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01-11-2025 : Will Eiffage absorb Getlink?

Eiffage, a construction and concessions group, is steadily increasing its stake in Getlink, which operates the Channel Tunnel. Last week, the acquisition of a fourth block since 2018 brought its stake to 29.9% of voting rights and 27.7% of capital.

Under takeover rules, if Eiffage held more than 30% of Getlink's voting rights or capital, it would have to launch a mandatory takeover bid.

At the time of this latest purchase (7.1% of the capital for €692 million), Eiffage stated that it ‘plans to increase its stake depending on market conditions but does not intend to make a public offer for the remaining capital.’ This statement binds Eiffage for 6 months, after which it will be free to launch an offer for Getlink if it wishes.  

The structure of the Eiffage group suggests that it will do so at some point and that it will not be content with a minority stake of 29.9%.

44% of the Eiffage group's EBITDA (€5 billion in 2025) comes from its subsidiary Autoroutes Paris Rhin Rhône (APRR), whose concession expires at the end of 2035. Beyond that, the State may resume direct operation as it did before 2006, or grant a new concession under conditions that are necessarily less favourable than in 2006. Within 10 years, Eiffage is therefore almost certain to lose this source of revenue, or see it dry up significantly.

The cash flow currently generated by APRR is partly used to strengthen Eiffage's other activities, in order to have new sources of revenue to replace those of APRR after 2035. It has thus covered the €2.5 billion invested since 2018 in Getlink, which has a major advantage over APRR: its concession runs until 2085.

However, this advantage is not without its drawbacks. Having 25% of its market capitalisation (€10.5 billion) tied up in a business that it does not control, and which is roughly the same size as itself, is an unusual situation for a listed group, and historically transitional. 

Investors interested in exposure to cross-Channel traffic prefer to invest directly in Getlink rather than in Eiffage, which owns 30% of Getlink but also other assets, unless the discount on Eiffage's valuation is large enough to tempt them (it is currently 30% on the sum of the parts, compared with 20% for Vinci). Once Getlink becomes a wholly-owned subsidiary, investors will have to acquire Eiffage shares to gain exposure to Getlink, which will likely reduce the discount.

If the merger took the form of a public exchange offer or a merger, Eiffage would probably gain entry to the CAC 40 with a free float of more than €14 billion, which is more than the market capitalisation of the bottom eight companies in the CAC 40. However, the shareholding of employees, Eiffage's largest shareholders, who have historically protected the group from hostile takeovers, would fall from 20% to 12%. Adding a cash component to a public exchange offer would limit this dilution of control.

27-10-2025 : When the Administrative Court of Appeal gives finance lessons to the tax authorities, episode 2

In the previous post, we saw how the Paris Administrative Court of Appeal corrected the tax authorities, who claimed that, in order to calculate a company's cost of capital, they used a risk-free rate calculated over two years and a historical risk premium calculated over 25 years.   

 

1. To justify its use of a historical premium, the tax authorities argued that it was relevant because Imperial Brands Seita was a long-term shareholder; whereas if it had been a short-term shareholder, a prospective premium would have been relevant.

 

The rapporteur was not swayed by this specious and sui generis argument put forward by the tax authorities, which contradicted the tax authorities' valuation guide: "In any event, there is no such thing as a sui generis tax value or administrative valuation methods: market value can only be determined by observing the market and using the methods employed by its participants."

 

The rapporteur emphasised: "If I buy LVMH shares to contribute to a PEA (personal equity plan) to finance my retirement in 20 years' time, or if I buy them to speculate on the stock market in the hope of paying for a trip to Namibia in the short term, the price of the shares will be exactly the same." This is common sense.

 

And to further disqualify the historical risk premium, the rapporteur repeats one of Vernimmen's arguments. When markets fall because investors demand higher rates of return, the historical risk premium, which is the average of annual market returns in excess of the risk-free rate, falls as a result, even though the rates of return demanded by investors are rising, which is paradoxical.

 

2. On another point, the tax authorities had considered that all cash assets should be taken into account in the transition from entreprise value to equity value. SEITA contested this, since part of these cash assets is the result of excise duties (SEITA manufactures cigarettes) which it must pay to... the tax authorities.

 

The rapporteur ruled in SEITA's favour, as the cash counterpart of negative working capital is not automatically a permanent asset of the company and therefore part of its value (see October's Vernimmen newsletter). One can imagine how the tax authorities would have reacted if SEITA had told them that it was unable to pay them the excise duties collected, having used them, for example, to pay a dividend to its shareholder!

 

3. As SEITA had probably paid the amount of the adjustment, the State will reimburse it the sum plus interest, which will further increase the budget deficit. There are cases where the tax authorities should seek the advice of valuation experts before embarking on procedures whose foundations prove to be uncertain.