ITALY. Could a major merger or acquisition be brewing in the food & beverage concession business? That’s the question being asked by members of the investment community after Autogrill’s announcement on 11 April that it had embarked on a corporate reorganisation.
As reported, the Italian parent of HMSHost and HMSHost International said the revamped structure would transfer the Italian business to a wholly owned subsidiary. In turn that would mean full flexibility to implement extraordinary operations related to the company’s three key geographic businesses – Italy, the remainder of Europe and HMSHost.
On the day of the announcement (11 April), Autogrill’s stock rose sharply, climbing by +8% to around €10.16 on conjecture that the ground was being laid for a significant M&A play. This morning (09.30 Italian time), the stock stood at €10.22. “Looks like World Duty Free take two” one investment banker told The Moodie Davitt Report, a reference to Autogrill’s spinning off its former World Duty Free Group business, ultimately sold to Dufry.
This year Autogrill will be a circa €430 million EBITDA business with the US accounting for around 60%, Italy for 15% and the rest of the world the balance.
In a note, equity research group Kepler Cheuvreux said: “Following this news and given the significant combination opportunities with Elior and SSP, we use a 50% probability of an M&A scenario (implying €12 per share) in our target price, which was based purely on fundamentals (€9.8 per share). We lift our TP to €11 and stick to our positive stance.”
Arguing the case for a likely M&A play, it commented: “The operation will simplify Autogrill’s corporate structure with the listed parent company just carrying out administration and management activities of the operating subsidiaries in Italy, the rest of Europe and HMS Host (where the North American and international business is concentrated). We estimate the reorganisation could take around 6-9 months.
“Before this operation, any deal involving the separation of the Italian business was made difficult by the operating status of the holding company (the Italian business being “inseparable” from the listed parent company). When completed, Autogrill would have full flexibility to buy/sell/combine any of its activities with other sector players, such as Elior or SSP.”
SSP stock has performed strongly over the past year, rising from 294.20 on 18 April 2016 to its current level of 451.20. It is present in over 30 countries and has more than 400 brands in its portfolio.
Elior owns fast-growing international F&B concessionaire Areas, the sector’s third-ranked player after HMSHost and SSP. Areas is present in 13 countries. Elior’s separate contracting catering business, which embraces multiple areas including day care, schools, universities and retirement homes, ranks fourth in that sector globally. Its stock is currently trading at €21.785, compared to €18.95 one year ago.
NOTE: The Moodie Davitt Report also publishes The Foodie Report, the world’s only media focused on airport (and other travel-related) food & beverage. The Foodie Report e-Newsletter is published every two weeks and The Foodie Report e-Zine every month.
Please send all news of food & beverage outlet openings, together with images, menus, video etc to Martin@MoodieDavittReport.com to ensure unrivalled global exposure.
The company also organises the annual Airport Food & Beverage (FAB) Conference & Awards.
FAB 2017, hosted by Greater Toronto Airports Authority, will take place in Toronto on 21-23 June. For details, click here.
