March 31, 2013 5:15 pm

Impregilo / Salini – half built

Businessman’s ‘national construction champion’ palaver looks overdone

List Europe’s biggest construction firms, and Italian names are as scarce as brickies after opening time. Roman businessman Pietro Salini, via his privately owned building group Salini, wants to change this. Last year he waged a complex but successful proxy battle for boardroom control at Impregilo, Italy’s biggest construction business. Now he is offering €4 a share in cash for the 70 per cent of the Milan-listed company his group does not own. Mr Salini talks energetically about creating a “national champion”. Investors should be wary.

The national champion palaver looks overdone. Combining Salini and Impregilo would create a group with 2012 sales of €4bn – a mere 10th of the level of France’s Vinci. Salini’s offer capitalises Impregilo at €1.6bn and looks underwhelming. Finding an undisturbed price is difficult given the protracted nature of this takeover saga, but Impregilo’s shares had settled at about €3 late last year. Annual synergies from merging the two businesses have been put at €100m, which, taxed and capitalised, equates to €1.75 a share. At the €4-a-share offer price, Impregilo trades at an enterprise value to 2013 earnings before interest, tax, depreciation and amortisation ratio of about four. Vinci trades on six times; Skanska higher still. Even advisers to Impregilo’s independent directors have produced possible offer ranges above €4 per share at the upper end.

Impregilo shareholders are to receive a dividend of about €1.50 a share through the return of some of the proceeds from the €925m sale of its Brazilian motorway unit. But how long the company’s stock market listing will last is unclear, even if Gavio, a big shareholder opposed to Salini’s plans, remains obdurate. There is talk of relisting the merged group in the future. Meanwhile, Mr Salini is loading up on debt to fund the merger. Not so champion.

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