EUR 200.00 For Business Accounts Only

ACS: TERMS OF THE SALE OF INDUSTRIAL SERVICES (ANÁLISIS BANCO SABADELL)

ACS has announced that it has reached an agreement to sell its Industrial Services subsidiary (Cobra; 100% ACS) to Vinci, which would confirm recent rumours that both companies had reached an agreement to close the transaction. The selling price is € 4.2 Bn EV, which represents 30% of ACS’ EV (with a cash inflow of between € 4.93 Bn and € 4.98 Bn for ACS for cash adjustments, although Industrial Services’ cash would be excluded), which will be increased by additional payments for the development of renewable assets (up to € 600 M over the next 8.5 years), implying a total valuation of € 4.8 Bn (vs. € 5.2 Bn initially). The payment will be made fully in cash.
The scope of the deal includes engineering activities and works, stakes in 8 concessions, and the development platform for new renewable energy projects (ACS has mentioned that, in principle, it had 25 GW in projects at different stages of development). ACS will keep Zero-e (without its pipeline, we understand), as well as 15 concessional projects (which will be spun off before the sale is effective, which should occur by late 2021). Separately, both companies have agreed to create a JV (51% Vinci and 49% ACS) that would incorporate, at market prices, the renewable assets included in the transaction once in operation.
Considering ACS’ clarifications regarding the adjustments for factoring and working capital included in Vinci’s initial offer (and bearing in mind that the payments for the renewable assets are deferred and that we assign them a 75% probability), the final amount of the deal would stand only -2% below the initial offer, with the difference being that part of this amount is contingent and deferred, even though the payment will be made fully in cash (which we welcome; vs. cash and Vinci shares previously). As for the valuation of the deal assumed in our T.P., the definitive terms would stand ~+10% above (out of prudence, we did not include the transaction itself nor the renewables pipeline due to the lack of visibility), which would translate into a ~+5% increase in our T.P. (to € 31.00/sh.; +10% upside).
MARKET IMPACT
Awaiting further details or clarifications by the company, this news would have a limited impact on ACS, as, although it means a +5% rise to our T.P., the final price would stand slightly below Vinci’s tentative offer (-2%), including part of the contingent payment (the cash payment was already expected). Under these terms, pro forma NFD’21e (assuming that the deal will be closed in late 2021; excl. all payments for renewables for the time being) would stand at €-650 M (net cash; including factoring and IFRS16). As for the agreement to create a renewables JV, in principle (awaiting any possible clarifications or comments by ACS), we would not expect an impact on valuation, as the agreement consists of contributing these assets at market prices. ACS has risen by +8% in the last week (+6% vs. Ibex) and +4% thus far this year (-2% vs. Ibex). Currently, the stock is falling by -1.2% (vs. -0.2% Ibex).