ANALYSIS: Dufry takes lead in race for Aldeasa

John Gallagher

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The Swiss retailer, backed by Advent International, appears to hold the upper hand as the bid for Aldeasa intensifies

After yesterday's Eu31 ($40.26) per-share bid from Swiss duty-free specialist Dufry and its US parent Advent International for the Spanish travel retailer Aldeasa, the Madrid stock market is wondering whether another bid will be tabled in the next few days. Early trading in Aldeasa stock was in a band between Eu32.25 and Eu32.67 ($41.88-42.43) but with very few shares changing hands.

Dufry's aggressive bid came at a time when the market was immersed in confusion. The Gestión de Explotaciones Aeroportuarias (GEA) consortium tabled an Eu29 ($37.66) bid in December and although a counter-bid was expected, the market was shaken by news of increasing tension between airport authority AENA and Aldeasa, first revealed on RavenFox.com on Saturday January 22. Last Friday Aldeasa lodged an exchange of letters with market regulator CNMV indicating that AENA wished to change the payment terms of the current concession contract.

On Monday morning trading in Aldeasa's shares was temporarily suspended owing to the excess of sell orders. The stock fell to Eu29.40 ($38.18) but rose to just below Eu31 before another suspension as Dufry advised the regulator of its intended bid. As trading recommenced, the share price continued to rise, closing at Eu32.35 ($42), down by 3.4% on Friday's close but much higher than traders had feared that morning. More than 1.1m shares were traded, fuelling speculation that another bid was on its way.

GEA's bid valued Aldeasa at 8.8 times the retailer's EBITDA; the Dufry bid represents 9.4 times EBITDA. The experience of Juan Carlos Torres in Advent and Julián Díaz in Dufry will be crucial to extracting value from Aldeasa to satisfy the Advent and Dufry shareholders. Dufry will be able to extract more economies of scale than GEA and its in-depth knowledge of the duty-free business will enable it to add new concepts to Aldeasa's commercial offer. What remains unclear is whether other venture capital companies studying a bid will want to take the risk.

Altadis and Aldeasa's other shareholders continue to look on with interest, while AENA looks on from the sidelines. The exchange of letters between AENA president and CEO Manuel Azuaga and Aldeasa president José Fernández Olano surprised many observers; some commentators in Madrid have suggested that the government has tried to scare off potential bidders from taking the Spanish retailer into foreign ownership. GEA will be asking why this information was not in the hands of the market regulator before last Friday and this morning's financial dailies are hinting at legal action.

Others claim that the relationship between AENA and Aldeasa has been strained since last summer. Market observers told Ravenfox.com last night that senior management at AENA was irritated by the previous management's decision to extend Aldeasa's contract at Madrid Barajas, appointing the company as anchor retailer in the airport's new terminal with little gain for the indebted landlord.

Leading financial daily Cinco Dias reports today that AENA will call a public tender for all duty-free and travel-retail shops in Spanish airports when Aldeasa's current contract lapses in December 2006. Dufry has a wealth of experience in public tenders and will be confident of convincing AENA that it is an attractive partner. Other risk capital players are less likely to understand how to manage concession contracts and may decide to watch from the sidelines.