The end or the beginning?

ACS ended up being the engine behind CVC’s entrance into Abertis’ shareholder base - but the transaction may only be a sign of larger restructurings to come.

As the Abertis play reaches its apparent conclusion, it is hard to avoid the feeling that the transaction has come full circle. And ACS president Florentino Pérez is once again centre stage.

After all, the deal, originally touted as a three-way, multi-billion euro leveraged buyout, was widely perceived as the brainchild of ACS president Pérez. And though it finished as a more modest €1.7 billion stake sale by ACS to CVC Capital Partners, Pérez still gets what he wants out of the deal.

Depending on who you talk to, Pérez engineered the transaction to get enough cash to increase his 12 percent stake in Spanish utility Iberdrola to 20 percent, cut ACS’ burgeoning debts – or a combination of both.

It’s obvious, though, that CVC did not get everything it wanted out of the deal. The original goal was to structure the transaction as a €12 billion leveraged buyout that would give CVC nearly one-third of Abertis’ total shares. That would put it on par with current majority shareholder La Caixa and leave Pérez with a lesser stake.

Instead, Pérez sold ACS’ entire 25.83 percent stake in Abertis for €2.86 billion to two investment vehicles. One is backed by ACS and will hold 10.28 percent of Abertis; the other is capitalised by CVC, and will hold the remaining 15.55 percent, or about half the interest it wanted.

But here’s the fine print: CVC owns 60 percent of the voting rights in both vehicles, while ACS possesses the remaining 40 percent. That effectively gives it control over 26 percent of the company.

Finance professors call this a “negative interest”: not enough to move a deal forward, but enough to block one you don’t like. And chances are the only person CVC would like to see in the driver’s seat of an LBO for Abertis is its infrastructure team leader, Stephen Vineburg.

Now, sure – the banks balked at providing €8 billion in debt required for the transaction. And negotiations to obtain a smaller €5 billion debt pile also failed.

But that’s not to say that the transaction can’t be revived if debt markets improve and – more importantly – Abertis delevers. The company currently has debt pile of €15 billion relative to a market capitalisation of €10 billion.

If this turns out to be the case, then this purchase might be Vineburg’s way of saying, as Humphrey Bogart put it in the 1942 classic Casablanca: “Louis [replace with Abertis], I think this is the beginning of a beautiful friendship”.