European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On 14 April, a consortium led by Edizione launched a defensive delisting takeover bid for Atlantia for €23/share (which won’t be adjusted for the €0.74 dividend payable before end of acceptance).</li>
<li>The premium is 24.4% (before takeover rumors), and represents 8.9x EV/Fwd Revenue and 14.1x EV/Fwd EBITDA (Capital IQ consensus). The offer price is 16% higher than my SOTP valuation (€19.82/share).</li>
<li>It is almost a knock-out bid with minimal interloper risk. Gross spread to the aggregate amount is 4%, annualised return is 18% (assuming 13 July settlement). Recommendation is long ATL IM.</li>
</ul>


On 14 April, a consortium led by Edizione launched a defensive delisting takeover bid for Atlantia for €23/share (which won’t be adjusted for the €0.74 dividend payable before end of acceptance).
The premium is 24.4% (before takeover rumors), and represents 8.9x EV/Fwd Revenue and 14.1x EV/Fwd EBITDA (Capital IQ consensus). The offer price is 16% higher than my SOTP valuation (€19.82/share).
It is almost a knock-out bid with minimal interloper risk. Gross spread to the aggregate amount is 4%, annualised return is 18% (assuming 13 July settlement). Recommendation is long ATL IM.


Edizione & KKR/Atlantia: Defensive and Generous Takeout Offer

<ul>
<li>GIP/Brookfield/ACS weigh launching a €15 billion unsolicited offer for Atlantia. Blackstone may partner with the Benettons to acquire Atlantia at €24/share (26% premium ). Italian Government's role will be key.</li>
<li>Atlantia trades at higher multiples than ACS (EV/22e EBITDA: 12.8x vs 3.2x, Capital IQ consensus). A hypothetical ACS/Abertis would become a world leader in infrastructure, but leverage is key. </li>
<li>The opposition of Edizione makes the operation difficult/more expensive. A joint-bid Edizione/Blackstone, would force the GIP-led group to present an improved offer. Nearly 50% of Atlantia's NAV is cash.</li>
</ul>


GIP/Brookfield/ACS weigh launching a €15 billion unsolicited offer for Atlantia. Blackstone may partner with the Benettons to acquire Atlantia at €24/share (26% premium ). Italian Government's role will be key.
Atlantia trades at higher multiples than ACS (EV/22e EBITDA: 12.8x vs 3.2x, Capital IQ consensus). A hypothetical ACS/Abertis would become a world leader in infrastructure, but leverage is key. 
The opposition of Edizione makes the operation difficult/more expensive. A joint-bid Edizione/Blackstone, would force the GIP-led group to present an improved offer. Nearly 50% of Atlantia's NAV is cash.


ACS, Actividades de Construcción y Servicios / Event-Driven

ACS, Actividades de Construcción y Servicios (ACS SM)

ACS, Actividades de Construcción y Servicios

ACS enters the bid for Autostrade with an offer of €10 bn (4.5x 2019 EBITDA), above the €9.1 offered by the CNP consortium.
<div>
<ul>
<li>Both offers are within the range considered by the market €9 bn -  €11 bn, although below the €12 bn that Atlantia believes ASPI is worth.</li>
<li>
The activist fund TCI, which has 10% of Atlantia argues that the value of ASPI ranges between €11 bn and €12 bn.
</li>
</ul>
Assuming that ACS participates in the acquisition of ASPI by contributing funds equivalent to a percentage of the value of ASPI (88%) similar to its stake in Abertis (30% though ACS and 20% through Hochtief), and assuming a €10 bn valuation (for 100%), the investment would amount to c. €4 bn (vs. c. €5 bn in cash that ACS would receive in Q4 2021 from the industrial services disposal).
<ul>
<li>Proforma net debt/EBITDA above 2x, although CF would gain in visibility and stability, assuming that ACS does not use the proceeds to reduce leverage.</li>
<li>Dividends upstreamed to ACS via a potential Abertis/ASPI would increase its FCF (and therefore its dividend payout potential). Depending on how the deal is structured, it could add c. €500 mn to ACS's FCF.</li>
</ul>
That said, details on the possible economic offer and the structure of the operation are very limited, therefore it seems difficult to evaluate the impact on TP.
ACS has a 2021e 7% dividend yield (forecasted dividend of €1.93, source Capital IQ consensus), funded by Hochtief and Abertis, so it does not seem at risk. But if the ASPI operation succeeds, ACS will become an infrastructure focused company. Pension funds would be willing to acquire its shares up to a price where dividend yield reaches around 3%, thus meaning a substantial re-rating of ACS.
From my SOTP valuation, on conservative assumptions, there is a 15% upside to ACS, with the optionality of a deal to acquire ASPI as part of a consortium. Recommendation is long ACS, TP €32.6.
</div>

ACS enters the bid for Autostrade with an offer of €10 bn (4.5x 2019 EBITDA), above the €9.1 offered by the CNP consortium.


