Status Update

May 20, 2021

Slides

Hello, and welcome to the Tigao Capital Conference Call. Let me now give the call over to Mr. Antoine Slevarion, Co Founder. You may begin. Thank you very much. Good evening, ladies and gentlemen. Thank you very much for attending today's call. I am Antoine Flammarion, Co Founder of TKO. I am with Matthieu Chabran, Co Founder, live from our New York office and Henri Marcoux, The Deputy Group CEO. We are very pleased to be here today to, 1st, give you an update on our AUM development during Q1 21, but also to detail an exciting news. You may have read in our press release that TKO Capital is establishing a simpler, future facing organization by regrouping its Expertise and aligning with the best industry standard with a view to unlock value for shareholder. The team and I have the pleasure to explain what we intend to do and answer any questions you may have. I'm now moving to the Slide 6. Starting with our AUM At end of March 2021, group AUM amount to €29,400,000,000 up 15 year on year and 2.9 percent in Q1. On the Asset Management side, AUM reached EUR 27,700,000,000 which is An 18% growth over the last 18 months. Since March 2020, TIKEO Capital has raised €4,200,000,000 A significant amount reflecting the solid sales momentum for our group strategies. During Q1, net new money for our Asset Management business amounted to EUR 500,000,000 which is broadly in line with previous years. No surprise there, there is nothing more than the usual seasonality that you have seen historically when looking at how our fundraising evolved during a given year. During Q1, we have also strengthened our balance sheet with, in particular, the success of the inaugural group sustainable bond issuance For a total amount of €500,000,000 maturing in March 2029. This issue of senior unsecured Sustainable bond is associated with a fixed coupon of 1.625%, the lowest ever achieved by the group And he's the 1st ever public sustainable benchmark bond issued by an alternative asset management in Europe. Reflecting our unique DNA and innovation prone mindset, TKO is proud To our pioneer, the alternative asset manager seen through this landmark transaction, once again the first ever euro denominated Public sustainable benchmark bond among the industry. I'm moving to Slide 7. Since end of March, we have been very active, and we wanted to briefly highlight some key announcements that we have made since Q1 ended. I will not go into details for each line, but maybe 2 examples. 1st, leveraging on the successful fundraising for our private equity fund dedicated Energy transition, we announced the launch of a North American private equity strategy dedicated to transforming Sorry, to transitioning to a low carbon economy with €300,000,000 of capital already committed by our balance sheet and our partner Total. 2nd, we also announced the sequential launch of 2 initiative strategies designed for retail investor Through unit linked products, 1 in private debt with MS ASF Group, the leading insurer for Health Professional and the other in private equity with CNP Insurance, Leading player in the French personal insurance market. This initiative demonstrates our strong positioning in tackling the increasing demand from military clients to access Now I would like to address the other topic We are here to discuss a very important event for the group and which sets the scene for our future developments. I'm moving to Slide 9. First of all, to understand where we are, Let's take a quick look in the mirror to understand where we come from. We founded TIKIO Capital in 2004 with Mathieu as a private company with just €1,000,000 of equity, our own savings and money from friends and family with an entrepreneurial mindset and strong ambition To build a leading player in the alternative management space. 17 years later, our ambitions I've materialized through a successful, profitable organic growth and targeted accretive acquisition. Having reached a milestone in scale, we are now a global diversified listed alternative asset manager with shy €30,000,000,000 of AUM. Our organization has provided strong support along this growth journey. But given our scale, our size and our ever growing ambitions, we believe it's the right time to adapt our organization to prepare for the next phase of profitable growth. Moving to the Slide 10. So today, we are happy to announce a new organization for TK Capital, which will not only simplify our profile, But we will also bring material financial benefit to the group, with, in particular, a new dividend policy going forward. Slide 11. In a nutshell, the current structure, which reflects the entrepreneurial roots of the group, would be replaced by a new, leaner and simpler Structure which will lead to: 1, regrouping all group employees within the listed entity 2, significantly improving TC operating costs and 3, Significantly reducing preferred dividend. To sum up, we will simplify the organization and the Financial ties between TCE and TCA. As part of this reorganization, TCA contribution will be compensated with newly issued shares. Be assured that what makes our strengths and differentiation will prevail in the new organization. A high level skin in the game, one of a kind in our industry