Economy

Internationalization of Spanish companies at the stroke of a checkbook

Internationalization of Spanish companies at the stroke of a checkbook

Surprising solvency and liquidity of large Spanish companies Faced with the delicate situation of SMEs and households that continue to await the reactivation of bank credit after 6 years of economic and financial crisis. Two "spains" at different speeds.


The increase in acquisitions of the large Spanish groups of the Ibex-35 abroad during 2014 shows progress towards a new phase of international expansion, like the one that took place at the end of the 90s with the landing in Latin America and the last decade in the British market.

This internationalization of Spanish companies has intensified at the stroke of a checkbook. Throughout 2014, the volume of foreign corporate operations amounts to 23,000 million euros, a historical amount that had not been reached since 2007, before the economic and financial crisis began.

After several years of reorganization, cost control, employment regulation files, dividend restrictions and balance sheet “cleaning”, these companies are now again in a position to grow inorganically due to the need to strengthen their international business and reduce the dependence on the Spanish market, taking advantage of emerging market opportunities and improving financing conditions.

Telefónica buys in Brazil and Germany

By importance, Telefónica highlights, with the acquisitions of the Brazilian operator GVT and the German E-Plus, both valued at approximately 12,500 million, more than 54% of the total invested in 2014. These purchases have made Telefónica a leader in terms of clients in both markets (Brazil and Germany), with a contribution from Brazil to its EBITDA (profit before interest, taxes and amortization) of 4,400 millions of euros.

Gas Natural, Cepsa, Grifols ...

The most recent and important operation has been the offer of 2,600 million by the Chilean Company General de Electricidad (CGE) by Natural gas.

Cepsa, controlled by the Abu Dhabi sovereign wealth fund, IPIC, formalized in January the acquisition of the oil company Coastal Energy for 1,550 million euros to increase its exploration and production assets, especially in Southeast Asia.

Grifols bought the Swiss company Novartis' transfusion diagnostics subsidiary. The plasma manufacturer, which gave a boost to its international business three years ago by taking control of the American Talecris for more than 2,600 million, obtains more than 60% of its income outside of Spain.

Likewise, it is estimated that Iberdrola may launch an offensive for control of the Brazilian company Neoenergía, merging it with its subsidiary Elektro, and the recent drop in crude oil may facilitate Repsol find oil companies at an attractive valuation in North America.

A very active company in recent weeks has been Ferrovial. To the acquisition of the Australian company Macquarie and three British airports for 1,300 million, we must add the recent offer of 700 million euros by the Australian group of services and infrastructures Transfield.

In the tourism sector, the purchases of the American Newmarket and the German i: Fao by Amadeus, while the RIU hotel chain acquired a resort on the Island of Guadalupe (Mexico) for 32 million euros.

Financial sector

Santander has acquired the Swedish consumer finance subsidiary of GE Capital and Canada's Carfinco, for more than 900 million euros, while Popular has invested in Mexico and BBVA and Sabadell they have done it in the US.

For its part, Mapfre has disbursed 550 million to grow in auto insurance in Italy and Germany.

Other operations with which the market speculates are the purchase of the minority of Santander México by the Spanish bank, or BBVA could increase its position in the Turkish bank Garanti to take over the majority of the capital.

Perspectives

Despite the rebirth of these types of transactions, the total value of purchases abroad in 2014 still does not reach the levels of 2004-2007, when Santander, Ferrovial, Telefónica and Iberdrola launched multimillion-dollar Public Acquisition Offers (OPAs) for the firms Abbey National, BAA, O2 and Scottish Power, respectively.

These operations in a stable market such as the United Kingdom served the Spanish groups to offset their exposure in the emerging countries of Latin America.

Now, the third phase of this internationalization process seems destined to complement the assets in these regions, rather than to search for new frontiers, except for Ferrovial's Australian adventure.

As in the early stages of the international landing, the Ibex giants could drag behind a large number of medium-sized Spanish companies in search of new markets. The market also foresees that the rhythm of corporate operations of Spanish multinationals abroad will continue during the end of 2014 and in 2020.

However, It is surprising that the “most benefited” sectors of the Spanish economy (banks and energy companies) have sufficient resources to invest in other countries, while the rest of the Spanish economy bleeds out or is sold to foreign vulture funds.

Image credit: freepik

Post author

Jorge Hernandez Degree in Economics from the University of Murcia. He is responsible for Financial Planning and Reporting in the Digitex Group. Previously, he worked as a Financial Analyst in the Valuation and Business Modeling area of ​​Deloitte.



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