IFM dips toes in European water with Aqualia deal

IFM Investors’ open-ended Global Infrastructure Fund has acquired a 49 percent stake in Spanish water management company FCC Aqualia for €1.024 billion.

The deal is IFM Investor’s first move into the water sector in continental Europe, and its third investment in the sector globally. It is expected to reach financial close by the end of August, subject to relevant merger control approvals and the consent of FCC’s senior leaders. The GIF also holds stakes in Wyuna Water in Australia and Anglian Water in the UK, but both are considerably smaller than the 49 percent stake it has taken in FCC Aqualia.

The water business recorded EBITDA of €242 million in the full year 2017, 29.6 percent of parent company FCC Group’s total €815.4 million EBITDA, according to latest figures. This was up from €231 million in FY 2016. It generated net revenues of €1.026 billion.

FCC Aqualia is the fourth-largest water management company in Europe and represents 23 percent of the Spanish market. It serves more than 23.6 million customers across 22 countries and employs more than 7,500 people.

Speaking to Infrastructure Investor, IFM global head of infrastructure Kyle Mangini said: “It’s a deal we’ve had an interest in for a number of years so it’s not a sudden decision. We’ve got a very large diversified portfolio, and we expect this to provide an attractive risk-adjusted return.”

When asked whether the acquisition could pave the way for further investments in the water sector, Mangini said: “I hope so – we can bring some complementary skills to the business.”

Spain accounted for 75.5 percent of FCC Aqualia’s revenues, with 24.5 percent generated overseas, according to the company’s 2016 annual report. It delivers services in countries including Portugal, Italy and the Czech Republic, as well as in the Middle East and South America.

The deal represents IFM’s first investment in Spain, which Mr Mangini described as a “positive step”.