our strong entrepreneurial corporate culture And create don't compete mindset, which drive innovation, will continue. Moving to Slide 12. The transaction we are contemplating will reinforce TCO Capital KPIs and bring significant benefit to shareholders. A simplified organization, easier to understand with all staff for groups. A cash flow improvement Of €40,000,000 in 2021 and much more over time. The return of equity Enhanced by 140 bps as early as 2021. The high single digit accretion of 2021 Adjusted earnings per share. And last but not least, as mentioned, a new dividend policy, which would, from now on, be based on the performance Of our fast growing and increasingly profitable asset management platform with a proportion to distribute going forward More than 80% of the sum of our FRE and PRE. I would add that, that would Set the floor at $0.5 per share in 2021. Finally, I am pleased to share with you that The organization has already received support for many shareholders, representing a total of 85% of the share capital Of TKO Capital, a very strong support from largest existing shareholder. I am now handing over to Mathieu. Thank you, Antoine, and good evening, everyone. Thanks for joining our Quarterly call in the context of those important announcements. As Antoine alluded to, this simplification aims at paving the way for future TKO success Through a leaner organization structure, an improved financial profile and a revised dividend policy, I will come back first On our track record and past success of this collective entrepreneurial journey, we will then look into details of this proposed transaction articulated around 2 pillars, Regroup and Reset. Finally, we will highlight how this transaction strengthens our foundation going forward, While preserving our defining values and unique DNA. So moving on to Page 14. As discussed earlier and Over the past 17 years, TKO Capital has transformed from a modest externally managed investment company at inception in 2004 Into a global listed diversified alternative asset manager with a strong and profitable growth. Let's have a look at a few figures on the next slide. Looking back at the journey, TKL has gone through an incredible growth story, combining a strong financial performance, Talent addition, geographical expansion and investment strategies innovation. At the end of March, We were managing €29,400,000,000 of assets, which is more than twice what we managed at the end of 2017, The year of our IPO. And as a data point, that is 10 times what we managed in 2013. Our partners and staff evolution has followed that trend and we have been tripling our positions between 2017 End March 2021. This very positive momentum is a reflection of a strong organic growth and a targeted accretive M and A strategy. Such achievements have positioned us today as a leading, diversified, global multi asset manager With extensive presence in major financial hubs from 5 Royale Paris based company, we are now a cross border player with offices in 12 countries across Europe, Asia and North America. Looking now at the key drivers and numbers for Management activity, Page 16. I think this slide is actually quite self explanatory. TKO has been delivering CAGOR above 40% for both our international AUM and our fee paying AUM, which are both key drivers to the business model. A very solid trend in management fee rates with no fee pressure, which is a quite unique trend in our industry and actually with Additional room for improvement, thanks to the rebalancing of our business mix. More than 50% CAGR in Asset Management Revenues, Largely driven by recurring management fees, the growth in FRE, the fee related earnings, which is the asset management profitability based solely on management fees of 126 percent between 2016 2020. This is clearly outperforming industry average. Our NOPAM, which could be defined as our asset management EBITDA and our NOPAM margin are trending clearly upwards With the scalability of our platform, it's very significant operating leverage and future carried interest, which are not yet fully contributing to profit. So once again, this track record demonstrates our ability to deliver a controlled but fast and profitable growth In the alternative asset management space. Let's dive now a bit deeper, Slide 17, into the reorganization itself. What we are proposing here today is articulated around 2 pillars, regroup and reset. We group all central corporate functions and expertise under the listed company to make things more simple to understand and reset All related parties fund flows accordingly for the benefit of TIKAYO Capital, which results in improving significantly The firm's financial profile. Let's now have a closer look Page 18 at the various Aspects of this simplification and the financial benefits for TKO Capital. First, the evolution towards an internally managed organization leading to all central corporate functions and expertise being regrouped Within the listed entity, simplicity is the keyword here. 2nd, we are looking at significant cost benefits ahead for TKO. Indeed, the management fee associated until then to the external management by TIKIO Capital Advisors and which was based on a 2% of the equity of the group Will be removed and replaced