Cashes Out: Top Guns Exit Construction Giants Amidst Hefty Infrastructure Boom
cru Frankfurt
Stockholders are refusing multiple stock offerings
The financial industry's heavyweights are cashing out left and right, selling stakes, divesting, or diversifying their wealth portfolios to rake in the big bucks. This year alone, the volume of large block trades via secondary offerings - aka accelerated bookbuilding - has hit an all-time high of €26.6 billion in Europe.
One recent case in point: Heidelberg Materials. Selling shares worth €263 million of the DAX-listed construction materials company have just hit the market, and it all went down via accelerated bookbuilding. This move by supervisory board member and entrepreneur Ludwig Merckle — the eldest son of Adolf Merckle — reduces his stake by 1%. The remaining 27.6% held by the Spohn Cement holding can't be shifted for at least 60 days.
Uniqa Jumps Ship on Strabag
The Merckle deal has Uniqa's exit from construction group Strabag written all over it. Uniqa sold 1.5% of its stake for a cool €140 million, and there's more: the Spanish del Pino family has sold 0.8% of its stake in infrastructure group Ferrovial via their holding Casa Grande de Cartagena.
All three block sales in the construction sector have one thing in common: the shares of the three affected companies — Heidelberg Materials, Strabag, and Ferrovial — saw a significant surge, part thanks to the federal government's multi-billion infrastructure package. Heidelberg Materials' share has risen by almost 50% since the start of the year.
Merckle Deal Minimizes Loss
Before the accelerated bookbuilding on Wednesday, Heidelberg Materials hosted a capital markets day, where the company upped its return target for invested capital from 10% to 12% by 2030. Merckle accepted a 2% discount on the latest closing price (€178.65) of €175 per share, and the bookbuilding process was pretty swift, lasting only three minutes. The following day, the share price dipped below the issue price. Merckle maintains his intent to remain a significant shareholder while diversifying his portfolio.
A similar scenario has also led to partial exits by the Sandoz family from pharmaceutical company Novartis and the sale of shares by the Agnelli family from Ferrari. Lately, there have been block sales at Galderma (EQT, Adia, Auba), Heineken (Mexican conglomerate Femsa), and car leasing company Ayvens (TDR Capital).
Infrastructure Funds: A Double-Edged Sword
Billion-dollar infrastructure investments can provide opportunities for growth and increased investor confidence in construction companies, but they come with their own set of risks and complexities. While the direct connection between these funds and share divestments may not be apparent, several factors could influence the dynamics:
- Market Confidence: The announcement of infrastructure investments can boost investor confidence in construction companies. However, if investors perceive the risks associated with these projects as too high, they might be more inclined to engage in share divestments to mitigate potential losses.
- Regulatory Environment: Infrastructure investments often come with regulatory support, such as the use of public-private partnerships (PPPs) or availability payments. While these models can provide stability and predictability for construction companies, currency fluctuations, changed regulations, and unforeseen circumstances can upset the apple cart.
- Financial Performance: Companies that secure large infrastructure contracts could see improved financial performance. Investors might gain confidence in these companies, thus reducing the likelihood of large block trades aimed at divesting shares. Conversely, if investors become cautious about the risks associated with these projects, it could result in increased divestment.
- Risk and Uncertainty: As with any large-scale project, infrastructure development presents significant risks, including delays, cost overruns, and regulatory changes. These concerns could prompt investors to opt for share divestments to minimize potential losses.
While the influx of infrastructure funds offers promise, the impact on large block trades and share divestments is more nuanced. It depends on how investors perceive the risks and potential returns associated with these investments. There's no conclusive evidence linking these funds to specific share divestments or block trades in Heidelberg Materials, Strabag, and Ferrovial.
Investors are actively seeking opportunities to diversify their portfolios, with notable examples being Ludwig Merckle's sale of €263 million worth of shares from Heidelberg Materials and Uniqa's exit from Strabag. This trend is also observed in the finance sector, with people like the Sandoz family selling shares from Novartis and the Agnelli family from Ferrari. The selling of shares in construction and infrastructure companies like Heidelberg Materials, Strabag, and Ferrovial is not solely due to the influx of infrastructure funds, but also influenced by market confidence, regulatory environment, financial performance, and risk and uncertainty associated with these projects.
