Presentation Acquisition of a 25% stake in Hochtief - Grupo ACS
Presentation Acquisition of a 25% stake in Hochtief - Grupo ACS
Presentation Acquisition of a 25% stake in Hochtief - Grupo ACS
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<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong> <strong>stake</strong> <strong>in</strong><strong>Hochtief</strong>1March 2007
The Transaction<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>• <strong>Grupo</strong> <strong>ACS</strong> has agreed to acquire a 25.1% <strong>stake</strong> <strong>in</strong> <strong>Hochtief</strong>,one <strong>of</strong> the world’s largest construction and <strong>in</strong>frastructuredevelopment groups.• The amount considered for the <strong>stake</strong> is € 1.264 million <strong>in</strong> cash, € 72 pershare.• This implies a 6.4% premium on the 19/03/07 market price (€ 67.7/sh).• <strong>Grupo</strong> <strong>ACS</strong> will become the <strong>in</strong>dustrial reference shareholder <strong>of</strong><strong>Hochtief</strong>:• The company will rema<strong>in</strong> <strong>in</strong>dependent.• It will be consolidated <strong>in</strong> <strong>ACS</strong> accounts by equity method.• The transaction requires the approval from German antitrustregulator.2
Brief Description <strong>of</strong> <strong>Hochtief</strong><strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>HOCHTIEFCONSTRUCTIONAMERICASHOCHTIEFCONSTRUCTIONEUROPEHOCHTIEFCONSTRUCTIONASIA PACIFICHOCHTIEFAIRPORTSHOCHTIEFDEVELOPMENTS• Lead<strong>in</strong>g build<strong>in</strong>g(commercial and<strong>in</strong>stitutional) <strong>in</strong> US, Canadaand Brazil.• 3 brands, Turner, Aeconand <strong>Hochtief</strong> Do Brasil.• Turner is a well renownbrand with US nationwidepresence.• € 8,241 million <strong>of</strong> backlogas <strong>of</strong> 30/09/06• Sales <strong>of</strong> € 5,934 million <strong>in</strong>2005• Construction: Civil Worksand build<strong>in</strong>g.• 80% <strong>of</strong> sales com<strong>in</strong>g fromGermany, a grow<strong>in</strong>gmarket.• Specialist <strong>in</strong> sizeable andcomplex <strong>in</strong>frastructureprojects.• Affiliates <strong>in</strong> UK, Austria andEastern Europe.• € 2,790 million <strong>of</strong> backlogas <strong>of</strong> 30/09/06• Sales <strong>of</strong> € 2,110 million <strong>in</strong>2005.• Lead<strong>in</strong>g Constructionservices provider <strong>in</strong> the AsiaPacific Area: Civil Worksand build<strong>in</strong>g.• World largest contractorm<strong>in</strong>er (€1,150 mn, 26% <strong>of</strong>its sales).• Market cap as <strong>of</strong> 19/03/07€ 5,255 mn.• 2006 backlog higher than€12.200 mn.• Sales € 4,578 million <strong>in</strong>2005.• Shareholder <strong>of</strong> 5 airportsserv<strong>in</strong>g more than 70million passengers.• Athens: 40% <strong>stake</strong>, until2026• Dusseldorf: 30%, 2057• Hamburg: 49%, 2060• Sydney: 12%, 2097• Tirana: 47%, 2025• Concession developmentand management.• Development <strong>of</strong> real stateprojects specializ<strong>in</strong>g <strong>in</strong> nonresidentialproperty.• Facility Management.• 22 PPP projects withworldwide presenceportfolio.Sales0% 6%EBITA11%2%15%EBT6%5%15%1%4%42%30/09/06 Data39%13%71%America Europe Asia Pacific Airports Developments70%3
<strong>Hochtief</strong>’s new shareholders structure<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>Shareholder’s Structure<strong>Hochtief</strong> stock price evolutionEvolution, base 100 31/03/97<strong>Hochtief</strong>Índice DAX<strong>25%</strong>6%20/03/07 Data69%€ per share<strong>Grupo</strong> <strong>ACS</strong> Treasury Stocks Free FloatSource: Annual report and Web page20/03/07 Data4
Transaction Rationale<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>1. Strategic growth platform for the US market2. Lead<strong>in</strong>g and highly pr<strong>of</strong>itable contractor <strong>in</strong> Asia3. Strong position for the concession development market4. Timely opportunity <strong>in</strong> Central Europe5. Experienced management with local approach to clients6. Strategic acquisition at a fair priceUnique opportunity to become a reference shareholder <strong>in</strong> one<strong>of</strong> the world lead<strong>in</strong>g contract<strong>in</strong>g and <strong>in</strong>frastructure groupswith strong complementarities with <strong>ACS</strong>5
