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Atlantia/Abertis: Atlantia synergies driven by Latam integration, management track record

30 NOV 2017

Atlantia plans creation of South American platform

Offer structure unlikely to change

The synergies generated by Atlantia [BIT:ATL]’s bid over Abertis [BME:ABE] are understood to being pitched as largely driven by the integration of the two companies in South America as well as by Atlantia’s management’s track record in integrating other industry players.

Atlantia and Abertis are both present in Chile and Brazil, thus allowing the creation of a larger platform in South America, it is understood.

Best practices developed by Atlantia’s management in connection, for instance, with Atlantia’s 2013 merger with Gemina, the airport holding company which owned Aeroporti di Roma, are also understood to be promoted as strong elements of the synergies package put forward by the Italian company.

Atlantia has not disclosed figures for the synergies the proposed combination with Abertis is expected to generate.

Meanwhile, the synergies produced by German construction company Hochtief’s [FRA:HOT] counteroffer are likely to derive from the use of Abertis cash to provide equity for Hochtief’s greenfield pipeline, as previously reported by this news service.

Hochtief expects the tie-up with Abertis to generate total synergies of between EUR 6bn and EUR 8bn by 2020, as reported.

Overall, Atlantia’s bid is being presented as centred on a strong industrial project that does not affect Abertis’ debt levels, it is understood. Furthermore, Atlantia is thought to benefit from a significant degree of flexibility from a financing point of view.

Atlantia is offering a EUR 16.50 per share cash offer for 100% of Abertis share capital. As an alternative to the cash bid, it is offering 0.696 shares of the Italian company for each Abertis shares, subject to certain conditions.

Meanwhile, Hochtief, which is controlled by Spanish group ACS [BME:ACS], is tabling EUR 18.76 per share in cash, with an alternative of 0.1281 new Hochtief shares for each Abertis share.

The structure of Atlantia's offer is not likely to change, although some considerations could be made about its cash component, it is understood. Atlantia has raised a further EUR 3.1bn to improve its offer, according to media reports.

Atlantia will need EUR 14.7bn for its bid, according to reports. The company's financing banks include the Spanish BBVA [BME:BBVA], Santander [BME:SAN] and CaixaBank, along with Mediobanca [BIT:MB], Credit Suisse [VTX:CSGN], Unicredit [BIT:UCG], Intesa San Paolo [BIT:ISP], BNP Paribas [EPA:BNP], Bank of America Merrill Lynch, Goldman Sachs [NYSE: GS] and ING [AMS:INGA], according to reports.

Atlantia’s is likely to wait until Hochtief’s offer is approved by Spanish regulator CNMV before raising its bid, as previously reported. The greenlight could come as early as in December, according to media reports.

Atlantia declined to comment.

Deal Reporter

NXP bump could form part of Qualcomm defence against Broadcom – sources

Qualcomm [NASDAQ:QCOM] bumping its price for NXP Semiconductors [NASDAQ:NXPI] could form part of its defence against Broadcom's [NASDAQ:AVGO] unsolicited approach, two sources close to and a person familiar with the situation said.

Qualcomm’s board rejected Broadcom’s USD 130bn offer on 13 November, saying it significantly undervalues the company. Broadcom had stated in its offer letter that its proposal stands whether Qualcomm's pending acquisition of NXP is consummated on the currently disclosed terms of USD 110 per share or whether that transaction is terminated.

Without a price increase for NXP, Qualcomm will likely fail to achieve the shareholder acceptance threshold required and the deal will lapse, as previously reported. NXP is currently trading above the USD 110 per share offer price at USD 113.51.

By definition, a bump for NXP makes Qualcomm more expensive for Broadcom, the person familiar with the situation said. Acquiring the Dutch company significantly enhances Qualcomm’s value by taking it into growing markets such as automotives, the company has previously said.

Whether Qualcomm increases its offer for NXP is clearly an issue for Broadcom, the first source said. Broadcom's current offer undervalues Qualcomm as a standalone entity, let alone including NXP, this source said. If Qualcomm increases its bid for NXP, it would have to be seen whether Broadcom would also raise its offer for the combined entity, the source said.

A price increase would have ramifications for Broadcom's offer because it would effectively save the NXP deal, a second source close said. Qualcomm’s value clearly increases with the acquisition of NXP, and in turn the attractiveness of Broadcom’s offer further decreases, this source added.

As it stands, Qualcomm is committed to completing the NXP deal, the sources said. Qualcomm prefers purchasing NXP to a sale to Broadcom, the second source said. But there is the risk Qualcomm becomes more willing to engage with Broadcom and decides not to bump the NXP price, this source said.

However, a higher offer from Broadcom would not change Qualcomm’s desire to complete the deal, the first source said, pointing to the lengthy regulatory process it has already undertaken and the USD 2bn break fee cost for abandoning the deal.

One of the reasons Broadcom's first offer was inadequate was because Qualcomm is due to acquire NXP and the first offer didn’t seem to take full account of this, agreed a sector banker. But, Broadcom is free to approach Qualcomm shareholders to negotiate a higher price, and sell the deal versus a higher price for NXP, the banker said.

Qualcomm shareholders could prefer a sale to Broadcom than an increase in the NXP price, the sector banker said.

As a listed entity, Qualcomm is obliged to listen to shareholders - though it does retain some control over its decisions, the person familiar with the situation said.

Broadcom has already consulted some of Qualcomm's largest shareholders, according to reports. If Qualcomm shareholders agree to a price from Broadcom, an NXP bump would have limited effect, the banker pointed out.

Broadcom is reportedly preparing a slate of directors to be proposed for Qualcomm's board by the 8 December deadline as it gears up for a proxy fight. The proposed board changes would be voted on in Qualcomm’s annual general meeting on 6 March – giving Qualcomm shareholders an opportunity to show support for the Broadcom deal.

A bump in price for NXP is only anticipated after Qualcomm receives regulatory approval for its takeover, as previously reported. The European Commission (EC) could conditionally approve the deal by year end, although early 2018 may be more likely, as previously reported. The deal is also awaiting approval from China’s MOFCOM, Japan’s JFTC and South Korea’s KFTC.

Qualcomm declined to comment.