Buying Grupo ACS division would make Vinci bigger, but a bit more vulnerable: S&P

If Vinci succeeds in acquiring the Industrial Services division of Spain’s Grupo ACS, it would benefit from greater geographic and revenue diversity but also be more exposed to pandemic-related uncertainties, ratings agency S&P said this week.

Vinci announced its non-binding €5.2bn offer for the division on 2 October, saying Grupo ACS’s board was open to negotiations. 

With some 46,000 employees in 50 countries, the Industrial Services division specialises in the design, construction and operation of energy, industrial and transport infrastructure.

Vinci expressed interest in eight concessions and public-private partnerships the division holds, mainly in energy projects.

In a note yesterday, S&P said the deal could "reduce rating headroom" for Vinci as the coronavirus continues to suppress travel and business activity around the world.

Adding the division’s €6.3bn of revenue achieved in 2019 would see Vinci Energies’s market share expand by almost 50%.

But S&P said it could also could change Vinci’s business mix disadvantageously by cutting the proportion of earnings got from more stable concession businesses, from about 70% of EBITDA now.

The agency noted that many of the division’s contracts are in service and maintenance, which are capital light but less stable than infrastructure.

It said Vinci’s ability to absorb the division depends on how fast Vinci can return to strong cash generation.

A barrier to that could be Vinci’s airports business, which has been hammered by the pandemic.

Yesterday Vinci said passenger numbers across its 45 airports in the third quarter of 2020 were down 79.1% on the same period the previous year.

Over the first nine months of 2020, cumulative passenger numbers had fallen 67.9% compared with the first nine months of 2019, it said.

Image: Passenger numbers are down 68% across Vinci’s 45 airports (Photograph supplied by Vinci)

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