Italy's Altantia acquires RCO in Mexico

Italy's Altantia acquires RCO in Mexico

M&A Project & Infrastructure Finance Mexico Europe US

Italy's Atlantia said its Spanish subsidiary Abertis will pay €1.5bn ($1.66bn) to Goldman Sachs Infrastructure Partners (GSIP) for 50.1% of the Mexican toll road operator Red de Carreteras de Occidente (RCO).

At the same time, Singapore's sovereign wealth fund GIC agreed to buy 19.9% of RCO in a deal that values the toll road concessionaire at around €5bn, Abertis said in a press release.

The remaining 30% of RCO is owned by local investors and pension fund managers called Afores, according to Abertis.

Abertis said it will finance the acquisition with cash on hand and existing credit lines. The deal is expected to close in the first half of 2020, when Abertis and GIC could make a tender offer to increase their stake by as much as 6%, the Spanish toll road company said.

RCO operates eight concessions that cover 876km of toll roads, including the 663km FARAC I network. The toll roads would have contributed €375m to Abertis' EBITDA in 2018. Abertis' entry into the Mexican market also compensates for the potential loss of revenues from the end of other concessions, the company said.

"The acquisition of RCO involves the establishment of a new growth platform in a target market that has actively been explored by Abertis in recent years, and that will facilitate the evaluation of future opportunities in the country," it said.

Abertis also operates toll roads in Chile, Brazil, Argentina and Puerto Rico. Atlantia, owned by the Benetton family, acquired 30% of Abertis in October last year, while Hochtief, the German division of Spanish builder ACS, took 20% of the Spanish company in a €16.5bn deal that also saw Atlantia buy 23.9% of Hochtief for €2.4bn.

Abertis had expressed interest in RCO in October 2016 and GSIP was rumored to sell the toll road concessionaire in March 2017, but it decided to keep its 70% stake at the time. RCO took out a 15-year loan from Santander for MXN2bn ($104m) in July this year to pay for repairs to its toll roads.

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