All eyes in the Spanish financial market are currently pointing to Ferrovial. The infrastructure company has become “on everyone’s lips” after announcing its intention to merge the parent company with its Dutch subsidiary, which implies the transfer of its headquarters to the Netherlands. Spain in Amsterdam to later make the leap to Wall Street.
The group chaired by Rafael del Pino argues that the shares of a Spanish firm have the option of listing in the US through ADRs (American Depositary Receipts), as other ‘Ibex values’ already do, including Grifols, Banco Santander, Naturgy or BBVA. This formula that allows trading shares of foreign companies in the North American country, to have a presence in that market, but without abandoning the domestic market. The fine print that Ferrovial defends against opting for this formula is that they do not give access to the US stock market indices. But it is an operation that in order to go ahead will have to have a broad consensus among shareholders.
The value of the Ibex limits the maximum compensation that it is willing to pay to those shareholders who oppose the operation and exercise their right of separation to 500 million euros. A budget that only gives to compensate the shareholders for 2.6% of the capital. The company indicates in the operation document that if that term were exceeded, it would resign from the project. Other conditions are having the “reasonable” certainty that the shares of FISE (Ferrovial Internacional and absorbing entity) -which are listed on no market- will be admitted to trading on Euronext Amsterdam and on the Spanish stock market. The unknown is: what will happen if any of these factors fail and their planes are truncated?
Given that the possibility of making use of the aforementioned ADRs is not an option for Ferrovial, an alternative if it finds itself blocked by shareholders in its merger project could be to emulate Iberdrola and make its debut on Wall Street with its US subsidiary. . Electricity is present on the New York Stock Exchange through Avangrid. From the outset, the company has wanted to make it clear that its intention is to continue growing in the US, where it hopes that its business will grow even more there, where nine out of ten projects that have been committed over the next five are concentrated.
“The United States is characterized by being one of the world’s largest transport infrastructure markets and by having one of the largest investment communities in the world,” they defend from Ferrovial. Among them, the new terminal 1 of the JFK airport in New York and the I-66 highway in Virgini stand out, among others, projects that will help them strengthen their long-term strategy. However, analysts view this measure as an attempt to disassociate themselves from any institutional relationship with Spain, so that the market does not take “country risk” into account when betting on Ferrovial, if one takes into account that less than one 10% of its institutional investors are Spanish.
Regarding the choice of the Netherlands, they assert that it represents an opportunity to position themselves worldwide and allows them direct access to the New York stock market thanks to the existing trade agreements between the two countries, in addition to “improving” their financial conditions at which time the central banks have begun to reduce the balance.
“Netherlands-based companies have benefited from lower volatility in their funding costs thanks to a more stable country risk premium compared to other European countries. That lower volatility should mean that, going forward, financing costs are reduced in the company’s debt issues and, in the long run, also in improvements in the total cost of capital”, they have argued.
The premiere of Wallbox in the US sets a precedent
One of the ‘made in Spain’ companies that has directly made the leap to the New York Stock Exchange has been Wallbox. The manufacturer of charging points for electric cars, whose main shareholder is Iberdrola, with a stake of 11.5%, debuted on this floor in the third quarter of 2021, when it reached a maximum of 18.5 euros. Almost half a year after their titles are worth almost 70% less and move around 5.6 euros.
A similar trend follows Avangrid, which corrects 30% from the 2020 highs and its shares oscillate around 38 euros. The ‘Bloomberg’ consensus raises alarms about this value, since it only has 10% buy recommendations and 50% maintenance, with a potential of 9.4%.
The announcement has not generated significant changes in the Ferrovial price, which accumulates an advance of 1.8% between the sessions on Wednesday and Thursday. After closing on Thursday at a price of 26.7 euros, it is only 6% of its all-time highs, reached in January 2020, just before the pandemic. Analysts believe that it has the potential to even reach 30 euros.
With a total capitalization that is close to 19,500 million, the bulk of investment banks view this measure favorably. One of them is Citi, from which they assure that it can strengthen confidence among investors, while Mirabaud highlights “the best economic context” that the US presents compared to Europe, and also benefits “from the tailwinds of the foreign exchange”.
