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Toll-road company Atlantia in 18.2 billion euro deal for Spanish rival

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Mr Castellucci said the goal is a bigger global footprint. For Atlantia, he sees higher value in consolidating Abertis than splitting its assets and says he has no intention of breaking up the latter.

Madrid

GIOVANNI Castellucci, the chief executive officer of the Benetton family's toll-road company Atlantia SpA, waged an eight-month battle to get control of Spanish rival Abertis Infraestructuras SA.

The truce that he reached this week to share the 18.2 billion euro (S$29.5 billion) acquisition was worth the struggle, he said, because Atlantia is also gaining more financial firepower to expand further.

"Our ambition is for a global footprint" with Abertis, Mr Castellucci said in an interview. "We see for Atlantia higher value in consolidating Abertis than in splitting its assets," he said, adding that there is no plan to break up the Spanish company.

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The Italian company's board approved a joint offer for Abertis alongsideĀ Real Madrid chairmanĀ Florentino Perez on Wednesday. Rome-based Atlantia and Mr Perez's Actividades de Construccion y Servicios SA (ACS) will create a co-owned holding company to control Abertis if their bid is accepted. Atlantia will have just over a 50 per cent direct stake in the new entity, allowing the Italian company to consolidate the results of the Spanish prize.

Under the deal, Madrid-based ACS will go ahead with a cash offer of 18.36 euros a share through its German arm, Hochtief AG. Atlantia will withdraw its competing and lower bid, and when the transaction is complete, gain control of Abertis.

Atlantia will invest about six billion euros in the deal, including buying around a 25 per cent stake in Hochtief, and will consolidate the Spanish company, Mr Castellucci said. Atlantia will end up investing 10 billion euros less than what was planned with its original bid, opening the way for other acquisitions.

The arrangement averts a longer bidding war that was looming over Abertis and removes political resistance that cropped up in Spain as Atlantia pursued the acquisition on its own. Abertis will remain Spanish, though its new Italian co-owners will have a stronger hand in management. A sale would require acceptance from Abertis shareholders.

The details of the multi-step agreement would also lead to ACS owning 30 per cent of the holding company that owns Abertis, which will be based in Madrid. The rest will be held by Hochtief. Atlantia will buy Hochtief shares for as much as 2.5 billion euros, adding indirectly to Abertis stake. It will name the CEO, and ACS will name the chairman, people familiar with the matter have said. Criteria Caixa, Abertis's top shareholder, supports the offer, the sources said.

Mr Castellucci sees the investment in Hochtief as a way to help the expansion of Abertis and Atlantia into attractive infrastructure markets, such as Germany, the US, Canada and Australia.

It also frees up capital for Atlantia, which has just agreed to buy a 1.06 billion euro stake in Channel Tunnel operator Eurotunnel, to seek more acquisitions to expand outside Italy. Atlantia, or another company that it indicates, also has the right until March 23 to exercise a call option on part of or the entire stake held by Abertis in Spanish mobile-phone tower operator Cellnex Telecom SA.

"We confirm the dividend growth we announced when we launched the tender offer for Abertis," Mr Castellucci said. The dividend based on fiscal 2018 results will mark a 30 per cent step up from 2016, in addition to the 10 per cent annual increase that Atlantia typically pays.

Credit Suisse, together with Santander and Mediobanca, are advising Atlantia in the deal and are said to be mandated for the financing. Lazard is advising ACS.

Mr Perez emerged in July at the helm of a Spanish counter-bid for Abertis as Mariano Rajoy's government was not willing to concede the country's biggest toll road operator, which manages 8,650 km of highways, including roads in France, Spain, Italy, Brazil and Chile, to its Italian rival.

The Spanish government was favouring a domestic buyer for Abertis, which was considered a strategic asset due to its infrastructure interests and satellite operating arm, Hispasat, people familiar with the matter said at the time. On Tuesday, Abertis agreed to sell its 57 per cent stake in Hispasat for at least 656 million euros, conditional on it receiving a binding offer from Spanish power network operator Red Electrica Corp SA.

Atlantia outlined its plan for Abertis after Bloomberg News reported last April that the company was looking at its Spanish peer to create the world's biggest toll-road operator. The Italian company made a formal 16.3 billion euro offer in May, and Mr Castellucci sought to get Abertis's top shareholder, Criteria Caixa, on board. The offer was topped in October by Hochtief.

With the deal, "we think that synergies would be possible with both Abertis and Hochtief in this case", Enrico Bartoli, a Milan-based analyst at MainFirst Bank AG, wrote in a report, pointing to potential access to new markets for Atlantia, such as North America and Australia.

Hochtief shares declined 0.4 per cent as at 9.09 am in Frankfurt, following a 5 per cent jump on Wednesday. Atlantia also fell 0.4 per cent in Milan. ACS fell 0.9 per cent in Madrid, and Abertis slid 0.1 per cent.

Since Atlantia made its tender bid in May 2017, shares of the Italian company have gained about 9.6 per cent. In the same period, ACS and Hochtief have lost about 8 per cent and 9 per cent. BLOOMBERG