ACS launches a competing bid for Abertis
ACS launches a competing bid for Abertis
ACS, through its subsidiary Hochtief, has announced a competing bid for Abertis at a price of €18.76/share in cash and/or 0.1281 Hochtief shares for each Abertis share. A minimum 20% of the price will be paid with Hochtief shares (or 22% adjusted for 8% treasury stock held). There will not be a lock up period for the new shares. The bid is conditioned to a minimum 50% acceptancy and to regulatory approvals.
Expensive but the deal is EPS accretive for ACS
Although the bid price is higher than both market expectations (€18/share) and our valuation of Abertis (€15.7/share), we do not expect the deal to have a significant negative impact on ACS’s stock price given that the higher than expected financial leverage make the deal accretive for Hochtief, and ACS, in terms of EPS and DPS, even excluding the €6bn to €8bn synergies announced by the company. The high leverage of the deal (78% LTV), the low cost of debt (around 2% during 7 years) and the higher pay-out ratio (>90%), lead us to expect a Hochtief’s dividend yield of more than 7% 2018e. In addition, ACS will dilute its current 70.01% stake in Hochtief (to around 50%), what would allow it to maintain its investment grade. We maintain our Hold recommendation for ACS and put our target price under revision.
Positive for Abertis
ACS’ bid is 14% higher than the €16.5/share offered by Atlantia and 5% higher than the €18/share expected by the market. Although the impact is positive for Abertis, it closed yesterday at €18.84/share, after rising by 7%. A subsequent bid from Atlantia seems unlikely at this price, but it should not be ruled out. We recommend to Hold Abertis until the possibility of a competing bid dissipates.
Neutral for Cellnex
We expect ACS to sell Abertis’ 34% stake in Cellnex, as well as Altantia was expected to do, and therefore the impact of this deal on Cellnex should be neutral. Expectations of a take-over bid from a third party will continue to weight favourably on its share price.
ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.