Shareholders continue to fight Cintra merger

Six dissident shareholders have signed a 'shareholder agreement' calling once again for the planned merger between Spanish toll road operator Cintra and parent company Ferrovial to be scrapped.

The UK’s Universities Superannuation Scheme along with CP2, Gartmore Investments, Magellan Asset Management, New Jersey  Division of Investment and rpmi Railpen Investments -which together own 4 per cent of Cintra – have outlined “deep concerns” about the plot.

The rebel shareholders have already voiced their discontent about the proposal, which they see as being instigated to help repair Ferrovial’s balance sheet rather than being in the interests of Cintra’s investors.

In April this year, USS, CP2, Magellan Asset Management and New Jersey Division of  Investment entered into an agreement to vote against any merger proposal  unless the proposal was “fundamentally improved”.That agreement, which terminated on 30 June, has now been renewed and extended to 31 October, enabling two further shareholders to join the rebel group. The two new investors opposing the plan are  Gartmore Investment  and Railways Pension Trustee Company.  

“The preference of all signatories would be for the merger discussions to be abandoned,” said the group in a statement. “Failing this, the merger exchange ratio should fully reflect the unwanted exposure to non-toll road operations and a substantial increase in financial risk due to Ferrovial’s level of borrowings,” they added.   

The shareholders are set to vote against the merger unless it is based on an exchange ratio of 1 new share in Ferrovial for 1 and a half shares in Cintra – or a more generous ratio for Cintra shareholders. At this level, they believe the deal would provide minority shareholders with “fair value” for Cintra’s assets and adequate compensation for the   increased exposure in operational and financial risks. 
 
The shareholders have also blasted Cintra's board for not responding 'adequately' to their calls.”Having written to the Cintra board on a number of occasions, the parties have received inadequate responses to the serious concerns raised regarding the significant conflicts the proposed merger brings,” they said.

The dissidents added the proposed merger provided “clear advantages” to Ferrovial, with access to around €400million of existing cash within Cintra, and potentially a further €1 billion from the sale of Cintra’s Chilean toll road business and its car parks division. “The merger seems intended to alleviate some of the well documented financial challenges being faced by Ferrovial whilst being fundamentally contrary to the interests of all other Cintra shareholders,” they added.

Warren Low, European fund manager of USS, said: “For over six months there has been continual speculation and uncertainty regarding the proposed  merger between Ferrovial and Cintra. The six global investors who have signed the agreement expect the Cintra board to act on behalf of and protect minority shareholder interests at all times.”

He said it was “clear” that the current focus at Ferrovial was on asset disposals and re-financing. “In a difficult  market for asset sales and with ongoing credit market dislocations it remains difficult to see how the expected exchange ratio comes anywhere close to  representing a fair deal for minority shareholders. Therefore, we would not support anything less than an exchange ratio of 1 Ferrovial share to 1.5  Cintra shares if and when the proposal is put to shareholders.”