M&A in Spanish road & rail transportation

M&A in the transportation market in Spain

We do expect quite some consolidation and hence M&A activity to see in the Spanish transportation market over the next years. Being able to deliver road transportation at low prices is crucial and hence scale (and cheap financing possibilities) is an important driver to compete. In 2011 the Spanish road and rail market reached a value of $34 billion. In 2016 the rail & road industry is forecast to have a value of $52 billion, an increase of 53% since 2011. Road freight is accounting for 99% of the transportation market value. The market in Spain accounts for 7,3% of the European market value. During the growth of the Spanish transportation market we think large buyers will grow their market share organically and via M&A activity.

Earning capacity in road transportation

Road and rail can be substitutes for each other, as the rail network is not very developed in Spain its treat is weak. Buyer power can be considered as moderate, large buyers can integrate backwards by establishing their own fleet. Buyer power is reduced by the large variety of potential customers, coupled with the importance of services offered within the industry Barriers of entry are low as everyone can buy a used truck and start a transportation company. Main inputs are fuel and vehicles, supplier power can be considered as moderate. Rivalry can be considered as very strong as the segment contains a large number of players with limited possibilities to differentiate the product. Despite challenging market conditions, the road and rail market is forecast to grow over the coming years. This should alleviate rivalry somewhat. The large variety of potential customers, coupled with the importance of services offered within the industry, reduces buyer power significantly. As the road transportation segment is very fragmented M&A activity can be expected.

M&A activity by leading companies in Spanish road and rail Logistics

Some companies that have performed M&A related activity and are important companies in road and rail freight are;

• Acciona
• Deutsche Bahn AG
• FCC Logistica S.A.
• M&A activity Acciona

On June 2011 Atlantia S.p.A., an Italy-based toll road operator, has acquired the remaining 50% stake in Sociedad de Operacion y Logistica Infraestructura SA (Operalia) from Acciona a diversified business group. Operalia is responsible for road maintenance and construction services on the section of motorway operated by Vespucio Sur.

Acciona is through its subsidiaries involved in several areas and operates in more than 30 countries worldwide. The company mainly operates through seven business segments: infrastructure, real estate, logistics and transport services, urban and environmental services, energy, water, and other business. The company recorded a revenue of $8 billion in the fiscal year ending December 2010.

The logistic and transport segment provides passenger and freight transport services by land, sea and air. Trasmediterránea, Spain & apos’s are involved in passenger and freight transport by sea. Airport Services provides airport management and handling services in Spain and Germany. It is also involved in long-distance trucking, rail, logistics and distribution.

M&A activity Deutsche Bahn AG

M&A deals include the sale in March 2011 of DB Vertrieb GmbH (trading as start.de) to SoQuero GmbH and the sales of Gruppo Ferrovie dello Stato SpA, based in Italy On February 2011. As a further M&A activity Cube Infrastructure Fund acquired Arriva Deutschland GmbH from Deutsche Bahn AG. In September 2007 Deutsche Bahn AG completed its takeover of Spain-TIR, a logistics company providing domestic land transportation, customs, warehousing and distribution services.

Deutsche Bahn (DB) is an international transport and logistics services provider. Deutsche Bahn has operations through 860 subsidiaries located in 130 countries. In Germany DB operates through 169 subsidiaries. The company recorded revenues of $46 billion in the fiscal year ending December 2010, an increase of 17% compared to fiscal 2009.

The company operates through ten business segments: DB Bahn long-distance, DB regional, DB urban, DB Arriva, DB Schenker rail, DB Schenker logistics, DB Netze track, DB Netze stations, DB services and subsidiaries. The company operates 27.000 trains and 5.000 freight trains per day. It carried 415 million tons of rail freight; 80.8 million shipments to European land transport; 1.6 million twenty-foot equivalent units (TEU) of ocean freight; and 1.2 million tons of air freight. Further, it managed a fleet of 106,000 vehicles and 7,000 bikes.

M&A FCC Logistica S.A.

In July 2010 Marina Port Vell S.A. (Barcelona Marina) from Global Via Infraestructuras, S.A. was acquired by Salamanca Capital Investments, Ltd, a UK-based private equity firm. The M&A transaction is part of Global Via’s parent company FCC’s plan to dispose of a number of non-core assets.

On November 2007 FCC-Connex Corporacion sold Corporacion Espanola de Transporte, S.A. (CTSA), a bus operator in Spain, for an enterprise value of around EUR90 million to Doughty Hanson & Co.

FCC Logistica S.A. is a subsidiary of Group Fomento de Construcciones y Contratas and has operations in both Spain and Portugal. FCC employs 4600 people. The company offers supply chain solutions covering ambient and controlled-temperature transportation and operates 64 warehouses and logistics platforms. FCC is segmented into 7 different business units, Automobile Pharmacy, Transportation, Customs, Consumption, Retail and Portugal.