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08-11-2025 : When the wise man points at the moon, the fool looks at the finger.

Telefónica, the telephone operator with a market capitalisation of €21bn and sales of €41bn, announced on 3 November that it would be halving its dividend. Its share price on Friday evening was down 16%.

Like the fool who looks at the finger when the wise man points at the moon, the naive might believe that Telefónica's share price decline is due to this halving of the dividend. This is to see only the consequence and not the cause. The primary cause of Telefónica's share price decline is the sharp downward revision, at the time of the announcement, of its free cash flow for 2026 from €3bn to just under €2bn.

However, the value of a share is determined by the discounted cash flow it generates. Less free cash flow means less value. Hence the fall in the share price.

Less free cash flow necessarily means, with dividends remaining constant, a reduced ability to repay debt. However, when you have €30bn in net bank and financial debt, as Telefónica does, and you distribute €1.9bn in dividends per year on €3bn in free cash flow, you struggle to pay your financial expenses with the balance. 

Inevitably, if your free cash flow is reduced by a third, the dividend must be cut in order to pay financial costs without incurring further debt. Telefónica's new CEO understands this perfectly well, which is hardly surprising. In a previous life, he was a finance teacher.

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In contrast to Telefónica's situation, Ayvens announced two days earlier a special dividend of €340 million and a share buyback of €360 million. In five days, its share price jumped by nearly 9%. So would the dividend payment/share buyback increase the value of equity? Yes, says the idiot who looks at the finger without seeing the moon.

The wise man will remind him that, while Ayvens is a long-term car rental and fleet management group with €9 billion in capital, it is also a financial holding company regulated by the ECB. Ayvens is therefore subject to prudential ratio requirements like a bank. Its CET1 ratio (the ratio of its equity capital to its risk-weighted assets) must be at least 9.36%. To give itself some leeway, Ayvens has set a target ratio of 12%. At the end of September 2025, this ratio stood at 13.5%. With the €700 million payout to shareholders, Ayvens' CET1 ratio will still be above the target at 12.8%.

There are two main reasons for the rise in Ayvens' share price:

•       The results for the first nine months of 2025 are above expectations;

•       Hoarding equity capital beyond what is reasonably required leads to value destruction, as this excess capital is placed on the money market and yields significantly less (2%) than what is required by shareholders (around 8 to 9%). For this simple reason, it is valued at a substantial discount. Once it is returned to them, the discount disappears, causing the share price to jump.

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.