Looking past the headlines to find value in the ‘bad child’ spin-off co.

Atlas Arteria

Atlas Arteria was formed from the split of Macquarie infrastructure group into what financial media reports termed a ‘good’ toll roads business and a ‘bad’ toll roads business. We were drawn to Atlas, the ‘bad’ child. We reasoned that in the face of such adverse publicity, few would bother investigating the stock properly prior to selling it shortly after it had been distributed to them as a result of their original holding in Macquarie Infrastructure Group. Atlas made its debut at a slight premium to the net cash held at holding company level, with no value attributed to the value of its other assets.

Underlying asset strength

If investors had investigated properly, they would have found that Atlas’s assets comprised a collection of high quality toll roads. Each of these toll roads were highly leveraged and some were unlikely to survive. However, all of the debt at the toll road level was non-recourse to the parent company. No matter what, Atlas was not going broke with no debt and $228 million of cash.

Most notably, Atlas held an interest in a toll road company in France that traded on the Paris Stock Exchange with a market capitalisation of around €6 billion at the time. Although the corporate structure was complicated, Atlas at the time of the split-off owned around 20% of this asset: worth roughly A$1.8b. Put another way, this asset alone on a look through basis was worth many times the enterprise value of Atlas at the time.


We initiated a position at an average price of $0.85, which we considered too low a valuation. we sold the stock once it reached $1.41 for an investment gain of 65%.


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