At the beginning of this decade, the talk surrounding Spanish toll roads was their bankruptcy proceedings. As we head towards the end of the 2010s, the second-largest toll road operator in the country is the subject of a mysterious tug of war between institutional capital.
At the end of July, Globalvia – the owner of toll roads in the US, Portugal and Chile – made further inroads in the Spanish market, announcing a €1.3 billion deal to buy 55.6 percent of Itinere from three minority shareholders, including construction group Sacyr’s 15.5 percent stake.
Alas, for the platform owned by pension trio OPTrust, USS and PGGM, it was not to be. Last week, APG and Corsair Capital announced their own deal for Itinere, claiming to buy 59.2 percent of the company, including Sacyr’s stake and the 38 percent owned by the Corsair-managed $3.4 billion Gateway Infrastructure Investments (formerly Citi Infrastructure Partners, until its takeover by Corsair in 2015). The pair’s offer was framed around an exercising of pre-emption rights and was also valued at €1.3 billion.
However, as Globalvia was keen to point out, this wasn’t a like-for-like deal. The share capital bought is clearly different and while Globalvia’s deal involved purchases from Sacyr, Abanca and Kutxa, the bid lodged by APG and Corsair involved Sacyr and Liberbank.
Globalvia told us the two offers are not comparable and that their “intention is to go ahead with the contract we have signed”. It was a bullish position taken by the Spanish company, and one that will ensure that APG and Corsair’s confidence their transaction will be closed by the end of 2018 will be tested.
The situation is made all the more bizarre by Sacyr – the common seller in the two bids – which informed the Madrid Stock Exchange of its sale to Globalvia in July but is yet to do so in relation to the APG/Corsair bid. When pressed, the company maintains silence on the issue and refuses to say whether it has accepted a second bid, despite a rather confident statement from APG indicating so.
In short, the whole thing is looking rather messy at the moment, with Globalvia muttering darkly about a €100 million break clause should Sacyr walk away from its deal. However, things can still get messier.
In recent weeks, we’ve looked at Chicago Parking Meters and Italy’s Morandi Bridge tragedy to highlight the often complex relationship between public assets and private capital. This case – if it escalates – could raise several questions about the relationship between pension pots and private managers.
While from a competition perspective it’s encouraging to see a previously failing market back in demand, the optics of pension fund capital battling against each other in a potential legal dispute are not great.
Should this reach that stage, you would effectively have PGGM, representing the pension money of Dutch healthcare workers, against APG, managing the pension money of Dutch government and education employees. Or OPTrust, manager of Ontario government employee pension pots, against PSP Investments, an LP in the Gateway fund and representing Canadian public service, police and armed forces capital.
When the concept of pension fund investment in infrastructure is floated, pension pots battling each other in court is not the first thing that comes to mind. That’s not to say there aren’t valid reasons for that to happen, but much has been invested in highlighting the virtues of long-term institutional ownership of public assets.
In the UK, for example, that virtuous circle has emerged as a powerful argument against the Labour party’s nationalisation plans, with opponents making the case that wholesale nationalisation without adequate compensation could jeopardise pensioners’ money, both at home and abroad.
Whether that argument is slightly disingenuous is beside the point. As the battle for 552km of Spanish toll roads unfolds, the five parties involved would do well to remember who and what they represent before heading to the courts.
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