Investors oppose possible Cintra, Ferrovial merger

A possible merger between Spanish infrastructure group Ferrovial and its sister company, toll road firm Cintra, would solely benefit Ferrovial, Cintra minority investors said on Wednesday. Debt-laden Ferrovial, which already owns 67 percent of Cintra, said in December it was studying a possible merger with the company but that there were no agreements in place as yet.
Cintra said in January it had agreed to study a possible tie-up. Disgruntled shareholders representing 4.2 percent of the share capital of Cintra wrote to the board outlining their opposition to any merger with Ferrovial. "The merger rationale is far from compelling from Cintras point of view and it seems designed to address the immediate financial challenges of Ferrovial," said Peter Doherty, Managing Director of infrastructure investment mananger CP2 Limited.
Bill Clark, Director of the Division of Investment at the State of New Jersey, representing the New Jersey Pension Fund agreed. "We are highly concerned with the proposed merger. It is very clear that all benefits from the merger flow to Ferrovial shareholders only," he said.
Ferrovial and Cintra declined to comment on the matter on Wednesday. Under Spanish law, a parent company must own at least 75 percent of a subsidiary to incorporate it fully into its balance sheet. Cintras losses would bring tax advantages to Ferrovial.
A merger could also give Ferrovial access to Cintras high cash levels, about to be boosted by the toll-road firms sale of car parks and Chilean toll road assets. "Around 1 billion euros ($1.3 billion) in liquidity would be a welcome boost to Ferrovials balance sheet," Citi analyst Mike Pinkney said at the time.
Ferrovial had debt of 24.1 billion euros at the end of December, dwarfing 2008 sales of 14.1 billion euros. It has put Gatwick airport up for sale and will use the proceeds to pay off debt as it moves to reduce leverage. The group bought British operator BAA, owner of Gatwick and Heathrow, in 2006 in a deal worth over 10 billion pounds ($13.82 billion).
The four signatories on the letter to Cintra are Britains Universities Superannuation Scheme (USS), Australias CP2 Limited and Magellan Asset Management and New Jersey Pension Fund. Together, the investors represent 13 percent of Cintras share capital not owned by Ferrovial. Cintra was 2.1 percent higher at 3.4 euros by 1430 GMT. Ferrovial was 1.4 percent higher at 17.8 euros.