Tecnotree: Considering future dilution, the offer is reasonable

Translation: Original published in Finnish on 1/28/2026 at 8:00 am EET.

We raise Tecnotree's target price to EUR 5.7 (WAS EUR 4.5), reflecting the takeover bid made for the company, and issue a Hold recommendation for the stock. We consider the cash consideration to be good, taking into account the dilution of convertible bonds and the continued subdued cash flow outlook. However, major shareholders have expressed disappointment regarding the premium, and if the 90% threshold is not met, we see a possibility of the offer being raised. Thus, we recommend that shareholders hold onto their shares at least for now, before the situation clarifies. 

Aiming to continue the growth trajectory as a private entity

Tecnotree's CEO Padma Ravichander, its largest owner Fitzroy Investments, and Helios Investment Partners, a private equity firm focused on Africa, have formed a consortium that has made a Board-recommended cash tender offer for Tecnotree's shares (EUR 5.70 per share), convertible bonds, warrants, and options. In addition to Ravichander and Fitzroy, Luminos Sun Holding Limited has also committed to accepting the offer, and together these commitments represent approximately 50.4% of all shares, including the convertible notes held by Ravichander and Fitzroy (46.7% including all outstanding convertible notes). Among the major owners, at least Kyösti Kakkonen has publicly commented on being disappointed with the bid price, which could indicate challenges for the offer to pass at the current price if Kakkonen can rally other owners to resist. However, we do not consider a competing bid likely.

According to the consortium, taking the company private would, among other things, remove the reporting and cost burdens associated with being listed. Tecnotree has historically struggled with cash flow challenges due to the repatriation of receivables and foreign exchange losses, which has forced the company to curb its investment pace, among other things. The consortium believes that as a private company, it could more freely increase growth investments, which may carry higher risk. The company has also been at the center of several governance-related crises in recent years, and in our estimation, the consortium believes that operating as a private company offers more freedom than a listed company, also from an investor communications perspective.

Cash flow outlook still relatively subdued

Tecnotree also provided preliminary data for 2025 and new guidance for 2026, which anticipates low to mid-single-digit revenue growth and free cash flow exceeding 5 MEUR. We believe the growth guidance was soft, considering the company's record-high order book. The cash flow guidance also does not indicate a significant improvement over last year (4.5-5.0 MEUR), and thus cash conversion will remain weak. With the new guidance, we have made cuts to our estimates for the coming years.

Considering the convertible bonds, the premium is attractive

The cash consideration of EUR 5.70 represents a premium of some 42.5% to the previous day's closing price and a premium of 36.6% to the average price of the previous 12 months. The share price was clearly above the offer price only a couple of years ago, so investors who are likely disappointed with the share price development will not be pleased with the price level, even though the 2026 guidance suggests a low cash flow yield (around 4%), indicating a good offer price. The dilution caused by convertible bonds should be taken into account in the offer. The total price of the offer is 131 MEUR, of which around 97 MEUR will be paid for the shares and around 34 MEUR for the convertible bonds. The convertible bonds would be converted into shares by 2028 at the latest, so it is relevant to include them in the valuation. Overall, the premium of the offer's market value to yesterday's closing price market value (68 MEUR) is over 90%, which is already a very significant premium. However, we recommend that shareholders hold on to their shares for the time being, as failure to reach the 90% threshold could lead to an increased offer. The biggest risk here is that the offer would not be raised and the bid would fail, which would likely put pressure on the share.