by a fixed annual compensation of €2,500,000 If we look at 2020 as a reference point for the reset of these economics, it is compelling, decreasing from a cost of almost €71,000,000 To around €21,000,000 pro form a for this new organization. Finally, the preferred dividend will also be drastically reduced From 12.5% to just 1% of TKO net income, generating a significant benefit for TKO Capital. So this transaction is clearly materially improving TIKIO Capital's financial profile. Moving on to Page 19. I think we made it pretty clear that we're implementing this reorganization with the unique objective To strengthen TikaO Capital. So practically, this reset in the fee stream I just described are Contribution made by Ticchio Capital Advisors, the group's largest shareholder, was actually the main beneficiary of these flows. So as part of this transaction, this contribution from TCA will be compensated for the issuance of approximately 39,000,000 1,000,000 new TKO Capital Shares. The terms of this transaction have been based on a multi criteria approach And validated by independent experts, which landed on the value of this contribution of approximately €1,100,000,000 And a reference value of TIKIO Capital shares of €29,500,000 This price corresponds to a 19 Percent premium to yesterday's closing price and certainly does not cap the upside and the value we see in the firm valuation. It is quite the contrary actually. We expect this contemplated simplification of the structure to meaningfully broaden our investor base And make it easier to invest in TK 0 shares. Similarly to what happened in the U. S. When some alternative asset Managers opted for the C Corp conversion. We believe that making our stock more easily investable will create a rerating over time And improve the daily liquidity. I would almost like to call it for our research analyst friends on the line tonight, The TKO C Corp moment. Incidentally and consequently to these transactions, Founders and management stake in TKO Capital will reach 56% versus 44% today. Obviously, this alignment of interest between TKO management and TKO shareholders cannot get better than that. So to summarize the key financial improvements, Page 20. First, this new organization will lead to a post tax cash flow improvement Of EUR 40,000,000 in 2021 and much more over time. 2nd, this will translate into a 140 basis points Incremental increase in TKO return on equity. Finally, we are looking at a high single digit accretion on 2021 adjusted EPS, Taking into account the anticipated financial benefits and the share issuance, so clearly and as targeted That makes this reorganization highly compelling for TK 0 shareholders. So looking forward now on Slide 21, This evolution is getting TKL ready for its next phase of growth with a future facing setup Fueled by our core drivers. 1st, a simplified organization easier to understand. We believe this simplification together with the continued strong performance will increase our ability to generate significant long term equity value For all our shareholders, our intention with all the changes we're announcing today is to make TKEO easier to understand, Buy and own, so that over time our stock reflects that. 2nd, a strong profitable growth with a model relying on a sound governance. And finally, the best in class alignment of interest reinforced by an increased management ownership, once again, second to none in this industry And the implementation of a very shareholder friendly revised dividend policy. Moving on now to Slide 22. We are definitely on track to deliver on our targets, putting us in a comfortable position to confirm our main guidance for 2022. Assets under management of more than €35,000,000,000 being today at €29,400,000,000 at the end of March. FRE, the fee related earnings to reach more than €100,000,000 the portfolio already in the range of our guidance with 66% of our portfolio investments Made up of investment in TKOFANTS and portfolio return from TKOFANTS investment aiming to reach between 10% to 15% On a run rate basis, in the midterm, the group has been delivering and is on the right track. Finally, on Slide 23, a few words on our capital allocation. Our capital allocation priorities going forward, Organic and external growth will remain unchanged. We will keep investing in TICO's funds and vehicles to leverage 3rd party AUM growth. Regarding M and A, we will selectively allocate capital to seize opportunity in acquiring new clients, expanding market shares across Existing and new geographies and expanding into new asset class to fuel growth. Having said that, this year onwards From this year onwards, we will also adapt our shareholder return policy based on the asset management business with a new shareholder friendly dividend strategy Set at a minimum of 80% of FRE and PRE with the floor at €0.50 €0.5 for 2021. As such, shareholders' interest will be fully aligned with the performance of the profitability and the scalability of the asset management platform. And with that, I hand over back to Antoine to complete this presentation. Thanks, Mathieu. Looking at the next step, I will be brief. After today's announcement, the next step will be the publication The documentation relating to the transaction, including