Ferrovial: Partial Sale of Services Subsidiary Most Likely

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Banc Sabadell | In its last shareholder general assembly, the constructor announced that the sale of its services subsidiary could be completed by the end of the year. The funds Lone Star and Apollo have demonstrated interest in acquiring 100% of Ferrovial’s services subsidiary. Goldman Sachs distributed the indicative document (teaser) several weeks ago.

Although it was already known that some funds might be interested (Blackstone, KKR, Pai Partners, EQT, Triton Partners, Advent o Carlyle), none had openly shown interest in acquiring 100% of the subsidiary, as have Lone Star and Apollo. The total sale is the preferred option of Ferrovial, as it would simplify the operation. However, we think the partial sale (dividing by geographical areas) is most likely to the extent that it would maximise the sale price. In any case we see it as positive that the number of potential buyers appearing in the press is ever greater (also including companies in the sector like CNTY) which we think increases the chances that f a higher price.

We recall that Ferrovial already reclassified this subsidiary as maintained for sale in its 2018 results and that it applied a deterioration of the value of its holding in Amery of €774 M. The book value of the subsidiary is €1.7 billion and there is talk of selling it for around €2.5 billion (~7X EV/EBITDA; in the press a range of ~€2.1-€3 billion has been mentioned), above our valuation of ~€2.1 billion (~6.8X EV/EBITDA), which would have an impact of +2.4% in our O.P