’s portfolio companies, and research carried out by Wendel’s investment team. Certain peers can be more heavily weighted if their characteristics are more relevant to those of the company being valued than the other companies in the sample.

The peer group remains stable over time. It is adjusted when a company is no longer comparable (in which case it is removed from the peer group) or when a company is newly considered as belonging to the peer group for the investment being valued.

Non-representative multiples are excluded from the peer group, such as during public tender offers or any other exceptional circumstance affecting the measures of income or the share price, or when reliable information is not available.

The data, analyses, forecasts, or consensus values used are based on information available as of the date of the NAV calculation. If actual data are available when the calculation is made, then they are used as a priority. For portfolio companies, as for peers, the EBITDA, EBIT and net debt figures used are adjusted for significant acquisitions or asset sales.

Significant non-controlling interests in portfolio companies are excluded from the portion of the equity value attributed to the Group.

Calibration

As per IPEV recommendation, when the average multiple of the selected peer sample displays a significant gap when compared to the acquisition multiple as of the acquisition date, this gap needs to be analyzed and understood (higher growth rate and margins, higher cash generation, better risk profile, better ESG roadmap, better geographic exposure etc., consistent with the investment rationale).

If the analysis concludes that this gap is long lasting, Enterprise Value can be calibrated using an adjustment coefficient to bridge the gap between listed peers’ multiples and acquisition multiples. This coefficient is calculated based on quantitative analysis, multicriteria approach and relevant KPIs. This coefficient is then applied to the average multiple of the listed peers sample.

The adjustment coefficient is calculated at acquisition and carried forward at each NAV date, at which its relevance is systematically reassessed. The coefficient may only be adjusted in case of a major event such as, but not limited to, a significant discrepancy in the achievement of the acquisition plan’s objectives, a significant change in risk/ performance of the peers and the underlying asset, or a major change in the peer group or market conditions.

If the coefficient needs to be adjusted over time, then it is adjusted using the same analysis and relevant parameters defined at acquisition.

The coefficient can never go beyond its initial value calculated at acquisition.

Valuation by transaction multiples

Transaction multiples may be used when the transaction involves a company whose profile and business are like those of the company being valued. In this case, reliable information must be available on the transaction, with sufficient and explicit details, so that there is a minimum of ambiguity regarding the transaction implied multiples. In some cases, the multiple used to value an investment will be an average, whether weighted or not, of the peer group multiple and the transaction multiple. If used, the transaction multiple is applied for a period of six months.

Valuation by Discounted Cash Flow

Discounted Cash Flows may be used if the valuation by listed peer multiples cannot be implemented or is deemed irrelevant.

The present value of the cash flows is derived from the Investment using reasonable assumptions and estimations of expected future cash flows, the terminal value or maturity amount, date, and the appropriate risk-adjusted discount rate that captures the risk inherent embedded in the cashflows.

Other methods

If a valuation by peer-group comparison is not relevant, other methods may be used, depending on the nature of the business, the characteristics of the asset and market practices. These include expert appraisals, sum of the parts, and other methods.

Purchase offers

Purchase offers received for unlisted investments may be considered if they are firm, fully financed, and have minimal conditionality, as well as a high probability of being accepted. In this case, Wendel uses the average, either weighted or not, of the internal valuation and the purchase price offered.

Relative weight can be based on the specific terms of the offer. The price of a purchase offer is applied as long as this offer is relevant and no significant change occurs in the company’s operational performance, the company’s environment and/or the Private Equity market. A purchase offer is considered if received prior to the date of the Executive Board approval of the NAV.

Price of dilutive or accretive capital transactions

To the extent justified by the circumstances, if the price of a capital transaction that has a significant dilutive or accretive effect, overall or on certain shareholders, implies a transaction multiple with a significant gap to comparable listed peers, then this capital transaction can trigger the use of Calibration to value the entire asset (see above).

These transactions are considered in the NAV if a firm commitment was signed prior to the date of the Executive Board approval of the NAV.

The principle of valuation at the price paid is not applied in the event Wendel, or any other shareholder, exercises an option to acquire shares or subscribe to a capital increase at an exercise price set based on a situation that pre-dates the exercise.

3. Valuation of direct growth investments

Direct Growth Investments in equity are to be valued based on the amount exteriorized by the last funding round considering the relevant adjustments to reflect the potential differences in the class equity subject to the valuation and their associated specific rights and preferences compared to the equity instruments subject to the last round of financing.

In the event of an indication of potential loss in value, a multicriteria valuation is performed. When such a valuation results in a lower value than what was exteriorized by the last round of financing, the value of the investment is adjusted downward accordingly.

At each valuation date, as per IPEV recommendations, other methods can be used depending on circumstances, the achievement of selected milestones or the horizon of the exit, leading to the valuation being revised upward or downward.

Investments in fixed interest rate instruments (quasi-equity or debt) are valued based on a yield method to derive a fair value and confirm or adjust the face value of the subject instrument.

This method persists until the underlying investment is considered “mature”, in which case the methodology described in section 2 – Valuation of buy-out unlisted investments – applies. Direct Growth Investments are considered mature when they achieve two consecutive profitable fiscal years or when profitability is in line with identified listed peers.

4. Investments in funds

Investments in funds are valued at the last valuation received from the General Partner, subject to adjustments when deemed relevant.

Reported NAV provided by the General Partner can be used as a starting point to determine the Fair Value of the Fund interest to the extent that the NAV is appropriately derived from the Fair Value of the underlying investments determined in accordance with the principles of Fair Value estimation.

As per IPEV recommendations, adjustments may be required depending on circumstances.

5. Cash

The cash of Wendel and its holding companies includes available cash at the valuation date (including liquid financial investments) and pledged cash.

6. Financial debt

Financial debt (Wendel’s bond debt and syndicated loan outstanding) is valued at its face value plus accrued interest.

For the purposes of the calculation, financial debt is valued at face value, which is not affected by changes in interest rates or credit quality. Accordingly, interest-rate swaps are not valued at their market value, as the swaps are treated as part of the debt.

7. Other NAV components

Current assets and liabilities are considered at their net book value or their market value, depending on their nature, i.e. at face value, less any impairment, in the case of receivables, and at market value in the case of derivatives, except for interest-rate swaps. Real estate is valued based on appraisals carried out at regular intervals. The effect of FX hedge mechanisms is reported at spot value as of the valuation date.

Shares held in treasury and earmarked for sale upon the exercise of stock options are valued at the lower of the strike price of the options or the average price of the shares over the last 20 trading days. Shares held to cover performance share plans are valued at zero. Other shares held in treasury are valued at the average price over the last 20 trading days.

A liability is considered for subscription stock option plans when the stock price exceeds the strike price.

As NAV is a short-term valuation of the Group’s assets, Wendel’s future operating expenses do not enter the calculation. Similarly, future tax effects are not included so long as the sale price of an investment and the form of the sale (especially the tax consequences) are not both known and certain.

The number of Wendel shares considered in the calculation of NAV per share is the total number of shares composing Wendel’s equity at the valuation date.

Assets and liabilities denominated in a foreign currency are converted at the exchange rate prevailing on the date of the NAV calculation. If several exchange rates exist, the rate used for the preparation of the consolidated financial statements is applied.

Some aspects of the method described above may be amended if such a change produces a more faithful valuation. Any such changes would be announced by Wendel.