Abertis Diversifies with Brazil Road Buy

At a time when many Spanish companies are exiting LatAm, infrastructure operator Abertis is increasing its exposure to the region, through an agreement to purchase control of OHL Brasil in partnership with Canada’s Brookfield. The pair’s joint venture has finalized the deal for control of the Brazilian toll road operation, valued at approximately $1.7bn, in which Abertis receives all of the shares of the Participes en Brasil vehicle which owns 60% of OHL Brasil, in exchange for 10% of Abertis shares, the assumption of EUR504m ($625m) in Participes’ debt and a payment of EUR10.7m. Through Abertis’ agreement with Brookfield, the Canadian asset manager comes away with 49% of Participes, and Abertis with 51%. “Abertis has a very solid cash flow situation, they have no liquidity problems so they do have the cash to do [the investment],” says a European equity analyst covering Abertis. “Europeans are in a bit of a tough position, because some of their best assets are in EM, but that is also what’s liquid today,” says a Brazil-based investment banker, noting that those who have the means will look to increase their positions as those who don’t exit. Through the deal, Abertis broadens its LatAm operations and diversifies away from deteriorating conditions in Spain’s toll road sector. Spanish toll roads should now represent 27% of Abertis’ revenues, down from 43% in 2011, according to the analyst, who notes the deal should be positive for Abertis going forward. Abertis will get a platform from which it can grow in the sector, and Brookfield, which has been present in the market for many years, will help manage the assets, the analyst says, adding that Brookfield has more than $18bn invested there so far. In a report, Credit Suisse values the transaction at 2.5%-8.9% below OHL Brasil’s current market price, calling the deal slightly negative for OHL Brasil. “While we understand the rationale behind the acceptance of this deal by OHL, namely to reduce leverage and improve cred