NAV Methodology as of December 31, 2020
NAV is a short-term valuation of the Group’s assets. It does not take into account any control premiums, illiquidity or initial public offering discounts; similarly, aggregates used in the valuation of unlisted assets are not adjusted from potential additional costs arising from a stock market listing.
1. Listed equity investments
Listed investments are valued on the basis of the average closing price of the 20 trading days prior to the valuation date.
2. Valuation of unlisted investments
Valuation following an acquisition
New, unlisted investments are valued through a weighted average of the current year multiples implied by the deal and valuation by listed peer-group multiples (cf. next section of the methodology) over a period of eighteen months.
On the first NAV following the acquisition Valuation is weighted at 100% on acquisition multiples and 0% on listed peer-group multiples.
The weight of the acquisition multiples linearly decreases to 0% over eighteen months. The weight of the listed peer-group multiples linearly increases to 100% over eighteen months.
Valuation by listed peer-group multiples
The preferred method for valuing unlisted investments is comparison with the multiples of comparable listed companies.
The value of shareholders’ 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 pensions booked in balance sheet less cash) appearing in the most recent financial statements.
If net debt exceeds enterprise value, the value of shareholders’ 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 Wendel, non-controlling interests and co-investor managers, if any (see note 4 “Participation of managers in Group investments” to the consolidated financial statements).
Enterprise value is obtained by multiplying measures of each company’s earnings by stock-market multiples of similar listed companies.
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 of 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. For NAV as of December 31, the budget for the new year being available, the calculation is based on the latest estimate for the year just ended (or the actual if available) and the budget for the new year.
Stock-market multiples of comparable companies 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 the comparable companies 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.
Comparable listed companies are chosen based on independent data and studies, information available from Wendel’s subsidiaries, and research carried out by Wendel’s investment team. Certain peer-group companies can be more heavily weighted if their characteristics are closer to those of the company being valued than are those of 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 occur during takeover offers or any other exceptional circumstance affecting the measures of income or the share price, or when reliable information is missing.
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 performed, they are given priority. For portfolio companies as for peers, 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 equity value attributed to the Group.
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, in sufficient and explicit details, so that there is minimum ambiguity on the transaction implied multiples. In some cases, the multiple used to value an investment will be an average, either straight or weighted, of the peer group multiple and the transaction multiple If used, the transaction multiple is applied for a period of 6 months.
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, valuation by discounted future cash flows, sum of the parts, and other methods.
Purchase offers received for unlisted investments may be considered if they are firm, fully financed, and have minimal conditionality and as well as a high probability of being accepted. In this case, Wendel uses the average either straight or weighted 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 for a period equal to that of the said offer extended by 2 months after the expiry date of the offer. 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, the price of a capital transactions that have a significant dilutive or accretive effect, overall or on certain shareholders, can be used to value the entire related investment. In that case, the methodology employed is the same as for recent investments made by Wendel (cf. “valuation following an acquisition” section of this methodology).
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 on the basis of a situation that pre-dates the exercise.
Investments in funds
Investments in funds are valued at the last valuation received from the General Partner.
Cash of Wendel and its holding companies includes available cash at the valuation date (including liquid financial investments) and pledged cash.
4. Financial debt (non-current portion)
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.
5. 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, with the exception of interest-rate swaps. Real estate is valued on the basis of appraisals carried out at regular intervals.
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 into the calculation. Similarly, future tax effects are not included so long as the sale price of an investment and the form of the sale (in particular the tax consequences) are not both known and certain. The number of Wendel shares taken into account 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.