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Analysis and Recommendations

In: Philosophy and Psychology

Submitted By ompashupati
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Analysis & Recommendations
We estimate the range of values for the 48% common equity stake of ACS to be between $647 to 684 million under the Damodaran Modified World CAPM approach .This range of values is based on WACC values that range between 6.74% and 7.03% when the cost of equity capital is calculated using the Damodaran Modified World CAPM. At these valuations, the range of the total value of the 100% common equity of Autopista Central goes from $1.3 to 1.4 billion. This range of values is significantly higher than the amount of invested capital in the project of $813 million (including subordinated debt).
Besides the fact that asking for an initial high price is a good idea in negotiations, we believe that ACS should ask for the highest value obtained in the Damodaran Modified World CAPM model or $685 million. This is recommended because we believe that Abertis and Santander should pay a control premium of 10 – 20% given the macro economic conditions of the time and the strategic value that the Autopista Central asset means for each prospective buyer. If we apply the 20% control premium to the highest range of the EHV based valuation of $556 million, we obtain a value of $667 million. This value is within range that ACS will be pressing to use under the more favorable discount rate that using the Damodaran Modified World CAPM provides them.
Abertis, who is an expert in managing existing toll roads, would presumably be able to generate cost synergies if not revenue synergies when operating Autopista Central. Furthermore, said synergies would probably be easier to realize as the toll road would fit into Abertis’ existing Chilean infrastructure portfolio and probably allow for some reduction in duplicated administrative expenses.
In the case of Santander, finding attractive infrastructure investments that could help them draw more investors to...

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