reports from an independent expert and external appraiser. This is subject to TCA obtaining from the French market regulator, the AMF, an exemption to the obligation to file a monetary tender offer. And then the reorganization will be submitted to an extraordinary general meeting to take place On July 15, clearing the way to complete the reorganization. At this stage, We are very pleased to share with you that this reorganization has already gathered the support from shareholders owning a total Of 85 percent of the TTO Capital share capital. One last important thing, If approved by the extraordinary general meeting to take place on July 15, this transaction will be retroactively effective As of January 1. Moving to Slide 26. A simple message as a key takeaway to wrap up this call. We are looking at Simplifying, financially compelling, value unlocking evolution, which materially Strengthens TTO Capital. Thank you for your time. Happy to start taking any question We have our first caller. Our question comes from the line of Arnaud Good afternoon and congratulations on the transaction. I've got a few Firstly, you mentioned QCLA valued at 1,100,000,000 39,000,000 shares implying a value of 29.5 shares for TCA. So but the reference price in terms of the issuance of new Of new secured capital shares, it's going to be that 1.15 divided by the share price at the time the transaction closes. Is that correct? Good afternoon, Arnaud. Thanks for the question. Yes, actually, the numbers of TC shares To be issued in the context of that transaction is resulting from a parity identified between The value of the contribution from TCA and TCGP, €1,100,000,000 and a reference price of TKO Capital Share in remuneration, which has been assessed at €29.5 per share. So this ratio, which actually takes you to €39,000,000 of newly created shares, It is actually fixed and it will not depend on the share price in June or July Of TKO Capital. Maybe a few other words on that. These elements Of parity have been assessed based on a multi criteria valuation approach comparable for each part of the parity exchange. The company has been advised by Rothschild on BNP Paribas on the valuation works that have been presented actually to the independent taxpayer And to the commissaire la Fusion, and as such, the retail methodology for the valuation contribution have been mainly based on DCF. Okay. But if I take €39,000,000 to your capital shares multiplied by the current share price, I don't get to €1,100,000,000 right? Because of course, it's a different share price than your reference price. That's what's going to happen. It's actually EUR 39,000,000 new shares are going to be issued. Sorry, once again, EUR 39,000,000 New Deal share price is a ratio that's the result of a parity between the valuation of the contribution from TCA, Which has been assessed at 1.1 divided by the reference price Forticchio Capital share Assets at €29,500,000 so this €39,000,000 newly created shares is a ratio based on the work on the several the 3 independent experts That have been working on the transaction, and all their reports will be published mid June. Okay. And can you share with us since you're referencing a discounted cash flow, what cost of capital and terminal value were used? Actually, at this stage, we cannot share such information. It will be included in the report from the 3 independent that will be published and finalized mid June. These reports are not yet finalized, and they will be actually published By the 3 independent experts. Okay. I've got a few actually more if that's okay. EUR 40,000,000 I think you say you talk about a on a pro form a 2020 Basis, you're talking about externally managed cost of EUR 70,600,000 looking backwards. The 2% of energy we have is 62.9%. So I'm wondering specifically what elements I need to look at. Just trying to understand how to get to 70.6 percent? Okay. Yes. I think the difference between the 62 and the 70 is VAT, which is non deductible as far as TKO Capital is concerned. Okay. Got it. And does this transaction Affect carried interest and how it's split between the company and shareholders between the staff and the company, I suppose? Well, actually, no, you know we have a very shareholder friendly allocation of carried interest as more than 53% of carried interest are allocated to The listed perimeter, this is not at all modified. We remain with the biggest proportion among our Of listed of carrying interest allocated to the listed perimeter. Got it. And just final question. You're talking about €3,000,000 improvement in cash flows going forward for 2021. Can you give the moving parts there from the transaction, please? Well, to calculate this, this is actually quite simple. We've taken actually, we've been using the net income Based on the self styled analyst forecast for 2021, we have restated an estimated preferred dividend Using an hypothesis of 75% of the consolidated net income for statutory account And from that basis, we have actually incorporated the savings linked to the termination of the 2% charge On one hand, then we've added up the new €2,500,000 compensation for the manager. Then we've added up the cost incurred By the integration of the corporate function transferred to the listed group