CVC may put more equity into Abertis buyout

CVC Capital Partners, the European private equity firm, may increase its equity contribution for a possible buyout of Spanish developer Abertis in the face of a reduced debt package, a source close to the deal suggested.

Abertis: downgrade is a concern

“What we are seeing – not just with CVC but with private equity firms in general – is that they are getting messages from their limited partners (LPs) telling them to do something with the money they have given them,” the source said.

“If you look at the kind of returns they [LPs] are seeking, then there is a good chance CVC will pursue this sort of opportunity and put more equity into it if the debt capacity is reduced,” he added.

Officially, Spanish construction company ACS and savings bank La Caixa – Abertis’ main shareholders – have only confirmed they are looking into ways of bringing CVC into Abertis’ capital and that a buyout is one of the possibilities to make that happen.

Abertis’ market capitalisation prior to the buyout announcement stood at close to €9 billion, according to the Financial Times, with sources originally suggesting the consortium would make an offer valuing the company at €12 billion. That amount would be financed with about €4 billion in equity from the three consortium members and some €8 billion in bank debt.

But with banks being reticent regarding their exposure to the troubled Spanish market, the debt package is now likely to be just above the €5 billion mark, two sources involved in the deal told Infrastructure Investor. Between 14 and 20 banks are looking at the transaction, they added, with Italy’s Mediobanca putting together the bank club.

This means the consortium is “either going to have to put in some more equity or lower the offer price,” an analyst told Reuters, with the source quoted above suggesting CVC will push for the former and possibly shoulder a significant part of that increased equity contribution.

A third option – which one source said is being discussed but is “highly sensitive” – would be for the consortium to launch an offer for a smaller number of Abertis’ shares. Market speculation is suggesting the consortium would seek to leave only about 10 percent of Abertis shares in free-float, down from the current 45.69 percent. But the source suggested leaving more shares in free-float than originally envisaged is also a possibility, depending on the funding package.

Both sources said that, following the buyout, La Caixa, which currently owns close to 28.5 percent of Abertis’ stock, will retain its place at the top of the shareholding tree, with CVC becoming Abertis’ second-largest shareholder. ACS, which currently owns 22.8 percent of Abertis after it lent a 3 percent stake to French bank Societe Generale, would be third-largest.

Pre-buyout asset sales are another option being discussed to help finance the deal, one source confirmed. They include the sale of Abertis’ minority stakes in toll road operators Atlantia, in which it holds 6.7 percent, and Brisa, in which it owns 14.6 percent, for a total of about €1.2 billion.

But selling those stakes in their entirety may not be straightforward.

A source close to Italy’s Benetton family, which owns the majority of Atlantia’s shares, told Reuters Benetton isn’t interested in buying Abertis’ holding in Atlantia, while a source close to Brisa indicated to Infrastructure Investor that for the de Mello family – Brisa’s main shareholder – to buy Abertis’ 14.6 percent stake in the Portuguese company it would have to initiate a full takeover of Brisa to comply with local stock market regulations.

Other candidates for disposal include Abertis’ car park business, Saba, which the consortium is rumoured to be touting for between €500 million and €600 million, its airports division and its telecoms holding. Following any buyout, there is a speculative consensus that Abertis would be refocused around its toll road roots.

The other “key point at this moment in the transaction is to keep Abertis at investment grade,” one banking source pointed out. The Spanish developer is currently rated BBB+ by Standard & Poor’s and A- by Fitch. But the amount of debt a leveraged buyout would add to Abertis’ €14.5 billion debt pile has prompted both ratings agencies to warn they might downgrade the company, raising fears that it could be downgraded to junk status post-buyout.