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Group Villar Mir could sell OHL

Group Villar Mir could sell OHL

OHL’s Main shareholder, Villar Mir group, is rumoured to be negotiating the sale of its 51% stake to China State Construction Engineering, a listed company with a market cap of USD 45Bn.

Neutral for the equity

The disposal of Villar Mir group’s 51% stake would eliminate some of the risks affecting OHL, such as this group’s liquidity needs and implication in corruption scandals. Nevertheless, the possible replacement of Villar Mir group for China State Construction Engineering as main shareholder opens a period of uncertainty. Many questions are on the table: What business is China State interested on? Will the new shareholder manage the company on the ground or from China?.

If China State buys a 51% stake in OHL, it will be forced to launch a take-over bid. In that case, the minimum price would be the last 6 month’s average price (€3.64/share), that is 5.4% above the last price.

Good for the bonds

With China State Construction Engineering as main shareholder of OHL, the prospects for the bonds would improve significantly as China State is unlikely to have difficulties to capitalize OHL if necessary.

We reiterate our Hold recommendation with a target price of €3.9/share