European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Event-Driven

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.
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<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.
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</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.
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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