Transaction Rationale1. Strategic growth platform <strong>in</strong> the US market<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>Market conditions<strong>Hochtief</strong>’scompetitive advantages<strong>ACS</strong> skills to back <strong>Hochtief</strong>• High demand <strong>of</strong> new<strong>in</strong>frastructures.• Increas<strong>in</strong>gopportunities <strong>in</strong> the USconcessiondevelopment <strong>in</strong>dustry.• <strong>Grupo</strong> <strong>ACS</strong> has beenlook<strong>in</strong>g for an adequateopportunity to accessthis market• Unrivaled branch network withnationwide presence (24states, 40 permanent <strong>of</strong>fices).• Well established and highlyreputed brand (Turner).• Experienced local managementwith market know-how.• Highly diversified build<strong>in</strong>gactivity, with a lead<strong>in</strong>gposition.• European-like approach <strong>in</strong> PPPs andconcessions development.• <strong>ACS</strong> and Turner complementaryactivities and know-how could create theclear leader <strong>in</strong> the US concessiondevelopment market.• Future developments should shareDragados expertise on concessions andcivil works with Turner’s localknowledge.• Promote Turner’s pr<strong>of</strong>itability <strong>in</strong>creaseby support<strong>in</strong>g expansion plans <strong>in</strong> highervalue added activities.Access US concessions market together with a lead<strong>in</strong>g local playerExpand Turners activity <strong>in</strong> the concessions development marketIncrease Turner’s pr<strong>of</strong>itability6
Transaction Rationale2. Lead<strong>in</strong>g and highly pr<strong>of</strong>itable contractor <strong>in</strong> Asia<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>Market conditions<strong>Hochtief</strong>’scompetitive advantages<strong>ACS</strong> skills to back <strong>Hochtief</strong>• Fastest grow<strong>in</strong>gmarket <strong>in</strong> the worldwith high demand <strong>of</strong><strong>in</strong>frastructures.• Good prospects <strong>in</strong>Australian civil worksand m<strong>in</strong><strong>in</strong>g markets.• Leighton is one <strong>of</strong> the ma<strong>in</strong> contract<strong>in</strong>gcompanies <strong>in</strong> Asia & Pacific with an<strong>in</strong>creas<strong>in</strong>g presence <strong>in</strong> Middle East.• World largest contractor m<strong>in</strong>er.• Local presence and know how <strong>in</strong> 15countries <strong>in</strong>clud<strong>in</strong>g Ch<strong>in</strong>a, India andAustralia.• Grow<strong>in</strong>g and geographically diversifiedbacklog.• Close to € 6bn on sales with a 3,9% EBTmarg<strong>in</strong>.• Comb<strong>in</strong>ed commercial networks tocover worldwide markets• Technical and f<strong>in</strong>ancialpartnerships could encourage thedevelopment <strong>of</strong> attractive projectsall over the world.Worldwide coverage <strong>in</strong> <strong>in</strong>frastructure development activities7
Transaction Rationale3. Strong position for the concession development market<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>Market conditions<strong>Hochtief</strong>’scompetitive advantages<strong>ACS</strong> skills to back <strong>Hochtief</strong>• High demand <strong>of</strong><strong>in</strong>frastructures <strong>in</strong>developed countries.• Public adm<strong>in</strong>istrations<strong>in</strong>creas<strong>in</strong>gly rely onprivate <strong>in</strong>vestors withtechnical backgroundto develop projects.• US, Europe andAustralia are allgrow<strong>in</strong>g markets.• <strong>Hochtief</strong> has <strong>stake</strong>s <strong>in</strong> 5 airports andmanages 22 PPPs, be<strong>in</strong>g the marketleader <strong>in</strong> Germany and very wellpositioned <strong>in</strong> Eastern Europe, USand Australia.• More than € 500 million <strong>in</strong>vested <strong>in</strong>airports, PPPs and toll roads <strong>in</strong>developed countries.• Positive cash position which impliesa high <strong>in</strong>vestment capacity• <strong>Grupo</strong> <strong>ACS</strong> and Abertis make todaythe global leader <strong>in</strong> concessiondevelopment, cover<strong>in</strong>g the fullvalue cha<strong>in</strong> <strong>of</strong> the bus<strong>in</strong>ess.• Best practices and know howexchange will benefit both parties.• There is a path already covered as<strong>Grupo</strong> <strong>ACS</strong> and <strong>Hochtief</strong> partner <strong>in</strong>Chilean concession developments.<strong>Grupo</strong> <strong>ACS</strong> and <strong>Hochtief</strong> as the world lead<strong>in</strong>g concessiondevelopers by size and pr<strong>of</strong>itability8
