The Boards of Directors of Grupo ACS and Grupo Dragados announce their intention to merge, creating a European leader
• The New Group will be a European leader in the infrastructure and services sectors by turnover, diversification, profitability and market capitalization. • The New Group will be the clear number one in Spain in construction, waste management, port and logistics services, industrial services and development of infrastructure concessions. • The merger will create a New Group with a balanced and diversified portfolio of activities. Additionally, it will have a strong financial profile, ideal to take advantage of the growth opportunities in the sector, in order to enhance EPS and to create value for shareholders. • The integration of both groups will generate operating and financial synergies that are estimated to reach approximately €75 million by year-end 2006. • The New Group will have a free float of over 60%, an enterprise value of over €6.2 billion and a market capitalization of approximately €4.4 billion before considering value creation through synergies. • The merged entity will be organised into four business areas, being an unrivalled leader in all of them: construction, urban and logistics services, industrial services and concessions. • It is expected that the new shares will begin trading in December 2003. The Boards of Directors of ACS Actividades de Construcción y Servicios, S.A. and Grupo Dragados, S.A. have agreed to propose a merger between both companies, whereby ACS will issue new shares in exchange for Dragados shares. The Boards of Directors, which have been advised by Lazard (ACS) and Goldman Sachs International (Dragados), have proposed an exchange ratio of 33 new ACS shares for each 68 shares of Grupo Dragados. Merrill Lynch and Citigroup have rendered a fairness opinion to ACS and Dragados respectively. After publication of a report by an independent expert, to be appointed by the Mercantile Registry, both companies will call Extraordinary Shareholder Meetings, which are expected to take place in October. If the shareholders of both companies approve the merger, the share for share exchange and the listing of the new ACS shares could take place in December. ACS will issue 54.46 million new shares to Grupo Dragados shareholders, representing 46% of the share capital of the New Group. The New Group will be the absolute leader in the Spanish infrastructure sector, being the number one in construction, urban waste management, port and logistics services and, in addition to Spain, leader in industrial services in Portugal and Latin America. The New Group will also be the world number one infrastructure concession company, as core industrial shareholder in Abertis, the world leader by number of road transport infrastructure concessions. Based on results for year-end 2002, the combined revenues and net profit of the New Group for fiscal year ended December 2002 were approximately €10 billion and €359 million respectively. According to estimates for the current fiscal year, revenues are expected to exceed €10.8 billion and EBITDA is expected to exceed €900 million, which will position the New Group as a clear benchmark for the sector in Europe and a leader in construction and services in Spain by revenues, net profit and profitability. 50% of revenues will be derived from services The New Group will be a highly diversified company, with approximately 50% of revenues derived from construction and 50% from services activities, and will have strong cash-flow generation. The New Group will be organised into four main business areas: Construction, Urban and Logistics Services, Industrial Services and Concessions. Based on the 2002 pro-forma financials, Construction represents 53% of turnover, Industrial Services 28% and Urban and Logistics Services 19% (concessions are equity accounted) Strategy focused on profitable growth in all business areas The strategic objectives of the New Group will include: maintaining strong growth based on a corporate culture, which is focused on client service and product specialisation maintaining competitive advantage, based on its human capital, which guarantees quality, technical excellence and innovation optimising the profitability of the resources managed, as demonstrated by both companies in the past In Construction, the New Group aims to consolidate profitability, mainly focusing on civil works and, in particular, on sizeable projects, which require specialization and value added. In the international area, the New Group will follow a selective expansion strategy, building its presence in more stable countries with greatest future prospects, while, in Concessions pursuing projects entailing construction activity. The increasing demand for private capital to finance substantial infrastructure works, both in Spain and, more recently, in the European Union, will play to the clear competitive advantage of the New Group with respect to its sector peers, based on its technical skills and strong financial profile. In Urban and Logistics Services, the new entity will focus on four main areas, in which the company already has leading positions: environmental services, port and logistics services, integrated maintenance and transport. In Environmental Services, the New Group will manage 45 plants in Spain, thanks to its world technical leadership. In Port and Logistics Services, the New Group will manage more than 2.5 million containers (“TEUs”) thanks to its privileged presence in Spanish ports. In Transport, more than 50 million passengers will use the New Group's regular road transport services. In Industrial Services, the merger between ACS and Dragados will boost the development and execution of projects by allowing the New Group to be present along the whole value chain: promotion, engineering, installation and maintenance, covering the electricity, oil & gas, industrial, telecommunications and transport sectors. In Industrial Services, the two companies had combined revenues of €2.8 billion last year, 23% of which were generated in the industrial sector, 30% in the energy sector, 19% in the oil & gas sector and 28% in the telecommunication systems and industrial, railway and traffic control segments. By geography, 71% of revenues were generated in Spain. World leader in concessions and main shareholder of Abertis In Concessions, the New Group will be a world-leader, with 42 road concessions with over 1,500 km of highways, 2 railway concessions which total 1,500 km of railway, 5 airport concessions, handling 31 million passengers in the 16 airports managed and with 135 car parks, involving 100,000 parking spaces managed. With its experience and financial capacity, the New Group will be the world leader in promoting, financing and building new transport infrastructure, as well as the core industrial shareholder in Abertis, holding a stake of 11.5%, stake which the New Group intends to increase Abertis is the leading European concession company by shareholders' equity (€2.0 billion), the second by market capitalisation (€6.0 billion), the second by net profit (more than €300 million) and the third by number of kilometres managed (1,500 km). Great value creation potential The combination of ACS and Dragados will create, over the next three years, annual synergies of approximately €75 million as a result of the optimisation of central costs, economies of scale, productivity increases and tax savings from the amortization of the existing goodwill. Additionally, as the Spanish leader and one of the top-three European companies in the sector, the New Group will be a benchmark for the domestic and international capital markets, with enhanced liquidity. The merger will increase the profitability of resources managed, and will allow the New Group to take advantage of new business opportunities arising both in the private and public sectors and, in particular, in the public infrastructure sector in Europe, both in existing EU countries and from new projects derived from the enlargement of the EU.
