Autostrade (Aspi), what the pacts between Cdp, Blackstone and Macquarie really say
What do the shareholders' agreements of Hra (owned by Cdp, Blackstone and Macquarie) which controls Autostrade per l'Italia (Aspi) provide? Giuseppe Liturri's analysis
The controversial sale of 88% of the shares of Autostrade per l'Italia (Aspi) by Atlantia of the Benetton family in favor of a consortium (Hra Spa) which sees Cassa Depositi and Loans (through its subsidiary Cdp Equity Spa) at 51% and two foreign funds (Blackstone and Macquarie) at 24.5% each.
It was Giorgio Meletti in the newspaper Domani , then taken up by Marco Palombi in the Fatto Quotidiano , who brought to light the content of the shareholders' agreements stipulated between all the shareholders of Hra – aimed at defining the corporate governance rules to be applied both at the level of the parent company Hra that of the subsidiary Aspi – to denounce the imbalance in favor of foreign funds.
Those pacts were signed on May 3, 2022, two days before the transfer of the Aspi shares in favor of Hra and are, according to Meletti , " the secret pact that authorizes private funds to strip Autostrade " or, as the Fact has titled, the pact that allows the two foreign funds to “ fleece ” Autostrade. He accuses the Treasury of having lied by claiming that " with 51% the state commands ".
The attempt to keep the attention on a story alive – which started with the initial concession in favor of the Benettons, passed through the tragedy of the Morandi bridge and ended with the sale of last May – which still presents numerous obscure points or passages in which the public interest does not appear to have been defended in the best way. However, we would like to express many doubts as to the validity of some of the allegations.
Accusations that are articulated along two lines:
- A dividend policy very favorable to shareholders, which provides that " Hra and the entities belonging to the Group distribute to their respective shareholders, on a half-yearly basis, the available cash resulting from the financial statements ".
- The need for reinforced majorities to deliberate in the shareholders' meeting and in the board of directors which, in fact, attribute to the two minority shareholders the right to decisively participate in particularly qualifying choices (the so-called "meeting reserved matters" and "board reserved matters ") For the management and the future of the parent company and the subsidiary Aspi. A qualified quorum is envisaged for voting on these matters, requiring the mandatory consent of the representatives of the two foreign funds. De-powering, in fact, the control of the state, via CDP, over the group.
Before entering into the merits of the two points, it is useful to recall a point that the author meritoriously underlines. To argue that Cdp is outside the perimeter of the Public Administration for Eurostat purposes – as did the general manager of the Mef, Alessandro Rivera – is a fig leaf that does not hold up when it is necessary to account for the work of the same company. CDP is 83% owned by the Mef, which in any case owes some answers, even if CDP is engaged in " entrepreneurial activities, in compliance with the principle of a private investor operating in a market economy ". To affirm, as Rivera did, that there has been " no disbursement by the state" is a forcing that is based on formal elements and is not very respectful of the substance that still sees taxpayers' money involved. Hiding behind a mere accounting convention means trying to avoid the problem.
But then the state made a bad deal, buying ASPI in company with foreign funds?
Because of how it began and how it came to the conclusion of the story, probably yes, but the accusation against foreign funds of wanting to strip the cash register and actually control ASPI, does not hold up for two simple reasons. The first, even trivial, is that emptying the cash (when there is!) At the end of the year would obviously be in favor of all the shareholders. So if there is someone who is "plucking" Aspi it is, above all, Cdp Equity (and therefore the State) at 51%, followed by the two funds at 24.5% each. It would have been different, and truly scandalous, if the three shareholders had been entitled to dividends that were not proportional to the capital. But this is not the case. So where is the scandal, if they all feast in proportion?
The second point is more technical and derives from the complete reading of article 6.5.1 of the shareholders' agreements: " As a general rule , the Parties have undertaken to ensure that HRA and the entities belonging to the Group distribute to their respective shareholders, on a half-yearly, the available cash resulting from the financial statements, in accordance with the restrictions deriving from the applicable legislation as well as from the concessions and related regulatory provisions , to the extent applicable, and in compliance with the statutory provisions of HRA and / or ASPI and the policy on the financial structure. "
The underlined parts tell us three things:
- We are in the presence of a "general rule" and therefore not mandatory but rather susceptible to exceptions.
- The "free cash" ("free cash flow" or FCF) does not mean at all – as experts know – that "every euro of profit will automatically become a euro of dividend". In fact, it is understood that the available cash is only the residual one after having financed the investments. In business practice, words have this meaning. In short, something quite normal has been foreseen, especially in companies with very regular cash flows operating in protected markets: investments are financed with the profit and what remains is distributed to shareholders.
- Finally, the rules must be read all of them, because this must be done " in accordance with the restrictions …" . That is, there are very specific constraints to be respected linked to the concession that Aspi benefits from and to all the regulations governing a very complex matter. No Far West and assault on the stagecoach.
The accusation of granting Blackstone and Macquarie "de facto control of the highway concession" due to the presence of qualified quorums is equally questionable.
What did you want? That those who invested billions of euros acted as a ball boy on the sidelines, without touching the ball on the pitch? It is normal practice for the government of a company with a narrow majority of 51% – while conferring legal control to Cdp – to establish robust counterweights in favor of those who invested 49%, which certainly cannot be equated with a shareholder with percentages to be zero point. The qualifying board decisions – loans, investments, purchase or sale of Aspi shares, etc… – must therefore see the vote of at least one director appointed by each of the two funds. Same mechanism for the quorum of the shareholders' meeting and for corporate offices, where Cdp expresses President and CEO, the funds express vice president, CFO and president of the board of statutory auditors.
That type of shareholder agreements are the normal practice in Italy and in the world, especially by private equity funds, because they are a reasonable protection sought and obtained by those who must defend their investment and demand that strategic decisions must necessarily be shared, at least when you own 49%. Whoever has a majority of 51% in no society has absolute powers.
If this structure prevents the state from having full control of the company, CDP could have bought 100% and thus avoided any negotiation and conditioning, arriving however at the paradoxical conclusion of putting the “gift” to the Benettons entirely on the public coffers. Of course, we understand the disappointment arising from a relative breadth of "reserved matters". Perhaps it would have been possible to negotiate better and narrow that perimeter, but details appear with respect to the substance of the rights to be granted to minority shareholders. Just look at any equity investment by private equity funds to find similar corporate governance mechanisms.
In any case, perhaps Dario Scannapieco and his team, instead of engaging in a difficult renegotiation operation , should wait for the pact to expire in May 2025.
Unfortunately the oxen escaped during the little less than 4 years from August 2018 to May 2022 and now climbing on mirrors only serves to increase regrets.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/aspi-cessione-cdp-blackstone-macquarie/ on Fri, 14 Oct 2022 06:27:31 +0000.