European bidding war expected for “world’s largest toll company”

Spain’s largest construction group ACS is this week expected to enter a bidding war for the global toll road operator, Abertis Infraestructuras.

The move, flagged by anonymous sources, would be in response to an opening bid by the Italian road and airport operator Atlantia which, if successful, would create "the largest toll motorway operator in the world", a regulator said.

Through its German subsidiary Hochtief, ACS would try and beat its Italian rival’s bid of $20bn with a $21bn package of cash and shares, sources told Reuters.

ACS’ interest has been piqued by Atlantia’s offer being cleared by regulatory bodies. Under Spanish rules it and any other suitors have until Thursday 18 October to make their offer.

Italy’s Atlantia kicked things off in May with its takeover offer for Abertis that valued Abertis at $20bn.

If it materialises, Hochtief’s bid is expected to be half in cash and half in shares, said Reuters, quoting unnamed sources close to the deal.

It would come in the week after Spanish, Chilean and European competition authorities approved Atlantia’s takeover, which allowed it to launch a formal offer on Tuesday, 10 October.

Atlantia’s bid was approved by the European Commission on Friday, 13 October.

Margrethe Vestager, the European commissioner in charge of competition policy, said: "Together, Atlantia and Abertis would be the largest toll motorway operator not only in Europe but in the world. We can approve the transaction because our analysis under EU merger control found that the European markets for motorway concessions will remain competitive."

Atlantia is offering €16.50 per share in cash, with an equity alternative worth €19.12 designed to appeal to CriteriaCaixa, the Spanish investment group that owns 22% of Abertis.

To be competitive, ACS would have to put together an offer worth at least €18, valuing the company at roughly $21.2bn. According to Reuters, the offer will be split equally between cash and Hochtief shares, which would be roughly equivalent to its market value.

Reuters notes that the extremely high levels of borrowing required for the deal are supported by the steady and predictable income flows generated by toll roads, but adds that Hochtief and Abertis would have a combined debt of about €24bn.

Milan brokerage Banca IMI said in a note on Friday that the offer of Hochtief shares may be less attractive to investors than Atlantia’s cash offer. It said: "Abertis shareholders would be directly exposed to the less predictable construction sector and, strangely, would even be financing the offer as Hochtief would issue new shares potentially to be underwritten by Abertis’ shareholders themselves."

However, the bank adds: "The main concern is that if ACS’s bid materializes, the entire process may be delayed a lot, probably until next year." This would give the Spanish company time to improve its offer.

Abertis operates toll roads and telecoms networks in Europe, India and the Americas. Atlantia is active in the toll motorway concessions. Its main shareholder is Edizione, which also handles food concessions through its Autogrill subsidiary.

Image: Abertis manages 1,500km of Spain’s toll roads, about 60% of the total (Abertis)

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