Pérez vs Benettons will be a tough fight

The logo of infrastructure group Atlantia is seen outside its headquarters, in Rome, Italy, October 5, 2020. REUTERS/Guglielmo Mangiapane

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MILAN, April 7 (Reuters Breakingviews) – Spanish tycoon Florentino Pérez’s uneasy truce with Italian family Benetton has come to an abrupt end. Construction group ACS (ACS.MC), which he chairs, has sided with funds Read More Brookfield and Global Infrastructure Partners for a possible tilt to family-controlled highway operator Benetton Atlantia (ATL. MID). A takeover would cost up to 20 billion euros, net of debt, although the sale of assets would lower the cost. Winning over the Italian billionaires, who own 33% of Atlantia, will be more difficult.

Pérez’s ACS and the Benettons have already locked horns. The automaker crushed the Atlanta party in 2017 as the Italian company tried to buy Spanish toll road operator Abertis. After months of fighting, the rivals reached a deal that gave Atlantia 50% of Abertis plus one share, and ACS and an ally the rest.

Pérez, who has never lost interest in Abertis, is now trying another type of aggression. Brookfield and GIP would buy Atlantia and then sell Abertis to ACS after the deal closes, insiders told Breakingviews.

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A takeover would be a mouthful. A 30% premium on the undisturbed market value would require a price of 20 billion euros. This increases to 50 billion euros once the net debt is added. But the outlay would likely drop to some 32 billion euros once Atlantia completes the sale of Italy’s motorway unit ASPI in May, bringing in 8 billion euros in cash and eliminating nearly 10 billion euros. euros of net debt. This would grant a return on invested capital of 6% once the 2024 EBIT of 2.4 billion euros, according to Refinitiv’s forecast, taxed, significantly above the company’s cost of capital of almost 5% , according to GuruFocus.

The question is whether newly installed family boss Alessandro Benetton is ready to relinquish control. Atlantia has just emerged from a protracted dispute with the Italian government following the Morandi Bridge collapse in 2018. Brookfield and GIP are willing to let the Benettons retain their 33% stake. But the deal would still mean playing second fiddle to the bottoms and letting the Atlantia empire be shattered by an old enemy. Benetton’s alternative plan of stringing Blackstone (BX.N) for a possible counteroffer suggests it won’t go ahead. For Pérez and his allies, sorting out the finances may be the easiest part of the battle for control.

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BACKGROUND NEWS

– Global Infrastructure Partners and Brookfield Infrastructure announced on April 7 that they had met with the main shareholder of Atlantia, the Benetton Edizione family vehicle, and on March 30 made a preliminary non-binding proposal to take over the Italian infrastructure group.

– Under an agreement with Spanish infrastructure group ACS, which has a significant stake in Atlantia-controlled Abertis motorway unit, ACS would acquire control of Atlantia’s toll motorway concessions following the takeover of Italian society.

– The funds said they had not reached an agreement with Atlantia shareholders on a possible takeover bid.

– The Benetton family, which controls Atlantia through a 33% stake, is in talks with US fund Blackstone over a possible alternative takeover bid for the Italian group, Reuters reported.

– Atlanta shares rose 9.6% to 20.83 euros at 07:45 GMT on April 7.

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Editing by Neil Unmack and Oliver Taslic

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