Analysis | Blackstone and Real Madrid’s Boss in an Auction? Let’s Hope So

A business that combines near-term exposure to a recovery in travel with long-term protection against the ravages of inflation is likely to attract a lot of interest. That should presage a fierce contest between the big-name bidders looking at buying Atlantia SpA, the Italian infrastructure giant backed by the billionaire Benetton family. But some of the protagonists have form when it comes to avoiding painful auctions.

Florentino Perez, the construction tycoon and president of Real Madrid soccer club, is teaming up with U.S. buyout firm Global Infrastructure Partners and Brookfield Asset Management Inc. on a potential bid for the 17 billion-euro ($19 billion) operator of motorways and airports, Bloomberg News reported on Wednesday. The consortium faces competition from the colossus of the buyout world, Blackstone Inc.

Atlantia possesses the attractive characteristics of infrastructure: predictable, inflation-linked cash flows tied to long-term government contracts. The shares have rallied sharply as concern about rising consumer prices has intensified (this is also a thinly-traded stock easily moved by speculation). While the pandemic has restricted revenue from aviation and highways, the longer-term investment case is clear.

The Italian government forced Atlantia to sell its controlling stake in Autostrade per l’Italia SpA, the Italian toll-road operator, in the wake of the deadly collapse of the Morandi bridge in 2018. A partnership between Blackstone, Macquarie Asset Management and Italy’s postal bank agreed to buy it, and Atlantia will soon receive more than 8 billion euros of proceeds. Adjust for that and a deal for the shrunken Atlantia portfolio is more affordable than it first appears.

For Perez, this is a familiar business. Atlantia’s main asset is Abertis, the Spanish toll-road operator it owns jointly with Actividades de Construccion y Servicios SA, the Madrid-listed construction group he leads. Perez bid against Atlantia for Abertis in 2017, and subsequently forced the Benettons into partnership instead of outbidding him. ACS said on Wednesday it had an exclusive agreement with GIP and Brookfield to receive a majority stake in Atlantia’s highway concession business, implying the consortium’s plan is to carve up the assets between them rather than jointly own the entire thing. 

As for Blackstone, a deal would be the natural follow-up to the Autostrade investment. 

Working out the undisturbed reference price for a transaction isn’t easy given the recent climb in Atlantia’s shares. A takeover at a standard 30%  premium over the three-month average stock price through April 5 would cost around 22 euros per share. The average analyst target for the shares is 19.39 euros. Size is no obstacle: There will be no shortage of infrastructure funds eager to be involved as partners on either side.

A key question is whether the Benettons seek to roll their minority holding into any bid vehicle while other shareholders cash out, again shrinking the cost of a takeover. Their agreement looks key to a transaction. Blackstone would have to structure a deal to be independent of its funds’ existing ownership of Autostrade. Even so, it might be controversial for to establish an indirect link with the Benettons so soon after the Genoa tragedy.

The risk for Atlantia shareholders is that this situation proceeds along the lines of other deal situations involving these buyers and culminates in some form of united offer. Just as Perez and Atlantia chose to share Abertis rather the fight for sole ownership, GIP and Blackstone decided against competing for a U.K.-listed private-jet refueling business last year and partnered on a joint bid.

For Italy, the situation is a test of its commitment to free markets. Atlantia’s assets are largely outside the country. Still, the company is among the top listed Italian firms and it’s unlikely politicians will relish it being broken up. That might play to Blackstone’s advantage if it aims to keep Atlantia intact, especially if the Benettons also want to keep the company as it is. Whether there are two competing offers that are both deliverable isn’t yet clear.

Atlantia’s board has a tough job ahead. It should primarily ensure that any transaction leaves the company with a responsible owner that doesn’t overburden these critical assets with leverage. And whatever the Benettons want, it must remember its duty is to all shareholders, and that means attempting to get them the best price for any exit. Getting an auction going may be easier said than done.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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