Delticom offered shares as part of Tirendo deal
Following on from the news that Delticom AG purchased fast-growing online tyre retailer Tirendo on 17 September, Delticom executives have also revealed that company’s founders and main shareholders Rainer Binder and Andreas Pruefer also sold around 500,000 Delticom shares to a subsidiary of European Media Holding AG (EMH), which itself is a founding shareholder of Tirendo. In addition EMH was granted options to purchase up to a further 1.6 million shares. Apart from increasing the apparent combined value Delticom attributed to Tirendo, it is also likely to have consequential effects on market pricing.
Deutsche Bank analysts explained the connection in an investor’s note dated 18 September: “We understand this share transaction comes on top of the 50 million euros paid in cash and that the exercising of the options depends on specific, non-disclosed conditions with the average price of those stocks already sold and the options being between 34-40 euros.”
What all this means is that, if the share purchase option is executed in its entirety, the combined Binder/Pruefer ownership stake would fall to around 35 per cent from roughly 55 per cent at the moment.
“In our view, [the share purchase options] significantly increase the attractiveness of the former Tirendo shareholders given the ability to purchase up to almost 20 per cent of the overall market leader’s outstanding shares at a decent discount to current trading levels and after a period of a significant share price decline over the past year,” the Deutsche Bank analysts continued.
Price pressure a tyre market ripple effect
However in addition to these corporation level consequences there are likely to be market level ripple effects too: “We believe the ad-hoc details support our initially stressed view. This deal likely secures Delticom know-how from a well experienced team of online professionals and could help to stabilize pricing in the short-term.”
The biggest potential problem appears to be the fact that other companies “could feel encouraged by the fact the market leader buys out a much smaller but very aggressive competitor only 1.5 years in operation with such an attractive deal” and that this could persuade them to pressurise already threadbare online tyre margins, thus putting more pressure on price in the tyre market in general the medium-term.