The 100 million EBITDA from M&A included in the new Plan is already very visible for over three quarters
On the same day in which the Board of Directors approves the new Business Plan, Hera announces to the market the signing of the acquisition of an additional stake in the capital of AIMAG, multiutility based in the province of Modena. In return for a swap for water assets held in that same area, Hera can increase its share from 25% to 41%, appoint half of BoD members, including the CEO, and therefore consolidate AIMAG in full.
Following the agreement to raise the holdings in AIMAG, therefore, more than 75% of the EBITDA that the new Plan estimates can be sourced from M&A for the 2024-2028 period already has a clear identity.
The deal has a strong strategic rationale, given the territorial contiguity between the two entities and the similarity in the business mix of the two portfolios. It also foreshadows attractive and visible synergies to be captured in the coming years.
AIMAG, the multiutility with the profile of a “little Hera”
With 21 municipalities of small-medium size in the province of Modena and Mantua, AIMAG operates in territories closely contiguous to those of reference for Hera.
The approximately 60 million euro of EBITDA achieved by AIMAG Group in 2023 also presents a structure very close to that of Hera’s business portfolio, despite the slightly more pronounced exposure to regulated businesses, which in the case of AIMAG contributed around 60%.
Hera integrates a Group with an appealing growth profile, which could be even strengthened by the development of about 20% synergies
The territorial proximity of the infrastructure of the two entities and the involvement in the same operational activities are a real premise for fostering the appearance of synergies from an integrated management of the two portfolios – synergies that Hera expects that may reach more than one-fifth of AIMAG ‘s current EBITDA over the Plan period, in line with the results historically achieved in the integration of similar activities.
Synergies in the region of 20% represent an attractive upside compared to the prospect of AIMAG’s pure organic growth, considering that its EBITDA over the five-year period is estimated to rise from 60 million euro of 2023 to 77 million euro in 2028.
The transaction offers benefits from different perspectives
In 2009, during the intense process of consolidation of its reference territory, Hera acquired a 25% stake in AIMAG capital. Until now, besides Hera, the main shareholders were the 21 municipalities served, with 65% holdings, and local foundations, with a 10% stake.
The municipal shareholders of the multiutility based in Mirandola, in the province of Modena, valued the advantage of relying on a partner like Hera, especially in view of the upcoming tender for the renewal of the water cycle concession in that same area.
The agreement takes shape through an asset swap
Thus, a NewCo was established, into which Hera contributed water networks in the province of Modena. Against the assignment of a 45% stake of the NewCo to AIMAG, Hera will rise from 25% to 41% its holdings in the Company’s capital and will be allowed to appoint 50% of the Board Members, including the new CEO. Due to the operating control, Hera will fully consolidate the equity holdings in AIMAG.
Real premises of capturing the estimated synergies
In addition to the similar structure of the business portfolio and the established presence in neighbouring geographies – just consider that Meta Modena entered Hera’s perimeter more than 20 years ago – the likelihood of actually succeeding in bringing out the synergies is also made visible by the governance features that the agreement envisages.
Hera, as already mentioned, will be able to appoint half of the BoD members of AIMAG, including the CEO.
The additional benefits that can be achieved
from strengthening the partnership are highly visible,
since Hera can shape the integration plan through
its Board Members and take care of its execution,
through a CEO of its own appointment.
Another significant factor: the approximately 600 AIMAG employees also have a relatively low average age. Based on a shared multi-utility culture, Hera will be able to transfer its technological and operational know-how to fertile ground, maximising the sharing of best practices.
Hera is back to conduct M&A operations to consolidate the industry, sticking to the strict financial discipline expected in its investments
Through this transaction, Hera accelerates the growth process also by external lines.
This deal, with an EV-to-EBITDA multiple around 7x, is in line with the valuation that the market implicitly assigns to Hera, thus excluding any dilutive impact, even in the short term, as the Group can capitalise on the value creation in all synergies from the partnership.
