Infrastructure Channel interview with Giovanni Castellucci, CEO of Atlantia
The agreement reached by Atlantia, ACS and Hochtief, on 14 March 2018, for a joint investment in Abertis will result in the creation of a world leader in the operation of transport infrastructures under concession. The agreement will involve the establishment of a jointly-owned holding company with capital of €7 billion, in which the Italian group will have 50% plus one share, ACS will have 30% and Hochtief 20% less one share. This will enable Atlantia to consolidate both the holding company and Abertis in its accounts. To execute the acquisition of Abertis, Hochtief’s public tender offer, approved by Spanish market regulator CNMV on 13 March, will be amended, eliminating the share component and transforming it into an all-cash offer at an unchanged price of €18.36 per share. The new holding company will then acquire Hochtief’s entire investment in Abertis at the price paid by the German company under the public tender offer. To fund the transaction, Hochtief will then issue approximately 6.43 million new shares to be subscribed entirely by ACS at a price of €146.42 per share. ACS will then sell Atlantia shares in Hochtief with a value of up to €2.5 billion at the same price paid for the newly issued shares, thereby permitting Atlantia to acquire a stake of up to 24% in the German company.
Mr. Castellucci, this transaction enormously accelerates Atlantia’s growth. What will this mean for your Group?
As well as being a great opportunity, the agreement reached marks a radical change for Atlantia. This will expand not only our horizon but also the speed at which we can grow and our prospects, resulting in the creation of a global leader in the infrastructure sector. Now, more than ever, we need to be able to exploit our competencies. Our competitive advantage when we operate overseas is that we control the entire value chain: design, construction, financing, management, valuation and project risk allocation. From now on, we have to be able to put our operational and financial expertise to the greatest possible effect in order to extract value from Abertis’s assets, which we will acquire in partnership with ACS and Hochtief. Quite clearly, without our financial strength, we would not have been able to carry out a transaction of this size. Let’s say that, for us, it is the culmination of a long-term process of improving our operational capabilities, cash flow generation and credibility in the financial markets.
How do you see Atlantia in the years to come?
If the public tender offer is successful, Atlantia will manage a diversified portfolio of assets in 15 countries, operating 14,000 km of motorways as well as handling 60 million passengers through the airports of Rome and Nice. Our partnership with Hochtief, on the other hand, will open up new growth opportunities in countries with high potential where Atlantia has yet to build a presence, such as the USA, Canada, Australia and Germany. The transaction will enable us to achieve our goal of diversifying the Group’s activities at an international level, reducing our exposure to any one market or individual asset, and at the same time offering growth opportunities in new markets.
Atlantia will be the key player in the sector for many operators and investors, and the go-to partner for the development of new initiatives. This is also the context, for example, for our investment in Eurotunnel, where Atlantia is now the majority shareholder, or in the Bologna airport and indeed in Hochtief itself. While these are major financial investments, their aim is to make our know-how and operational experience available to drive further growth and create value through strategic projects.
How did you arrive at the decision to form an alliance with ACS?
The creation of a leading infrastructure builder and construction company, resulting from Atlantia’s agreement with ACS and Hochtief for the acquisition of Abertis, is not a necessity, but a great opportunity to continue to create value, to strengthen our shareholder base and our ability to take advantage of opportunities throughout the world by establishing a global leader. The agreement will allow us to achieve something that looks somewhat different from the initial aim of our takeover bid. While it entails us giving up on our attempt to take full control of Abertis, it offers potentially more attractive prospects over the long term: a strong partnership with the largest construction group in the world specializing in major infrastructure projects.
In fact, this transaction won’t result in the acquisition of just a motorway operator, but will see you take a stake in a general contractor. What could this mean for Atlantia in industrial and strategic terms?
Hochtief isn’t just a construction company, but also a leading provider of engineering services. As a result, we believe that our acquisition of an interest in Hochtief is not only a valid financial investment, but is also compelling from an industrial viewpoint, making Atlantia and Abertis global leaders in the development as well as the operation of transport infrastructure. The deal will give us additional strategic options, enabling us to maximize synergies in new public-private partnerships and in greenfield and brownfield projects.
Will anything change with regard to your presence in Italy?
The agreement widens Atlantia’s horizons: new concessions in Europe and in South America, our entry into the market for PPPs, laying the foundations for Atlantia to become a company with strong roots in the geographical areas where demand for transport infrastructure will see the highest rate of growth: the USA, Canada, Australia. We will, however, continue to increase our investment in Italy for many years to come, in view of the existing commitments in the concession arrangements to which Autostrade per l’Italia and Aeroporti di Roma are party. Following completion of the Variante di Valico, we are now faced with an equally complex task: construction of a motorway bypass for Genoa. In the meantime, at Fiumicino, after opening the new non-Schengen terminal, we are working on a new terminal for Schengen flights and on plans for the new airport of Fiuminico North. At the same time, we intend to export our project management and investment capabilities abroad, thanks to the new group’s expanded international footprint.
Financially, what does all this mean for Atlantia?
Despite its size, the transaction will not put excessive pressure on the Atlantia Group’s finances. This is because Atlantia has a portfolio of very long-term concessions, which gives us an inherent financial strength. In addition, we are starting from a very low degree of leverage, thanks to years of careful management of our finances. This is why we can allow ourselves to take this step.
To conclude, how do you intend to meet this important new challenge?
Over recent years, we have expanded overseas by implementing an international diversification strategy, an approach we share with Abertis. This is because, if we want to be successful in the future, it is essential to build a large international presence. Atlantia needs to compete at a global level in order to optimize our cost of capital, benefitting from a range of sources of financing and of projects in which to invest. We aim to be the leader in every country in which we operate. We are already very familiar with Abertis and its management team: the integration of the two companies is an ambitious and challenging prospect, but we have all the managerial and financial expertise needed to complete the process efficiently and successfully. We are ready to take up the challenge.