June 4, 2019 / 2:23 PM / 6 months ago

Italy's Autogrill looking for acquisitions as war chest grows

MILAN (Reuters) - Italy’s Autogrill, which runs restaurants and bars at airports, motorways and railways around the world, is looking at possible acquisitions in related sectors in the next few years, when it will have 1.5 billion euros for M&A.

Autogrill, controlled by the Benetton family, is interested in convenience stores and newly listed U.S. grab-and-go food retailer Hudson is “interesting”, but the company is not up for sale, Autogrill CEO Gianmario Tondato Da Ruos said on Tuesday.

Tondato also said Paradies, owned by Lagardere, was an attractive convenience retail operator, but declined to say if the Italian company had any concrete deal under negotiation.

Presenting the group’s financial targets for the 2019-2021 period, Tondato said the group wanted to more than double revenue in the convenience retail sector after some bolt-on acquisitions made in recent years.

“Sales coming from the convenience retail business will be around 200 million euros by the end of this year, we want to boost them to 500 million euros rapidly,” the CEO said.

Autogrill, which has recently preferred smaller acquisitions over big mergers, entered the sector when it bought Stellar Partners and Avila in North America.

Other potential M&A targets could be found in the supply chain, logistics and, in general, services to travelers.

“It’s no longer the usual (M&A) suspects, Elior etc, anymore, there is a wider world to look at,” the CEO said.

He ruled out the possible listing of Autogrill’s North American unit HMSHost to raise cash for the purchase of a large rival.

In its plan Autogrill sees revenue growing on average by 4.5-5% annually over the next three years to 2021.

The group said it would bet on airports and train stations to drive revenue, while further reducing its toll-road business after selling its Canadian motorway operations.

With a 2021 free cash flow expected to be five times that of 2018, Autogrill said it would have 1.5 billion euros to use for growth, in addition to 900 million euros in capex to be spent on the renewal of existing contracts.

“I appreciate the focus on cash generation and the target set by the company,” said Alberto Checchinato, an analyst at brokerage house Fidentiis.

The stock fell nearly 2 percent by 1356 GMT as investors had been hoping for a more aggressive approach on acquisitions.

The group said it aimed to lift its underlying core profit margin, a measure of profitability, to around 10 percent of revenue in 2021 from below 9 percent last year.

Revenue is expected to reach 5 billion euros at the end of 2019, from 4.7 billion in 2018, driven by North America and the International channel, which includes Northern Europe and Asia.

Underlying earnings before interest, tax, depreciation and amortization (EBITDA) is seen at between 450 million and 470 million euros this year.

Editing by Valentina Za, Louise Heavens and David Evans

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