coming from TCA and all that actually net of tax And that all this sum actually gives you to a cash earnings benefit of a bit more than EUR 40,000,000. Perfect. Thank you very much. Thank Our next question comes from the line of Christophe Friedrich of Berenberg. When you're ready, please proceed. Yes. Good evening and thanks a lot for taking my questions. Yes. The first question will be for the this proposed new structure to be approved during the What type of maturities needed for that? I assume the 85 that you have secured so far, this should be sufficient? Yes. Well, actually, yes, we have already obtained approval from just slightly more than 85% of our current shareholder, And this is fully sufficient effectively to move forward to obtain the full approval during the mid July during the AGM that will take place, yes. And this is like a verbal commitment? Or how should we understand that support? It has been Julie documented and totally firm commitment. Okay. And then I was wondering, you're also talking about the accretion to the 2021 earnings per share. So what kind of, yes, earnings per share are you having in mind to come to that number? We are taking the 116 €1,000,000,000 of which is the net group results coming actually from the sell side analyst forecast Updated after our 2020 financial year results. Okay. That's great. And then lastly, what I'm wondering is, so we have the introduction of the 2 new managers and then the 1 Some preferred dividend and this €2,500,000 of fixed compensation. Yes, I'm just wondering like In the context of this restructuring, why did you not decide to kind of completely, yes, exclude such Type of agreements or why it's not just everything taken away, we have basically just the listed entity left. Well, Christophe, we think that the format of the Comandeat is fully adapted to our entrepreneurial history and profile. It corresponds to our entrepreneurial culture and structure that has actually allowed the group to grow significantly. And so as you know, the founders and management are by far the largest shareholder of the group, which is a strong factor of alignment of interest, Which is why we've been actually keeping such structure. And just that I fully understand that, so for Antoine and Mathieu, you will become now employees of the listed entity? Or you will basically be represented by those managers? No, Antoine and Mathieu will be directly the manager of the lessee density. And as such, they will have this compensation of €2,500,000 Per year for both Antoine and Mathieu directly. Okay. That's very clear. And then just lastly, I remember back when you announced The 2020 AUM, you are mentioning that you're currently working or thinking about targets for 2025. So just wondering how far you've come in that exercise and when we could expect to hear more about that? Well, Christophe, the current target we have provided was done in 2019. So that was prior to the COVID, I would say. We have been keeping our guidance ahead, so more than €100,000,000 of fee related earnings and over €35,000,000,000 AUM, so we have been keeping those guidance. We stick to that guidance. And hopefully, before end of 2020, We will issue a new guidance, and we will provide more outlook beforehand of 2022. First, Let us complete this reorganization and then we will move to next step. Okay. And then, please Sorry, Christophe, go ahead. That was all from my side. That was all very clear. Thank you. Thanks, Chris. I just wanted to add to this conclusion for from Henry, and it's a general comment I'd like to add that effectively it's a first step, but it's a defining step. I mean with all of you, I mean Arnaud or Yaron with you And other of your colleagues or peers on the line, I mean, we all know that we've been on the road with you. We heard many feedback from investors And very often, this structural aspect was coming back. So we're really seeing that as you know, at the beginning of a new chapter together. And Back to your question, yes, Antoine and I will still very much be there and we look forward to being back on the road with you. Yes, sounds very good. Thank you. Our next caller is Jan Thalberg of Citi. When you're ready, please go ahead. Hi, guys. Thank you very much for the presentation and for I don't think I have much left. Just on the operating costs, to get that sort of clear. 1st, obviously, if we See the big decrease from or you've a $70,600,000 or if we even say the 2%, which I think Donald mentioned was $62,000,000 from 2020 to the pro form a $20,800,000 I mean that seems like quite a significant step. Can you just give us more And then secondly, operating costs going forward. So we have the €2,500,000 of fixed annual compensation and then the €20,000,000 which I think, yes, you stated as from 2021 onwards. So two questions around them. One is, do you expect any significant growth in that cost position? And then secondly, given that the $2,500,000 is a fixed annual compensation, What are the other sort of incentive schemes in place just to make sure that Chris, are aligned even though they seem to be yes, sorry, that was a handful of questions, but any color would be appreciated. Hello, Yance. Thanks for your question. Maybe I start the first question on Matthew and myself