ETR:DAI Daimler AG soon to be Mercedes-Benz

Look like the trucks division will be floating around €35bn. DAI right now is trading at €71bn so a roughly half split, shareholders likely to get 1 trucks share for every DAI they hold? What do people think happens to the DAI price afterwards?

From the official statement:

Significant majority stake to be distributed to current Daimler shareholders

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I am quite interested in this.

It will be interesting to see the individual accounts when they split them, I don´t know how they will be splitting the debt. I will be monitoring this one, I may buy shares before the split (to get both) of after. I am currently mainly interested in the truck division, but I guess it also depoends on things such as how they split the debt. Also, I have not looked at what the actual revenues and profits of the two divisions are.

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Not sure if 212 supports receiving shares from this sort of arrangement. I am sure I’ve read before that you just get the cash equivalent as if the new shares were sold.

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Yes, I believbe that is the case.
However, I have not seen a date for the split, so I imagine that it will be in at least 6 months time, so hopefully by then T212 support getting shares from split offs and scrip dividends.
It might be wishful thinking though, but the team have achieved quite a lot in just the last year, so maybe :slight_smile:

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I hope that they can. I will be in the same situation as you when GSK splits itself into two companies.

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In 2019 Cars/Vans Revenue was €108.7bn with €250m EBIT, Trucks/Bus Revenue was €44.2bn with €2.7bn EBIT. There’s also €28.6bn in sales with €2.1bn in the mobility division which is supposed to be split evenly but some of that ride sharing stuff that is probably going to be abandoned. Trucks has better margins usually but has rebounded way slower than cars so far, and will also have higher R&D costs related to electrification/hydrogen than autos.

I also don’t understand why they can’t just institute this, don’t they hold our shares under nominee anyway? How hard can it really be when every other broker does it.

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Thank you for the numbers.

Also, according to the information on the T212 app, Daimler invested 6.55 billion Euros in Research and Development in 2019.

https://www.bloomberg.com/news/articles/2021-05-20/daimler-showcases-the-truckmaking-behemoth-it-will-soon-spin-off

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Thanks for sharing.

Have they announced at any point when they are aiming to spin it off?

By end of the year afaik.

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Wanted to take a look at what the near future looks like for Daimler, and what the upcoming spin-off will do to the stock price.

EBIT is Daimler’s preferred profitability metric, so I will use that going forward.

Mercedes-Benz AG

After the Trucks and Buses division is separated, Daimler will change its name to Mercedes-Benz. Daimler AG’s trailing EV/EBIT has hovered between a 12-30 multiple, spiking during recessions as visible below. Mercedes Benz Cars & Vans TTM EBIT is €13.3b, and this is expected to increase as the recovery continues.

Mobility

This division includes all the financing operations of the companies, as well as other smaller ventures such as rental and ride-sharing.

In a recent earnings call, Daimler reiterated that:

Contract volume decreased, but we continue to finance or lease half of the vehicles we sell.

That gives a good indication of the split here, and I estimate approximately ~€600m of the financing EBIT will be allocated to Daimler Truck, and the other €2.3b left with MB.

That gives a total operational EBIT of €15.6b for Mercedes Benz AG, and roughly €1.6b EBIT for what will trade as Daimler Truck AG. The improving results in this division is making the target of a €30b+ float achievable as rivals such as Traton, Volvo and PACCAR trade at similar multiples, DT has a commanding share of the market, and will likely have in excess of €2b TTM EBIT by the time of the offering.

Debt

From the Q2 release:

Financing liabilities of €142.6 billion were below the level of 31 December 2020 (€145.8 billion). Adjusted for exchange-rate effects, there was a decrease of €5.4 billion, mainly due to the lower refinancing requirement from the leasing and sales financing business. 52% of the financing liabilities relate to notes and bonds, 21% to liabilities to banks,13% to liabilities from ABS transactions and 10% to deposits in the direct banking business

The debt is supposed to be split according to the two businesses. The banking business will stay within MB, and given Car & Van is roughly three times the size of Truck, assuming equal leverage, about €32b liabilities will be transferred to Truck and Mercedes’ debt will reduce to c. €110b. Note proceeds of the IPO will at least partially be used to reduce this and liabilities seem to be reducing QoQ so this is very much a high tide.

Minority stake

Assuming Daimler Truck retains the current Daimler payout policy of 40% of net profit, there would be roughly €600m available for distribution to all DT shareholders. If MB retained a 5% stake, that would equate to a €30m dividend. It is likely this stake would be higher but this is still a largely immaterial addition to overall EBIT until profits were to return to historical levels and MB’s stake was closer to double digits in which case this would start to add several hundred million euros to Mercedes-Benz’s bottom line.

Price target

This gives a pro forma EV of €161-444b (and a base EV of €62b for Daimler Truck). The nearest comparative is BMW, which has tended to trade at a 15x EV/EBIT multiple, however Daimler has higher margins, and this gap will increase post-spin. So it is likely the price will appreciate toward the higher of that range, towards the likes of Ferrari. This values the equity between €51 and €334b, or roughly €48-312 per share. This does not include Mercedes’ future stake in Daimler Truck expected to be worth at least €1.5b at 5%. Shareholders will then also receive a “significant majority stake” in Daimler Truck. 50% of a conservative float of €30b is €15b. I believe Daimler will be targeting at least 55% and a float of €35b or more considering the strength of the commercial vehicle market - remember also the bigger the stake they can sell the lower DT’s enterprise value will be, boosting the equity value. Essentially shareholders are about to receive at absolute minimum €66b of equity value, almost definitely more than €70b and possibly much more, and with DAI’s market cap rising from around €57b at the start of the year to €80b, it’s clear the market is aware of this. However buying in now simply for the distribution is probably unwise as that has been priced.