A common sight: Edenred and Pluxee are selling off based on regulatory news. This time it’s Turkey. The Turkish competition authorities announced an investigation into Edenred, Pluxee and two of its peers (Multinet and Setcard) on suspicion of collusion in the meal voucher market. Let’s take a look at the impacts this might have on the fundamentals of both companies and if my investment case is still intact, with shares of Edenred down significantly, since I started to be interested in the sector. I’ll predominantly cover Edenred here, because I’m only invested in their shares, but most of the discussed topics apply to Pluxee as well.
What happened?
On Monday, the Turkish competition authority launched the investigation alleging the following anti-competitive practices:
Collusion in tenders
sharing customer portfolios
exchange of competitively sensitive information between companies.
You can read the source here, it’s google translated, so there might be errors lost in translation.
Obviously this is not great and I’d love for the industry to have fair competition. Time will tell what’s going to happen here. This isn’t the first confrontation both companies have had with Turkey, however. Back in 2010 the Turkish antitrust authorities conducted an investigation into the sector and ultimately ruled in 2018 that Edenred was to pay a 1 million Euro fine, for its subsidiary Netser, which was created together with Sodexo (now rebranded to Pluxee). Edenred made an appeal, which is still to be decided. What we can see is that the past fine in Turkey has been really insignificant for a company generating a billion in EBIT.
To find out what this might mean for the long-term picture and the overall investment case, let’s take a look at some other historical fines Edenred had to pay, unfortunately it’s part of this business and something investors must expect. We’ll also look at another reason why shares sold off on Monday.