Both offers are within the range considered by the market €9 bn -  €11 bn, although below the €12 bn that Atlantia believes ASPI is worth.

The activist fund TCI, which has 10% of Atlantia argues that the value of ASPI ranges between €11 bn and €12 bn.


Assuming that ACS participates in the acquisition of ASPI by contributing funds equivalent to a percentage of the value of ASPI (88%) similar to its stake in Abertis (30% though ACS and 20% through Hochtief), and assuming a €10 bn valuation (for 100%), the investment would amount to c. €4 bn (vs. c. €5 bn in cash that ACS would receive in Q4 2021 from the industrial services disposal).

Proforma net debt/EBITDA above 2x, although CF would gain in visibility and stability, assuming that ACS does not use the proceeds to reduce leverage.
Dividends upstreamed to ACS via a potential Abertis/ASPI would increase its FCF (and therefore its dividend payout potential). Depending on how the deal is structured, it could add c. €500 mn to ACS's FCF.

That said, details on the possible economic offer and the structure of the operation are very limited, therefore it seems difficult to evaluate the impact on TP.
ACS has a 2021e 7% dividend yield (forecasted dividend of €1.93, source Capital IQ consensus), funded by Hochtief and Abertis, so it does not seem at risk. But if the ASPI operation succeeds, ACS will become an infrastructure focused company. Pension funds would be willing to acquire its shares up to a price where dividend yield reaches around 3%, thus meaning a substantial re-rating of ACS.
From my SOTP valuation, on conservative assumptions, there is a 15% upside to ACS, with the optionality of a deal to acquire ASPI as part of a consortium. Recommendation is long ACS, TP €32.6.


Atlantia - CDP - ACS: Moving Parts in the Acquisition of ASPI

Florentino Pérez is known for its deal-making prowess (both as head of Real Madrid and chairman of ACS).
<ul>
<li>On 2 October ACS announced negotiations to sell its Industrial Services division to Vinci for €5.2 bn (now undergoing due diligence). </li>
<li>On October 19, ACS announced that CIMIC (subsidiary of Hochtief) had entered a sale agreement with Elliot for 50% of subsidiary Thiess.</li>
</ul>
Both transactions would add cash to the group, and all three companies, ACS, Hochtief and CIMIC could end 2020 debt-free. This is in contrast with ACS traditionally being high leveraged, which would reduce the risk profile of the group.
With the extraordinary income from the sale of Industrial services, ACS could increase the size of its concession area where the flagship is Abertis (shared with <a href="https://www.smartkarma.com/entities/atlantia-spa" target="_blank" data-smartkarma-citation="entities:21157:1" rel="noopener">Atlantia SpA (ATL IM)</a>, currently a distressed seller), or it could increase its stake in Hochtief, even could do a bit of both.
<div>
ACS has been affected by the global crisis, and its value is well below the potential of its assets: its market cap is just 22% higher that what Vinci is willing to pay for half the business.
I see solid upside in ACS (and higher dividends), thus I recommend LONG ACS, target price €28.5 per share (applying a conservative 15% discount to my SOTP valuation), a 25% upside.
</div>

Florentino Pérez is known for its deal-making prowess (both as head of Real Madrid and chairman of ACS).

On 2 October ACS announced negotiations to sell its Industrial Services division to Vinci for €5.2 bn (now undergoing due diligence). 
On October 19, ACS announced that CIMIC (subsidiary of Hochtief) had entered a sale agreement with Elliot for 50% of subsidiary Thiess.

Both transactions would add cash to the group, and all three companies, ACS, Hochtief and CIMIC could end 2020 debt-free. This is in contrast with ACS traditionally being high leveraged, which would reduce the risk profile of the group.
With the extraordinary income from the sale of Industrial services, ACS could increase the size of its concession area where the flagship is Abertis (shared with Atlantia SpA (ATL IM), currently a distressed seller), or it could increase its stake in Hochtief, even could do a bit of both.

ACS has been affected by the global crisis, and its value is well below the potential of its assets: its market cap is just 22% higher that what Vinci is willing to pay for half the business.
I see solid upside in ACS (and higher dividends), thus I recommend LONG ACS, target price €28.5 per share (applying a conservative 15% discount to my SOTP valuation), a 25% upside.


