Wed, May 17, 2017 - Page 10 News List

Spain recovery draws foreign investors

FUN IN THE SUN:The nation’s economic recovery has now extended for 14 straight quarters and data show that M&A have risen 57% year-on-year in the past 12 months

Bloomberg

Spain Inc is back in fashion. Italy’s Atlantia SpA on Monday announced a 16.34 billion euro (US$18.03 billion) bid for Abertis Infraestructuras SA that would create the world’s biggest toll-road operator, a deal that might be the largest takeover of a Spanish company in 10 years.

The offer is a sign of the growing attractiveness of the country’s assets as the economy, ravaged during the financial crisis, continues to heal.

The volume of mergers and acquisitions (M&A) involving Spanish targets has increased 57 percent to about US$63 billion in the last 12 months, according to Bloomberg data.

If successful, Atlantia’s bid to buy Abertis would be the biggest since 2007 when Italy’s Enel SpA along with Spanish infrastructure firm Acciona SA bought power company Endesa SA in a landmark deal before the economy lapsed into a five-year slump at the end of 2008.

Atlantia’s offer is “a vote of confidence in Spain and shows how the country’s companies are now becoming anchored in the global economy,” said Mauro Guillen, a management and international relations professor at the University of Pennsylvania’s Wharton School.

Interest from foreign investors has grown as the Spanish economy continues a recovery that has now extended for 14 consecutive quarters.

The election of Spanish Prime Minister Mariano Rajoy of the pro-business People’s Party to a second term in office last year has also helped seal a period of political stability for the country.

The increasing confidence in Spain last year paved the way for three significant deals. Europe’s biggest publicly traded healthcare provider Fresenius SE agreed to buy Spanish hospital group IDC Salud Holding SLU, also known as Quironsalud, for 5.76 billion euros.

Canada’s Global Infrastructure Partners bought a 20 percent stake in Spain’s gas supplier Gas Natural SDG SA for 3.8 billion euros, and Europe’s largest engineering company Siemens AG and Gamesa Corp Tecnologica SA agreed to combine their wind-turbine manufacturing businesses.

That compares with previous years when some of Spain’s biggest publicly traded companies bought businesses abroad to reduce exposure to their home markets. In 2014 alone, Spanish companies spent US$22 billion buying assets outside the country, mainly adding businesses in the Americas, Bloomberg data showed.

However, there might be clouds on the Spanish horizon.

As the leader of a minority government, Rajoy might struggle to achieve much more in terms of economic reforms. The opposition Socialist Workers’ Party, whose goodwill on key legislation Rajoy needs to ensure the nation’s parliament does not become gridlocked, are also embarking on a leadership contest with party primaries due on Sunday.

A win for former Socialist Workers’ Party leader Pedro Sanchez, a fierce critic of corruption scandals swirling around the People’s Party, would lead the Socialists into more open conflict with Rajoy and his government.

For now, Spain’s economic recovery is on course and set to attract more foreign investment as the government expects the economy to average 2.5 percent growth over the next four years.

“The combination of growth and value means Spain will stay in an investment sweet spot,” Madrid-based asset management firm Tressis Gestion chief investment officer Daniel Lacalle said.

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