In Play

Real Madrid Boss Makes His $22 Billion Play

Soccer tycoon Florentino Perez's counterbid for Spanish toll-road operator Abertis is an impressive feat, but may not be enough to secure a win.
Photographer: Denis Doyle/Getty Images
At Closing, January 19th
18.95 EUR

Real Madrid boss Florentino Perez has put the Benetton family on the back foot with a stunning 19 billion euros ($22 billion) counterbid for Spanish toll-road giant Abertis Infraestructuras SA. But the soccer tycoon still may not have done enough to secure a win.

The offer is being made by Hochtief AG, the German-listed subsidiary of Spanish construction group Actividades de Construccion y Servicios SA, which Perez chairs. It comprises 15 billion euros in cash plus shares in Hochtief that were worth 3.7 billion euros based on the bidder's share price after the announcement on Wednesday. That compares with a previous 16.8 billion-euro offer from Atlantia Spa, the toll-road operator in which the Benettons have a 30 percent stake.

Road to Riches

Abertis shareholders are having a good year with competing bids for the toll-road operator

Source: Bloomberg

The Hochtief offer structure blasts through the obstacle that had seemed to stand in Perez's way: raising enough debt to finance a deal with a majority cash component when ACS and Hochtief are smaller than Atlantia and Abertis. Equity investors have hesitated at the idea of taking shares in a combined Hochtief-Abertis, with some questioning the wisdom of combining construction and infrastructure management.

The debt markets see it differently. JPMorgan Chase & Co. has arranged the required facilities at a dirt-cheap rate of 2 percent -- the same rate enjoyed by Atlantia. That keeps the stock component of the offer down to only 20 percent.

What a Relief

Shares in Hochtief rallied after it revealed a bid for Abertis using far less stock than expected

Source: Bloomberg

Intraday times are displayed in ET.

It's still hugely ambitious. The stock component is nearly 40 percent of Hochtief's current share count. A combined Hochtief-Abertis would have leverage of about 5.3 times Ebitda based on 2018 forecasts, factoring in the new debt. Hochtief reckons leverage would be 3.7 times in 2019. That implies a substantial program of disposals.

If Hochtief has pulled off the seemingly impossible, it still needs to justify the price. It claims there would be synergies with a present value of 6 billion to 8 billion euros. Taking Abertis' 13 billion-euro market capitalization as of January, before bid speculation hit the stock, those purported synergies cover the premium -- on paper.

The difficulty is that only 1 billion euros come from cost savings. The rest are expected to be generated from anticipated new opportunities arising from combining the two operations. That may be wishful thinking.

This matters because the offer is conditional on investors accepting the share component in full. They need to believe Hochtief can deliver. Criteria Caixa, which has a 23 percent stake in Abertis, could satisfy that condition on its own -- but it may need persuading.

The Benettons haven't been seen off for sure. Whatever financing Hochtief can raise, Atlantia can, too. The latest offer is only 5 percent higher on an enterprise value basis and Atlantia may yet feel comfortable matching it if it thinks the benefits of diversification are worth it. This isn't over yet.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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