compensation, the €2,500,000 annually. As you all know, we are big advocate of skin in the game. And our incentive is to be the largest shareholder of the firm, Similarly to the senior management and the employee, so we see ourselves as fully incentivized. And alignment of interest has been really the key driver of this firm since inception and has been has enabled us To be the fastest growing alternative asset manager in Europe, that's part of the DNA. We want to continue this path. So that's how we see compensation on our side. To come back on your previous Question, and I mean you have the figures on Page 18 of the presentation. But effectively, you had previously this 2% of consolidated equity for the year 2020, which was representing €70,000,000 including VAT. I remind you that During the year 2019, we've done a significant capital increase, which has therefore increased this figure for the year 2020. For the previous year, it was a bit lower. And then the corporate costs that we allocated within TCA that we are Pushing down, bringing down into the listed entity are representing effectively around €20,000,000 All these costs are representing all the central function of the group, would that be IT, legal, HR, internal audit, Compliance and Finance. And so these all these teams have been have strongly increased over the past year to actually Be in line with the expectation growth for the group, and so they should not grow drastically in the coming years. Okay. Can I just quickly follow-up on that? Firstly, Antoine, your point is very well taken. Clearly, you guys are Among the largest shareholders in the group saw that there's clearly incentivization. I was just wondering if there's any other variable component More related to the direct employment, I thought clearly the shelving does a lot there. Just on the operating costs, I mean, the services Don't really change, right, other than being transferred from outside the listed entity into the listed entity. And yet, You see the decrease from the $70,000,000 to the just about $20,000,000 Yes, it's just I'm having a few question marks there as to how the same services become so much cheaper all of a sudden, if that makes sense. I might be having the wrong end of the stick there, but yes. Sorry, Jens, would you mind Rephrasing or because I'm not sure we get 100% of the question. Yes. So just on the operating costs in So 2020 figure, which was the 2% of consolidated shareholders' equity, which you say that that's the $70,000,000 right? You then based on this transaction, you speak about the pro form a figure of just above $20,000,000 which again is very much Lower than the $70,000,000 But yes, the services don't really change, right? You transfer those corporate functions Into the list of entities. I'm just trying to understand as to why they are all of a sudden so much Cheetah, if that makes sense. But if you remember, and I think that's been part of the discussion with some of you, This company, TKO Capital, was externally managed, and it's been since 2004 the case. And this company was externally managed TCO Capital was externally managed by TCA. And for that has been receiving 2 components: 2% of the equity and 12.5 percent of the net income of the listed entity. If you take 2020 figures, €2,800,000,000 of equity, let's call it €56,000,000 plus VAT plus part of the 12%, it came to €70,000,000 Part of this transaction, we transfer the entire staff, Which, as you can calculate, costed less than €70,000,000 We transfer the compensation of the management, I. E, €2,000,000 So you've got Plus €70,000,000 minus the cost of the staff, minus our compensation, that leads to a minimum of €40,000,000 So that's why we said the cash flow increased by €40,000,000 But during many years and since the inception of TKO, All the ATCA has supported all these external costs since the inception of the group. Yes. Yes. No, that's fair enough and I appreciate where the group comes from and the sort of structure that was in place so far, so that all makes sense. Yes, thanks. That is helpful color. Moving on to our next question, we have Ghislain Chelet of OTO BHF. When you're ready, please go ahead. Hi, everyone. Thank you for taking the question. So we understand that basically you transfer the Compensation from management fees of consolidated 2% of consolidated equity to a much more shareholder friendly Dividend policy for everyone to above 80% of FRE and PRE. But don't you think in the end That at some point, it will not let you be able to invest enough in new strategies, in M and A. I mean, Since also the fact with the fact that your balance sheet will be much more locked into long term funds, Which is, to me, a good strategy, but which is also a problem when it comes to the liquidity if have 75% of your funds into locked funds, will you still be able to be active Pushing new strategies with M and A or launching new funds. Thank you. Thank you for your Thank you for your questions. If you have all the figures in mind, we ended up the year or we started the year, sorry, with 8.40 €5,000,000 of cash. We issued this inaugural sustainable bond for €500,000,000 So let's call it close to €1,500,000,000 And on top of that, We've got the €500,000,000 RCF. So our liquidity position