Florentino Pérez's plan at ACS: release ballast and lay the foundations for a strategic turnaround in the group

PREMIUM

• MARÍA HERNÁNDEZ

  Madrid

Monday, November 2, 2020 - 22:37

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• Business.

  ACS soars on the stock market after admitting that it is studying an offer from the French Vinci to buy Cobra

• Results.

  ACS earns 477 million until September,

The day ACS confirmed its negotiations with Vinci to sell Cobra, the construction company's shares rose almost 26%;

the day after Real Madrid took the last

against Barça, the titles lost 5%.

Between the two dates there are about 20 days, a period of time in which many voices in the market have wondered about the cataract of movements that the Spanish group has announced in recent months.

The question is not only what motives are behind these operations, but above all what strategy

proposes

for the future of the company.

First it was the sale to the Portuguese

of 75% of its photovoltaic plants in Spain for 325 million euros, and later the sale of 50% of its Australian mining company

to the Elliott investment fund for about 1,150 million.

Between one operation and another, ACS confirmed the negotiations with the French Vinci to divest most of its industrial division for some 5.2 billion.

The latter includes the transfer of

, one of the flagships of the Spanish construction group, and that is one of the features that has surprised the markets the most.

In 2019, this area reported to the construction company an ebitda of 693 million euros, a turnover of 6,530 million and a portfolio valued at 9,924 million euros

Cobra has been one of the pillars of ACS since 1989 and an element that differentiates it from other competitors.

The subsidiary heads the industrial division that would be handed over to Vinci if the feasibility study is successfully completed.

The more than 5,000 million that the French has put on the table to acquire it would raise the value of the ACS divestments to

The transaction with Galp and the sale of its mining business in Australia have enabled ACS to offset the losses and difficulties associated with its Australian subsidiary

in the last year.

The capital gains that the operation with Vinci could bring him - if it is finally confirmed - would suppose an oxygen balloon for the group.

Impact of Covid

From a financial point of view, the direction of the divestments seems clear.

The money that reaches the coffers of ACS not only allows it to strengthen its

but also

generate cash, support the payment of dividend and improve the balance of the group.

But there are those who see in all these movements reasons beyond financial ones.

The intentions of the president of Real Madrid remain unknown, and that brings us back to the beginning:

Experts and investors agree that we are facing movements that announce a strategic change in the firm.

Where?

, predicts

, an analyst at

.

Tuesta believes that ACS could thus reduce the cyclical component in the

of its business, "since construction activity is severely penalized in times of economic difficulties."

Strategic turn

The capital gains generated by the transaction with Vinci could be partially used to promote this transformation with a focus on infrastructure and concession management, where the group chaired by Florentino Pérez wants to consolidate its leadership at a global level.

, an analyst at

,

also delves into this line

, who highlights the company's double strategy.

"On the one hand, ACS is disinvesting in non-strategic assets to achieve the maximum possible liquidity, contain its debts and clean up its balance sheet. On the other hand, it intends to diversify investments towards sectors other than construction in the search for recurring income" and less exposed to

like the current one. "

The strategy is similar to that followed before by other firms in the sector,

, because they reorient their businesses towards less cyclical and more profitable segments.

It happened with

and its focus on services, or with

and concessions, or with

and its specialization in the environment, waste and water.

"The sale of Cobra to Vinci is understood in this context of diversification," adds Robles.

As ACS explained in the statement sent to the National Securities Market Commission (CNMV) to confirm the negotiations, Vinci would pay the 5,200 million euros it offers with the delivery of 2,800 million "at least" in cash, and the rest (2,400 million), in shares of the French group or in cash.

Therefore, it cannot be ruled out that the Spanish company ends up being part of the French company's shareholding.

The proposal for the sale of the industrial division has received the approval of the Board of ACS and is pending the result of the

or review process, in which the necessary actions will be examined for the segregation of the activities that would not enter into the sale to Vinci.

Specifically,

, as confirmed by the group.

Bet on Abertis

Dragados, Hochtief, Iridium and half of Abertis

would be the vehicles to command the change.

In fact, there are voices in the market that do not see the possibility that ACS wants to expand its positions in the latter company, despite the poor results this year.

The infrastructure manager, controlled by the Italian Atlantia and ACS (through Hochtief), reduced its profit by 63% in the first three quarters of 2020, to 318 million euros, due to the reduction in traffic on the highways.

The sale to Vinci "would leave the company [ACS] in a favorable position to continue growing in the concession area in joint venture with Abertis, or even increase its participation in it if Atlantia were forced to make any divestment in this regard", Banco Sabadell analysts point out.

Financial sources tell

that such an operation would make more sense if Abertis obtained a new portfolio of concessions in other regions where it is not present.

Bag

The announcement of the talks with Vinci was a turning point for the battered performance of ACS shares on the stock market.

The company has accumulated a loss in value of more than 37% since the beginning of the year, although it came close to 50% before the Vinci statement.

, compared to the 35 in which they started the month of January, but well above the 11 euros that touched with the outbreak of the pandemic at the beginning of March and the

.

"Companies associated with the cycle, such as construction companies, are being heavily penalized on the stock market due to the uncertainty surrounding the economic environment," explains Juan Tuesta.

Many projects were paralyzed with the confinements inside and outside of Spain.

Investors had priced those projects, but the hiatus forced them to rethink their valuations and the result was translated into a

.

The announcement of the sale of Cobra, its jewel in the crown, far from scaring those investors away, has been interpreted as a positive move to strengthen the company, whatever the course Florentino Pérez eventually takes.

According to the criteria of The Trust Project

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