A new study by EDHEC has challenged the validity of the sale of the State's holding in Autoroutes du Sud (ASF).
The main conclusions of the study 'The Privatisation of French Motorways', co-written by professors Noël Amenc and Philippe Foulquier, are that the sale is at an 'undervalued price' and the planned privatisation is 'a highly debatable financial decision'.
The study stresses that:
The controversy caused by the idea of using the public investment discount rate recommended by the General Plan Commission (the French planning office) has no reason to exist, because that rate does not take the risk of the motorway franchise into account and cannot therefore be used by a private investor to place a value on the acquisition;
In view of the limited risk involved in a motorway franchise and particularly that of ASF, the risk premium that should be taken when discounting the future revenue flow of the franchise is necessarily quite low. Determining that premium, on the basis of a state-of-the-art multifactor model from modern portfolio theory, leads to a value of 2.97%. Its use, in a classic pricing model taking into account a weighted average cost of capital that integrates the financial gearing of the company, leads to a valuation of EUR 64 for ASF shares (without the additional franchise of Lyons-Balbigny). This price is 28% higher than the value obtained by the State;
The decision to sell the State's shareholding in the motorway franchises seems to us to be much more open to criticism than the price itself. The government did not take into account the particular nature of the State's status and the fact that its decision to disinvest could not be evaluated through the same type of reasoning as that of a private investor: France does not have holders of equity capital to remunerate and its cost of capital, which depends on the rating and its debt, is not linked to the uncertainty of the revenues from its shareholdings. Therefore, by basing its search for a buyer on a financial logic that is not its own, the State incurred a financial opportunity cost of more than 73% of the price obtained for the ASF shares, which, related to all sales of financial shareholdings, would represent a loss in value of almost EUR 10 billion.