is fairly unique for the industry And part of the business model has been really to see it sponsor our initiative and our fund. If you I like taking this example, but when we launched our energy transition initiative back in 2018, you remember, we invested €100,000,000 totally invested €100,000,000 And on the back of that, we raised €1,000,000,000 So Seating sponsoring has been part of the DNA. We just announced Earlier today that we launched North America decarbonization fund with €300,000,000 €200,000,000 coming from our balance sheet and €100,000,000 from Total. So we will continue to seed sponsor a new initiative. The culture of the film has been fairly innovative, Not nuclear science, but it's like launching our cybersecurity initiative, like launching direct lending back in 2,009. So Yes. We will continue to seed sponsor our fund initiative and we've got enough cash as just explained. Number 2, you've got Cash coming back from existing fund and existing investor, so we can consider that we've got a fairly large amount Of capacity to launch these funds. Number 2, on acquisition. As you know, we've been fairly selective on acquisition. For the time being, we've been focusing on small acquisition in terms of price I'll try to put some TKO inside in this acquisition. Latest acquisition is ACE, focusing on aerospace. When you remember, we bought this small company managing €300,000,000 2 years ago. This company is now managing €1,000,000,000 So I think we will continue to look at acquisition around the world. Star America is a good example last year for infrastructure In the U. S, at a time whereby the Biden administration is just focusing Large amount of money on infrastructure. So on 12, I. E, acquisition and sponsoring seeding a new fund, We have the capacity, and we'll continue to do that in a fairly selective manner. And I would add, Geoffroy, if I may, on this point is Here again, I mean, 4 years into our listing and our models that you know extremely well is asset management And balance sheet and sometimes the market has been kind of pushing back on this model, why the asset manager would need a balance sheet. I mean, your question illustrates the merits of the balance sheet. And by setting up this new structure, what we intend to do is that The market will be rewarded out of the FRE and effectively the multiple that the FRE will be benefited from as you know constantly growing And dividend being, but by the same token, having the balance sheet to your point, which is a key differentiating factor that can help you Fuel the growth, potentially look at some acquisition and you know this industry much better than anyone else here. And when you look at the rerating of some of our Peers, competitors, ICG in Europe, KKR here in the U. S, who've been balance sheet heavy asset manager, But who have demonstrated effective the merits of this balance sheet, we think that we are now in the right position To address this new chapter of the TCO development, hopefully, bringing along and dragging with us The support of shareholders with this new structure because the models of alternative asset management should no longer be divided between on the one hand the Asset Light, Asset Management Business and on the other hand, the balance sheet heavy investment company, all style investment company. I mean today the merger of Dial and AllRock here in the U. S, the blue all seems to be going ahead. It's a great precedent, a great order data point. So in this ever changing landscape of the alternative asset management Globally now, I mean, we've tried to look to listen to effectively factor that impact. And your question is actually a great one because actually It seems that now the market starts to realize that having a balance sheet shouldn't be effectively shouldn't be handicap, But much more differentiating factor. Thank you. That's very clear. That's all for me. We'll move on to our next caller. Our next question comes from the line of Iren Wangen of Gupteep Pitcherbaum. When you're ready, please go ahead with your question. Yes, good evening. Thank you for taking my question. I have more of a clarification question actually. So you mentioned the €1,100,000,000 for €39,000,000 shares, so €29.5 per share. And if I understand correctly, this deal will actually add value for TC shareholders because if at closing, The TC share price is, for example, €25, TC will give shares worth €25,000,000 and will receive assets Worth 29.5%. Is that correct? Or did I understand wrong? No, it's the other way around actually. It's let me rephrase it. So On one hand, independent experts and banks have valued the €1,100,000,000 for the contribution. But the French regulator and usually in this transaction are asking for multi criteria valuation of the listed company. And it could have been 20, it could have been 25, it could have been 30, but they came to the 29.5. And so because it's higher than the share price, the current share price You divided 1.1 by 29. If you divide by the current share price, you will get to 42,000,000 new shares. So now you've got 39. So it's better actually to have a higher multi criteria. Does that answer your question, Yaron? Yes. Thank you. All right. We now have a follow-up question from Christoph Friedrich