Hochtief AG (HOT), Germany’s largest construction company, agreed to sell its airports division to Public Sector Pension Investment Board of Canada as it narrows its focus to building.
The deal values the business, which has stakes in airports in Athens, Budapest, Dusseldorf, Hamburg, Sydney and Tirana, at about 1.5 billion euros ($2 billion) and Hochtief will get 1.1 billion euros as some shares are held by business partners, the Essen, Germany-based builder said in a statement.
“The price makes it look more like a gift,” said Marc Gabriel, an analyst at Bankhaus Lampe KG. “In the end, there’s not much left for the shareholders because no extraordinary result was achieved with the sale. OK, they managed to sell it after almost four years, but the price is not sexy.”
Chief Executive Officer Marcelino Fernandez Verdes, who took over in November and comes from majority owner Actividades de Construccion & Servicios SA of Spain, is reversing a decade- long strategy of expanding into services. Hochtief, scheduled to report first-quarter earnings today, is also looking into selling its real-estate development, facility and energy- management units.
“You can’t generate much margin with infrastructure and building and you have to take on high risk,” said Bankhaus Lampe’s Gabriel, who has a hold rating on the stock. “That puts a big question mark on whether it will work to completely focus on building again.”
Hochtief predicts a full-year pre-tax profit of between 600 million euros and 680 million euros after the sale of the airports, with net income reaching between 180 million euros and 220 million euros, it said today. It had earlier forecast net income of between 174 million euros and 190 million euros. The forecast excludes restructuring costs.
First quarter pre-tax profit climbed to 123 million euros from a year-earlier loss of 92 million euros. The average estimate of three analysts surveyed by Bloomberg was 111 million euros.
Hochtief shares rose 5.1 percent to 56.11 euros as of 10:15 a.m. in Frankfurt trading, valuing the company at 4.3 billion euros. Before today, the stock had risen 22 percent since the start of the year, while the Stoxx 600 Construction and Materials Index gained 4.2 percent.
In a failed attempt to sell its six airports last year, bidders including Vinci SA (DG), Europe’s biggest builder, and China’s HNA Group, offered more than 1 billion euros for the unit, while Hochtief valued it at as much as 1.6 billion euros, people familiar with the process said at the time.
“The transaction is the result of a very competitive tendering process,” and Hochtief expects no significant “extraordinary earnings impact from the transaction,” it said in the statement. The sale to PSP Investments, based in Montreal, is subject to certain conditions and the transaction is expected to close in the second half of the year.
Hochtief may pay a special dividend following its disposals, Fernandez Verdes said when presenting 2012 full-year results in February.
Hochtief, the builder of Frankfurt’s Commerzbank tower, plans to dedicate the proceeds from unit sales to repaying debt, investing in the infrastructure division and entering new industries, it has said.
“The reason they give for the sales is to bring down net debt,” Gabriel said. “The net debt of Hochtief isn’t really the problem, it’s more the net debt of ACS.”