Transaction Rationale4. Timely opportunity <strong>in</strong> Central Europe<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>Market conditions<strong>Hochtief</strong>’scompetitive advantages<strong>ACS</strong> skills to back <strong>Hochtief</strong>• Recovery <strong>in</strong> theGerman marketexpected to cont<strong>in</strong>ue,specially <strong>in</strong> civil works.• Eastern Europe marketsgrow<strong>in</strong>g, <strong>in</strong>vest<strong>in</strong>g oncivil works and<strong>in</strong>frastructuredevelopment.• Ma<strong>in</strong> contract<strong>in</strong>g firm <strong>in</strong> CentralEurope.• Established presence <strong>in</strong> all thecountries with partnershipopportunities already identified.• Support the rationalization <strong>of</strong>subcontract<strong>in</strong>g and procurementprocesses currently underway.• Increase partnership <strong>in</strong> newmarkets <strong>in</strong> Eastern Europe.Recover<strong>in</strong>g markets will improve marg<strong>in</strong>s, pr<strong>of</strong>itability and valueComb<strong>in</strong>ed growth opportunities <strong>in</strong> Eastern Europe to be explored9
Transaction Rationale5. Experienced management with local approach to clients<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong><strong>Hochtief</strong>’scompetitive advantages• International vision with local approach.• Service culture with a widespreadcommercial network.• Multi-Brand approach on <strong>in</strong>ternationalmarkets: Turner, Leighton and <strong>Hochtief</strong>.<strong>ACS</strong> skills to back <strong>Hochtief</strong>• Shar<strong>in</strong>g <strong>of</strong> cultural values oriented to theclient.• Exchange <strong>of</strong> common markets <strong>in</strong>sights: SouthAmerica, US and Eastern Europe.• Reliance on experienced local managementteams.Identified and valuable po<strong>in</strong>ts <strong>of</strong> co<strong>in</strong>cidence <strong>in</strong> culture,management and strategic vision10
Transaction Rationale6. Strategic transaction at a fair price<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong><strong>ACS</strong> has paid a fair price……for a strategic <strong>stake</strong> <strong>in</strong> <strong>Hochtief</strong>• Analyst consensus target price <strong>in</strong> 2007reports ranges between € 57 and € 91 /sh,averag<strong>in</strong>g € 71 per share.• Implied EV/EBITDA multiples lower than 7times for a grow<strong>in</strong>g company• Irrelevant impact on <strong>ACS</strong> EPS.• <strong>Grupo</strong> <strong>ACS</strong> becomes the largest shareholder <strong>of</strong>the company with an <strong>in</strong>dustrial view.• It allows the Group to position itself as aworldwide construction firm and<strong>in</strong>frastructure developer with a multi-brandapproach.• The transaction ma<strong>in</strong>ta<strong>in</strong>s s<strong>in</strong>gular corporatecultures and management <strong>in</strong>dependency whilstenables strategic and commercial cooperation.11
Valuation: Analyst Consensus 2007<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>PublicationTarget PriceBroker Recommendationdate(€/sh)21-Mar-07 Dresdner Kle<strong>in</strong>wort Buy 9116-Mar-07 DZ Bank Buy 6919-Feb-07 Bankhaus Lampe Buy 5714-Feb-07 WestLB Equity Markets Buy 7713-Feb-07 Société Générale Buy 7812-Feb-07 UBS Buy 737-Feb-07 Merrill Lynch Buy 6924-Jan-07 HypoVere<strong>in</strong>sbank Hold 651-Jan-07 M.M. Warburg Sell 57Mean 69Average 71Source: I/B/E/S Consensus 200712
Comb<strong>in</strong>ed <strong>in</strong>ternationalization<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>13
Conclusions<strong>Acquisition</strong> <strong>of</strong> a <strong>25%</strong><strong>stake</strong> <strong>in</strong>• Unique opportunity• Positions <strong>Grupo</strong> <strong>ACS</strong> as a worldwide player <strong>in</strong> the construction <strong>in</strong>dustry(North America, Central Europe and Asia-Pacific, areas where <strong>ACS</strong> was not present)• Strategic <strong>in</strong>vestment at a fair price• Investment totals € 1.264 million• Available f<strong>in</strong>anc<strong>in</strong>g• Limited risks• Liquidity <strong>of</strong> <strong>Hochtief</strong> assets that, valued <strong>in</strong>dividually, greatly exceedsprice paid• Huge value generation opportunities• High growth potential• Slight marg<strong>in</strong> improvements generate significant pr<strong>of</strong>itability <strong>in</strong>creases14