of Berenberg. When you're ready, please go ahead. Yes. Thank you. Just two quick follow ups from my side. The first one was coming back to the EPS accretion. My thinking is in 2021, there's obviously a drag on the net income that comes from the macro hedge They were still in place at the beginning of the year. So I think the argument of EPS accretion might be A lot more difficult to uphold when we look into the next year. So I'm just wondering if you have looked at that and then that exercise. Thanks, Christophe. Well, we've taken effectively the consensus of the analysts for this year. If you restate the effect this effect you are mentioning, it is slightly flat, Slightly flat positive depending on how you calculate effectively the preferred dividend. Okay. And then the other question, and apologies if that was already answered. I had some technical issues before. But just if you can give us any Color on the valuation methodologies used in the key assumptions in order to come up with those valuations for the 2 entities. Okay. I would try we can have all this valuation methodology will be described End of June, in the report of this expert, but once again, these elements of parity, I remind you, I recall you how this has been calculated. The numbers of new TC shares to be issued is resulting from a parity Identified between on one side, the value of the contribution from TCA and TCGP, which have been assessed at €1,100,000,000 And on the other side, the reference price for TCO Capital share in remuneration, which have been assessed at €29.5 per share. Both elements of parity have been assessed based on multi criteria valuation approach comparable for each parity, Okay. As such, so the retail methodology for the valuation of TCA and TCGP contribution I've been mainly based on discounted cash flow. Secondary evaluation has been done based on multiples of net results, So price earning ratio are multiples of fee related earnings and performance related earnings. That's for the valuation of TCA and TCGP contribution. For the valuation of TC share at €29.5 per share, The same methodology has been retained with the sum of the part approach. On one side, the IMFT the accept management activities, Which have been appraised based on a multi criteria approach, BCF, multiples of FRE and PRE And the investment management activity, which has been valued based on the 2020 fair value account. Once again, all this methodology will be disclosed in the report of the 3 experts, which will be made Available at end of June, okay? And so this €29,500,000 per share that has been used is actually not a cap. It's a value that Being used to fix the €39,000,000 of share. Yes, that's very helpful. Thank you. We now have a Follow-up question from Alain Symonds of Exane. When you're ready, please go ahead. Yes, just a very quick follow on. Thanks. It's very clear now the The methodology, the evaluation methodology, is it the regulator that requires an external valuation from 14 to your capital? Or is it your own choice? I'm wondering because obviously, you could have chosen to use the share price, which would have been more advantageous for your conversion. Yes. So let me just on the process, the process, which is a Legal and regulatory process is, 1st of all, the Board of TTO Capital appointed an ADOC Committee, Only independent Board member, this other committee had to choose an independent expert, number 1. Number 2, The French Paris court appointed 2 independent experts on top of that. The Board of TCL Capital decided to appoint banks, namely Rothschild, BNP and Natixis. And TCA decided also the TCA Board decided to appoint also Bank, which was Credit Suisse. Thanks, Jose. Just one point on that. I'll remind you, Siquiri, that To be very clear on that, PHOENIXI, which is the independent expert, has been appointed by the Supervisory Board with the Head of Committee of IKEA Capital as an independent expert. This expert is issuing a fairness opinion on the term of the transaction. Binnie, meanwhile, you do have actually some statutory appraisers, which have been nominated, appointed By the President of the Commercial Court of Paris, in that case, that was Sonia Benelbert and Alain Berger, Which are in regards to the term of the merger and the contribution, giving as well their opinion on the transaction. And at this time, it looks like we have no further questions. One last call. We have no further questions. I'll now return the conference over to your host. Thank you very much for your time and patience. We look forward to continue the discussion, and we think it's been A new step for us, and we look forward to see and talk to you. Mathieu, I let you conclude. Thank you. Thank you all. No, I mean, just as Antoine said, we see that as the beginning of a new chapter for TKO Capital With this increased alignment of interest across the board and more importantly for those of you who've been asking questions and thanks for that over the past Us factoring all the feedback that collectively we heard on the road together over the past 4 years, and we're ready to take the company to the next phase. So thanks. Thank you, everyone. Looking forward to seeing you soon. Thank you for joining today's conference. You may now disconnect your lines.