CompuGroup Medical SE & Co. KGaA (COP) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining today's conference call on a short notice. As you have seen this morning, we have announced an investment agreement with CVC Capital Partners. In the context of this envisaged partnership, CVC has announced the intention to launch a voluntary public tender offer for all outstanding shares of CompuGroup Medical. In today's call, our CFO, Daniela Hommel, will guide you through the rationale and key details of the announcement. Her presentation will be followed by a question-and-answer session. Before I hand over to Daniela, I'd like to draw your attention to the disclaimer on this slide. The presentation contains forward-looking statements, which involve risks and uncertainties. These statements are based on assumptions that may change over time, and actual results could differ from what is discussed today. Please refer to this slide, and obviously, to the tender offer document once it is published for additional information. And now I would like to give the floor to our CFO, Daniela Hommel. Daniela, over to you.

Thank you, Claudia, and also a warm welcome, and thank you from my side, for joining this call. I would like to start with a brief overview of the transaction. To start with, CompuGroup Medical is entering into an investment agreement with CVC Capital Partners. We, the Managing Directors as well as the Administrative Board and the Supervisory Board welcome the strategic partnership with CVC, subject to our review of the offer document to be published by CVC. CVC has announced the intention to launch a voluntary public tender offer to all outstanding shareholders at a price of EUR 22 per share in cash. The successful completion of the public tender offer is the precondition for the envisaged partnership. After completing the public tender offer, the intention is to take CGM private through a delisting offer. The offer price represents a significant premium of 51% compared to the 3 months volume weighted average share price as of December 6, 2024. CGM will remain a family-owned business with the founding family Gotthardt and related shareholder, Dr. Reinhard Koop, retaining their 50.1% shareholding. The tender offer is subject to a minimum acceptance threshold of 17% and regulatory conditions, including antitrust clearance. So much for the facts for today's announcement, but let's take a step back and look at the bigger picture. For more than 30 years, CompuGroup Medical has been contributing to the digitization of health care. We developed software that streamlines medical and administrative processes for health care providers, including electronic communication with patients. This not only gives providers more time for their services and thus more time for patients. It also provides health care professionals and patients with helpful medical information that benefits everyone in the health care system, anytime, anywhere. Our customer focus has always been strong, and we are continuing to strengthen it further through targeted investments. In this context, CGM has been writing an impressive success story for more than 30 years, always in line with our purpose as defined by our founder, Frank Gotthardt. Nobody should suffer or die because at some point, medical information was missing. We serve a unique customer base in health care, a sector which has seen accelerating change momentum given shortage of skilled professionals, democratic shifts and rising cost pressures for medical practices, hospitals and pharmacies. That is where CGM products come in. The demand for innovative digital tools represents enormous growth potential, but realizing this opportunity requires sustained and significant investment. To deliver against our purpose, we are determined to continue investing on a high level going forward. CVC is fully committed to support our strategy of innovation and growth in the envisaged partnership. With CVC's deep health care and software expertise, strong commitment and global network, this potential partnership could provide the support and the resources to catalyze the next phase of innovation, growth and transformation in health care. The envisaged partnership is fully aligned with our existing strategy as initiated by our CEO, Professor Dr. Daniel Gotthardt since September and is driven by the whole CGM team. We continue to focus on operational excellence. We need to become faster, more efficient, more transparent. This is and will remain an all-encompassing initiative at CGM with enormous potential to improve processes, tools and way of working, crucial to unleash our full strength. The second priority is synchronizing our products in order to make health care more efficient and effective. And the third topic is the development of a digital copilot to best support health care professionals around the world. This is pivotal to enable health care professionals to make informed decisions, streamline workflows and improve patient outcomes. Our potential partner, CVC, is fully aligned and supports our strategic priorities, which will require further investments going forward. Let's take a closer look at the details of the partnership. CVC, GT1 Vermögensverwaltung GmbH, which is our largest single shareholder and controlled by Frank Gotthardt and CGM have signed an investment agreement. All 3 partners are fully committed to our existing strategy focused on innovation and growth. As mentioned before, the Gotthardt family and Dr. Koop will retain their 50.1% majority stake. As a result, CGM will remain a family-owned business. CVC is one of the world's leading private equity firms and has extensive experience partnering with family-backed companies and entrepreneurs, also taking minority positions. Our governance is not going to change. Frank Gotthardt will remain Chairman of the Administrative Board and Professor Dr. Daniel Gotthardt will remain CEO of CGM and member of the Administrative Board. Also, the parties have agreed not to enter into a nomination or profit and loss transfer agreement for a period of 2 years after the closing of the offer. The joint goal in case of a successful tender offer is to reliably empower medical professionals with next-generation products and strong customer support. As I said before, the strategic partnership is subject to the successful closing of the public tender offer, which again depends on a minimum threshold of 17%. Now let's move on to the perspective of our shareholders. The tender offer price of EUR 22 represents a significant premium of 51.1% to the 3 months volume weighted average price and a premium of 33.5% over the closing price as of December 6, 2024. The offer price also exceeds the average broker target price of EUR 20. The offer gives CGM shareholders the opportunity to realize immediate and secure cash value without the risk associated with ongoing investments and industry uncertainties. CVC intends to pursue a delisting as soon as legally possible. As mentioned before, the parties have agreed to not intend to enter into a domination or profit transfer agreement for a period of 2 years after the closing of the offer. Unlike a strategic buyer, there will be no upside from integration measures or synergies. The Managing Directors, the Administrative Board and the Supervisory Board of CGM, welcome these offers and subject to review of the offer documentation, intend to recommend that shareholders accept the offer. Finally, let's outline the next steps. Today, we have announced the investment agreement and intended voluntary public tender offer by CVC. The tender offer document will be filed with BaFin shortly. Within the next few weeks, the offer document is to be published and CGM's Management and Supervisory Board will issue their statements. The acceptance period for the offer will likely begin at the end of December and last for 5 weeks. The offer meets the minimum acceptance threshold -- if the offer meets the minimum acceptance threshold and regulatory approvals are obtained, we expect to close the transition in the first half of 2025. We will keep you updated throughout the process. Now let me hand back over to the operator for any questions.

[Operator Instructions] Our first question comes from Knut Woller from Baader Bank.

While I understand all the talk about the premium compared to the weighted 3-month average share price, I think looking at historical valuation, the offer looks quite unattractive. So I want to get a better understanding, Daniela, regarding the invest required that you see and also regarding the growth and margin levels that you have factored into this consideration of the strategic partnership.

Many thanks, Knut, for your questions. What I can say is that our current business plan, as usual, has been the basis for the fair value, fairness opinions that we have obtained and that fairness opinions provided that, that share price that is offers is fair, and that was the basis for our decision or our intended decision. Our business plan, I think we never provide transparency on that one, but it's for these calls. I provided that you in the Q3 call, a lot of information of where we want to invest, how we deal with AI, and that is basically the road that we are going.

Okay. Got it. And the current construction basically will grant the upside to the founding family that remains a shareholder. But then if the strategy is successful, then the investors that accept the offer, they are basically left out in this kind of deal. That's the way how it works, right?

So everybody who tenders today can get a significant upside to the share price that was relevant on December. The Gotthardt stay and bear the operational risks. And shareholders that do not want to tender, I think that's their decision, how they evaluate whether the premium is attractive enough or whether they want to stay.

The next question comes from Florian Treisch from Kepler Cheuvreux.