Corporación Financiera Alba ($ALB.MC) is a €3 billion Spanish holding company that acts as the investment arm of the March family. Alba is mainly devoted to long-term investments through the acquisition of minority stakes – but with management board presence to influence their strategic direction - in listed and non-listed companies in different industries: the company's portfolio reads like a “who's who” of Spain's manufacturing and services sectors.
While only listed on the Madrid Stock Exchange since 1986, the holding company traces its roots to Banca March (founded in 1926) and Fundacion Juan March (founded in 1955), which are integrated into the wider group:
Banca March is the largest family-owned Spanish bank with a strong focus on family businesses
Fundación Juan March is a family-run institution that dedicates its resources and activities to the fields of science and humanities and, through the Center for Advanced Study in Social Sciences, promotes specialised research in the areas of political science and sociology
As could be expected, Alba is majority owned by several individual members of the March family (a total of 63%), with a further 15% owned via Banca March, leaving just a 22% as free float.
History
The current company has its origins in Cementos Alba, a Spanish company controlled by the March Group, which began manufacturing cement in the 1950s. In 1986, Hornos Ibéricos, also a cement company whose majority shareholder was the Holderbank Group (today part of Holcim), acquired the cement plants and concrete subsidiaries.
As a result of the sale of these industrial assets, Cementos Alba changed its name to Corporación Financiera Alba and used the proceeds from the divestment to become a financial holding company with a diversified portfolio of industrial and service companies.
In line with its strategy, Alba has tended to concentrate its investment in a relatively limited number of companies in which it holds a significant minority stake: a long-term partner with strong commitment with the existing shareholders and the management team, but typically with an active participation as board members and in other committees.
Alba may carry out investments in any geography, sector and financial asset: historically it has been mainly focused on Spanish companies but it’s currently widening the investment universe to businesses headquartered abroad.
While its investment strategy is centred on buying profitable and sustainable businesses for the long-term (with prudent diversification and low debt), since its inception Alba has been quite an “active investor”, as evidenced by the chart below:
Some of the businesses that have been bought and later sold since 1995 include:
Airtel (sold to Vodafone)
Carrefour
Cerveza San Miguel
Ginés Navarro Construcciones (acquired by ACS)1
Media Planning Group (now part of Havas)
Prisa TV
Prosegur
Sogecable
Clinica Baviera
Indra Systemas
Bolsas y Mercados Españoles (now part of Six Group AG)
Euskaltel
Satlink
Current portfolio
Alba is not the most investor-friendly company: despite having a very detailed communication policy, there are no analyst days, no strategy presentations and very little updates on the company’s website.2 As far as I know, it is not followed by any sell-side research analyst, at least from primary brokers. They even stopped reporting on a quarterly basis:
“Since it is not further compulsory to publish quarterly financial information, Alba has decided not to publish Q1 and Q3 results. The latest quarterly report published was Q1 2021.”
At least, they provide updates on the portfolio composition and NAV at irregular intervals on their website (the latest data presented below is as of June 30, 2023).
Listed equities
All current listed companies are headquartered in Spain, with the exception of Befesa, a Luxembourg company listed on the Frankfurt Stock Exchange, and Technoprobe, an Italian company listed on the Milan Stock Exchange.
Naturgy: an integrated multinational energy company with a presence in the gas and electricity sector in 20 countries; it’s the third largest electricity company in Spain and the largest Liquefied Natural Gas (LNG) operator in the Atlantic Basin
Acerinox: one of the world’s leading stainless steel and special alloys manufacturers
Viscofan: the global leader in artificial casings for meat products, being the only world producer to manufacture all categories of casings (cellulose, collagen, fibrous and plastic)
CIE Automotive: a global full-service supplier to the automotive industry focused on the design, production and distribution of all sort of components and sub-assemblies
Ebro Foods: the leading Spanish multinational food company, a world leader in rice and with a significant presence in fresh pasta and, to a lesser extent, in premium dry pasta globally
Befesa: provides hazardous waste recycling services for the steel sector (world leader in steel dust recycling) and the aluminium sector (salt slag and secondary aluminium recycling).
Technoprobe: a global provider of probe cards for non-memory chips, complex electromechanical interfaces that enable microchip testing during the integrated circuit production process.
Other positions include Global Dominion (engineering solutions), Inmobiliaria Colonial and Merlin Properties
During 2023 it bought a further 1.5% in Technoprobe and increased its stake in Inmobiliaria Colonial above 3%.
Alba is the biggest shareholder in Acerinox (18%), Viscofan (15%) and Ebro Food (15%), and the second biggest in Cie Automotive (13%). Last year Aperam wanted to buy Acerinox (reportedly offering €13-€14) but the March family decided against the offer (today Acerinox trades around €10).
Unlisted equities
These investments are mainly made directly, although Alba also has a number of smaller investments through holdings in private equity vehicles (Deyá Capital IV, a 100% subsidiary managed by Artá Capital: medium-sized companies in Spain and Portugal) and in the March P.E. Global funds of funds (LBOs, venture capital, secondaries, etc.).3
Verisure: a leading provider of monitored alarm solutions for homes and small businesses in Europe and Latin America with more than 4.8 million customers
ERM: based in London, a global leader in environmental, health/safety and sustainability consulting services, operating in diverse industries (metals and mining, energy, financial services, technology, chemistry, pharmaceuticals and fossil fuels)
Profand: one of the main operators in the fishing industry in Spain and a global leader in the commercialisation of cephalopods, with a significant presence in other species such as salmon and shrimp
Atlantic Aviation: the second largest airport service operator for private and corporate aviation in the US, present in more than 100 US airports through long-term contracts with an average duration of more than 20 years. Atlantic Aviation provides a wide range of services: refuelling, renting hangars, de-icing, aircraft management, and passenger/crew services.
