Apax, Apollo, Platinum, Portobello or Morgan Stanley Infrastructure Partners. These generally Anglo-Saxon-sounding names – the last one is Spanish – correspond to some of the investment and venture capital firms that for a couple of years have been popping up in the garbage of big Spanish cities in search of business that others no longer want. They are betting on the waste and environmental services that the big construction companies have decided to put up for sale almost in unison, and they are doing so convinced of their profitability.
This summer, two operations have taken place that confirm the turmoil in which this activity lives and that, incidentally, turn the contract of the city of Barcelona upside down. Morgan Stanley’s infrastructure fund bought Valoriza Servicios from Sacyr for 425 million euros, which manages one of the three lots of garbage in the Catalan capital, valued at 400 million euros. Shortly after, it was a French investor and not a fund, in this case Paprec, that bought the CLD subsidiary from Lleida’s Sorigué, which also manages one of the road cleaning lots in Barcelona.
The cleaning business is thankless because it is very staff-intensive and requires complex management. Because of this, construction companies such as ACS, Ferrovial, Sacyr, FCC and OHLA have sold their service divisions or are doing so to focus on more profitable areas such as concessions. Market sources indicate that Acciona could also consider selling its subsidiary.
A recent report by Scope Group shows that the major Spanish construction companies have sold assets for 7,000 million in the last two years to reduce debt and focus on businesses with higher margins. Of this amount, most of it corresponds to services, with cleaning and rubbish at the forefront.
This is where investment funds come in. Sources from an investment bank explain that these firms are very interested in the subsidiaries that companies reject, because they also give them access to recycling infrastructures and circular economy projects. It is about buying them at a good price and then grouping them into a new company, as Portobello has done with Serveo, made up of Sacyr and Ferrovial assets.
Owner changes also involve the transfer of an army of workers, with contracts that are subrogated under the same conditions. The Sorigué operation, which also affects Lleida and Tarragona, will cause 1,500 workers to change their uniforms. Valoritza, sold to Morgan Stanley, employs almost 20,000 people throughout Spain.
At the beginning of June, FCC sold to the investment fund of Canadian pensioners, CPP Investments, 24.9% of its environmental services subsidiary for 965 million with the aim of dedicating the income to growth. The operation replicates the one carried out in 2018 with Aqualia, of which it sold 49% to the Australian fund IFM, the same one that entered Naturgy, for 1,024 million euros.
Two years ago, Ferrovial sold its environmental business to Germany’s PreZero for 1,133 million, which includes 16,000 employees dedicated to the collection, treatment and recycling of waste. That same year, the US fund Platinum bought Urbaser for 3.5 billion euros, owned by China’s Tianying and, previously, by ACS. Apax and Apollo were some of the firms that bid in the process.
The dance of operations also affects the billion dollar garbage collection contract of the city of Madrid, awarded last year. The biggest package, of 500 million, was taken by FCC and the investment firm that it now has as a partner. Valoritza, just acquired by Morgan Stanley, participates in another of the lots, just like PreZero.
