Two Mexican groups aspire to take control of Duro Felguera without launching a takeover bid

After the layoffs comes the recapitalization of Duro Felguera. This Thursday the company presented its strategic plan and explained to shareholders the preliminary agreement signed with two industrial partners, the Development and Infrastructure Promotion Group (Prodi) and Mota-Engil Mexico, which will lend the company 90 million euros convertible into capital with sight set on its entry into the capital with up to 31% and 25% respectively. “Investors will provide financial strength, business and commercial synergies that generate the necessary confidence in the financial market and customers,” said its CEO, Jaime Argüelles.

Confidence is precisely what the Asturian company needs after signing 180 layoffs a few months ago and after years of difficulties crowned by the rescue of 120 million Sepi, to which another six from the Asturian Government were added. Prodi, a Mexican industrial company controlled by José Miguel Bejos whose main activity is the design and construction of public infrastructure, transportation, oil and gas, energy and tourism projects, has a 49% stake in the other investor, Mota-Engil México. This, in turn, is a listed industrial company head of a business group that bills 3,450 million focused on civil works, infrastructures, concessions and engineering, energy, industry and tourism, owned by the Portuguese business group Mota-Engil.

But the operation is not so simple. The company indicates that the circumstances exist to release the new partners from the obligation to launch a takeover bid for all the capital despite exceeding 30%. Jaime Argüelles, CEO of Duro Felguera, explained that they have the approval of “interest groups”, thereby implying that the Government would agree to allow the movement, something necessary for Duro Felguera. They have been talking with the CNMV for months to bring it to fruition. “We must receive all the authorizations, but we are very positive because this operation is good for everyone. Our commitment is to repay the public debt that they have lent us. Shareholders will benefit from the company’s growth and increased value. Employees and customers too ”, he transferred in a meeting with the media. The banks would also have received the movement positively: “It seems like a great operation to them.”

The announcement also includes a plan for current shareholders to pitch in. In a first phase, investors will offer a loan (50 million Prodi and 40 Mota-Engil) to the Asturian company that will lead to a capital increase with preferential subscription rights by current shareholders for a value of 40 million, at a price per share of 0.7661. The part that is not subscribed will be covered by the investors. The third phase would consist of a new capital increase, this one by capitalization of the initial loans, which will cause investors to take control of the majority of the company.

The solution they have found to get rid of the takeover bid is to go “from a loan to a capital increase”, in the words of Argüelles. The increase in liquidity, the business synergies and the generation of trust, he says, will do the rest to “comply with the takeover bid exemption requirements.”

What does the Spanish want to achieve? “The objective is to put the company in four years at a level of 1,000 million” in income, assured Jaime Argüelles. If that happened, he assures him, they will reduce the scope of the agreed layoffs. The company aspires to execute projects of greater volume and have the support of the bank, essential to guarantee the projects. “The greater generation of operating cash from this new plan will make it possible to meet all of the company’s debt obligations.”

In Duro Felguera, however, they do not have any plan to exclude the company from the Stock Market. In 2022, it billed 123 million with a portfolio of works of 348 million. Its ebidta, of five million in the last year, should grow, according to the new plans, to 95 million in 2028. Its main activity is the engineering and construction of “turnkey” projects. Installations for methanol, ammonia, hydrogen plants or renewable parks are some of the projects in which they work.

One of the questions that arise if all of the above materializes has to do with how corporate governance will change. The chief executive admitted that “future governance details” have not been put on the table, because, he says, what prevails in this relationship is trust. “We are empowered to work as a united team, together.” The 90 million will be used to improve its treasury, its working capital and the financing of projects. Also to invest in off-shore wind power.

There will not be, according to the current assessment of the CEO, a change of headquarters: “We are a Spanish and Asturian company.” This, he says, is going to be “the company’s ultimate solution.”

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