Parques Reunidos: one of the largest leisure parks operators in the world, it currently manages more than 50 theme parks in 10 different countries (Europe, US and Australia), it’s the second-largest operator in Europe and the eighth largest in the world in terms of traffic, and the world’s leading water park operator.
Real estate
Currently, the real estate activities consist of investments in 5 top-tier office buildings in prime downtown or suburban business locations in the city of Madrid. This business area focuses on the rent operation of the office buildings, seeking to optimise their yield by managing the commercial, administrative and technical aspects of the properties.
Alba’s investment portfolio tends to be moderately concentrated, with a limited number of companies that represent an important portion of its NAV: today Naturgy alone accounts for ~25% of NAV. Nevertheless, Alba has historically reallocated its assets in a gradual non-traumatic manner, leaving sectors that had been traditionally core for the company to enter into new ones that are perceived as more attractive and with a higher potential. Since 2012 it invested in energy (Naturgy), leisure (Parques Reunidos), airport services (Atlantic Aviation) and consulting services (ERM), while divesting from construction (ACS, in 2017), financials (Bolsas y Mercados Españoles, in 2020) and tlc (Euskaltel, in 2021).
Historical performance
Despite recovering nicely from the Covid lows, the price has literally gone nowhere for the past 15 years, as it is lower than it was in late 2006.
The situation is slightly better using prices adjusted for dividends, but that still only turns out a return of ~4% p.a. since 2000 (a couple of decimals more over the last 10 years).
A big part of the mediocre performance is due to geography, as the Spanish equity market has only recently recovered the pre-2008 peak (btw, there are worse countries in Europe…).
Growth in reported NAV has also been positive but not exceptional, at +7.5% p.a. over the last 10 years.
As a consequence, the stock has constantly traded at a significant discount to reported NAV.
I’ve updated the latest reported NAV to today and also used a more conservative approach for unlisted equities.
While a little bit more conservative, my current estimate of NAV is not that far from what the company reported for H1 (€96.75). At the current €48 price, Alba is trading at a 45% discount to my estimated NAV.4 Another way to look at valuation is that the current value of listed securities is – net of taxes on unrealised gains5 – around €3.3 billion, vs a €2.9 billion market cap. So we are basically getting the real estate and private assets (valued by the company at €1.9 billion) for free.
Alba used to return cash to shareholders via buybacks, but since 2008 they have switched to dividends: the payout is 20%-30% of cash earnings, for a current 3.2% dividend yield.
Conclusions
To summarise:
Pro
Concentrated but sufficiently diversified portfolio (at least by sector if not yet by country)
Active ownership, both in terms of “influence” on the operating companies and in buying/selling stakes
Significant discount to NAV, with more than current market cap in liquid, listed investments
Cons
No real catalyst to reduce this discount: the current value is wider than the historical averages, but not uncommon, Alba has always traded at a large discount
Small float (~€600 million) does not encourage big funds to buy: not necessarily a negative point per sè (I like when small companies are cheap because they are ignored by big funds/ETFs), but to close the gap with NAV you need someone to start buying in size
Overall, management has shown to be astute long-term investors. I personally like most of the listed investments (Naturgy, Befesa, Viscofan, Technoprobe) and some of the unlisted assets (Verisure, Atlantic Aviation): but you don’t really a holding company to make listed investments (2/3 of NAV) for you!
Considering the discount to NAV, the best action should probably be to buy back a consistent amount of shares (they haven’t done it since 2011). But that would further reduce the float, thus exacerbating the problem rather than solve it (i.e., just a short-term fix). Alternatively, the March family could invest just a little bit and take the company private to profit from the (apparent?) valuation mismatch. No idea whether this would be of interest to them or even possible: if the answer is yes, they could have probably done it several years ago.
I love family-controlled companies, but it doesn’t look like Alba is really a long-term compounder, and there isn’t also a near-term catalyst to unlock value: there are better opportunities in holding/family companies in Europe if you want to invest in private assets. [I might be wrong, as usual…]
When Alba sold its remaining shares in ACS in 2017 it registered a gross gain of €353 million and a 11.5% IRR since the creation of ACS in 1997
I haven’t spoken with their investor relators (not even sure whether there is one: the only way to contact the company is via a generic email address), so I’m using what is publicly disclosed. Mandatory disclosures are obviously available on the CNMV (Comisión Nacional del Mercado de Valores, the Spanish market regulator) website
Alba used to also be a shareholder in Artá Capital, but in early 2023 it announced the sale of its entire stake in the private equity fund manager to the rest of its shareholders: Alba continues as a reference investor in the funds managed by Artá Capital but without being a shareholder of the fund manager.
As there is no disclosure on the valuation of each single unlisted position, I used the original/latest acquisition value (the investment in Parques Reunidos has been done in four instalments over the years) rather than the external valuation provided by Alba. I’m also puzzled by the value of the Naturgy stake, as the number reported by Alba implies a much lower market capitalisation than the company currently has (impact on NAV is around €400 million). Take my NAV with a grain of salt.
I have used a 24% tax rate on capital gains, I don’t know whether Alba could achieve some tax savings on its positions.
Like always, great write-up! I also really loved your conclusion – transparent and not always focused on a happy ending or a buy recommendation☺️