<a href="https://www.smartkarma.com/entities/atlantia-spa" target="_blank" data-smartkarma-citation="entities:21157:1" rel="noopener">Atlantia SpA (ATL IM)</a><a href="https://www.atlantia.it/en/press-release/-/bulletin/view/699a3ebd-81fe-4d51-b275-ded5ffb8613f" target="_blank" rel="noopener">announced</a> on 17 October that it has agreed to sell a 49% stake in Telepass to global private markets investment manager Partners Group, on behalf of its clients.
Blackstone and Macquarie want Atlantia's toll roads in Italy. The funds would join the public bank CDP to acquire 88% of the toll road subsidiary (ASPI). Atlantia shot up 9% on 13 October in the stock market due to the possible agreement that will put an end to a long litigation.
Atlantia has <a href="https://www.atlantia.it/documents/20184/87656/2020-09-24_ASPI_Dual_track.pdf/6ce235e4-bfbd-4959-86bc-daa4d0d8aa81" target="_blank" rel="noopener">released a presentation</a> about the disposal plan for Autostrade per L'Italia (ASPI).
My SOTP valuation shows a NAV per share of €19.10, vs. the last close of €14.61. This means that the implied market valuation for ASPI is low and there is upside on Atlantia.
The value of the other assets ex-ASPI is known and higher than the amount of debt at the holding level. Atlantia receives dividends from them and they could attract interest from other trade buyers or infrastructure funds (ACS is selling its industrial services division and I would not rule out that it could try to buy Atlantia's stake in Abertis, where ACS has 50% minus 1 share, or increase its stake in Hochtief, which it sold to Atlantia during the Abertis JV deal).
On the minus side, there is uncertainty related to both the impact of the Covid pandemic and the collapse of the Genoa Bridge.
So uncertainties are becoming less so, and on the basis of my calculations, I believe there is upside in Atlantia, if and when the regulatory and event related uncertainties become clearer. In spite of leverage, Atlantia's assets are worth more than the debt at holding level. Therefore I recommend LONG Atlantia, target price €19.1.

Atlantia SpA (ATL IM)announced on 17 October that it has agreed to sell a 49% stake in Telepass to global private markets investment manager Partners Group, on behalf of its clients.
Blackstone and Macquarie want Atlantia's toll roads in Italy. The funds would join the public bank CDP to acquire 88% of the toll road subsidiary (ASPI). Atlantia shot up 9% on 13 October in the stock market due to the possible agreement that will put an end to a long litigation.
Atlantia has released a presentation about the disposal plan for Autostrade per L'Italia (ASPI).
My SOTP valuation shows a NAV per share of €19.10, vs. the last close of €14.61. This means that the implied market valuation for ASPI is low and there is upside on Atlantia.
The value of the other assets ex-ASPI is known and higher than the amount of debt at the holding level. Atlantia receives dividends from them and they could attract interest from other trade buyers or infrastructure funds (ACS is selling its industrial services division and I would not rule out that it could try to buy Atlantia's stake in Abertis, where ACS has 50% minus 1 share, or increase its stake in Hochtief, which it sold to Atlantia during the Abertis JV deal).
On the minus side, there is uncertainty related to both the impact of the Covid pandemic and the collapse of the Genoa Bridge.
So uncertainties are becoming less so, and on the basis of my calculations, I believe there is upside in Atlantia, if and when the regulatory and event related uncertainties become clearer. In spite of leverage, Atlantia's assets are worth more than the debt at holding level. Therefore I recommend LONG Atlantia, target price €19.1.

Italy

Mundys is an Italian holding company specializing in motorway and airport infrastructure, and mobility-related services. It manages toll motorways and airports across Europe, the Americas, and Asia, and provides digital platforms for mobility solutions. The company is headquartered in Rome, Italy, and was founded in 1950.

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Mundys (ATL IM)

Edizione & KKR/Atlantia: Defensive and Generous Takeout Offer

The Benettons want to protect their interests in Atlantia. ACS was eager to acquire 50% of Abertis, but the Benettons were even more eager so as to...

Jesus Rodriguez Aguilar

Atlantia in Play?

The GIP/Brookfield/ACS deal seems a priori difficult, due to the size of Atlantia (for ACS) but above all because of the possibility that the...

Jesus Rodriguez Aguilar

Atlantia - CDP - ACS: Moving Parts in the Acquisition of ASPI

From my SOTP valuation, on conservative assumptions, there is a 15% upside to ACS, with the optionality of a deal to acquire ASPI as part of a...

Jesus Rodriguez Aguilar

ACS: Unlocking Value Via Disposals

I see solid upside in ACS (and higher dividends), thus I recommend LONG ACS. My valuation is €28.5 per share (by applying a conservative 15%...

Jesus Rodriguez Aguilar

Atlantia, Light at the End of the Tunnel

I believe there is upside in Atlantia, if and when the regulatory and event related uncertainties become clearer. Its assets are worth more than...

Jesus Rodriguez Aguilar

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