Posted on 08/05/2006 8:28:42 AM PDT by Republicain
ROME (AFP) - Italy's centre-left government has blocked a proposed 25 billion-euro (32 billion-dollar) merger between Autostrade and the Spanish company Abertis which would have created the world's largest toll road operator, citing the public interest.
Italian Infrastructure Minister Antonio Di Pietro and Economy Minister Tommaso Padoa-Schioppa said the merger, agreed in April, was "not compatible" with the government's concession agreement with Autostrade.
"The merger would not be compatible or coherent with the aims (of the government) in granting the (motorways) concession," the ministers wrote in a joint letter to Italy's state roads authority ANAS made public late Friday.
However, the Spanish company said it intended to continue with the merger despite the Italian government roadblock.
The two companies "want to continue with their merger plans," an Abertis spokeswoman told AFP in Madrid.
Abertis is studying the grounds for the government's decision "and in the meantime we are continuing to work towards completion of our plans," the spokeswoman said.
Italy's ANSA news agency, citing sources close to the merger, said the deal was not yet dead, as the government veto would not be definitive until formalised by an inter-ministerial decree.
Autostrade made no immediate comment, saying it would wait to do so when given the full reasons for the government veto.
A key objection of the Italian government was that the merged company would have a construction company, Spain's ACS, as one of its shareholders.
ACS would have a 12.5 percent stake in the new entity, a breach of the conditions under which Autostrade was privatised in 1999, which include a ban on constructors holding stock in the company to avoid what in Italy is seen as a conflict of interest.
The announcement, at 9:00 pm (1900 GMT) on Friday, appeared to have wrongfooted the main players.
Only hours earlier, Abertis chief Salvador Alemany Mas was quoted by Italian media as saying he had "total confidence" in the merger, adding that Italy's Prime Minister Romano Prodi "has no interest in blocking the operation."
His opposite number at Autostrade, Gianmaria Gros-Pietro, told the Corriere della Sera: "The statement says that at the time of the privatization of the company (Autostrade), a decree fixing the conditions of sale excluded the presence of constructors."
"But constructors are part of motorway companies throughout Europe and also in Italy," he said, adding that some recent concessions have been won by companies with constructors as shareholders.
The planned merger was dominated by Spanish capital in a tie-up that was set to create a group with market capitalisation of more than 25 billion euros and a staff of 17,000.
The government in Rome had seen the deal more as a Spanish takeover which would jeopardise investments in Italy's road network, rather than a merger. The headquarters of the new company would be in Spain, the chief executive Spanish and Autostrade's shares would be folded into Abertis.
The announcement of the proposed merger in April was greeted by a chorus of criticism of Autostrade's past performance, including a lack of investment in infrastructure.
Di Pietro had personally made no secret of his distaste for the deal, asking for a postponement of merger talks in May to allow more time for the recently installed minister to examine its consequences.
"The motorways are a primary good. They are fundamental to the development of our country," he said at the time.
"We cannot allow ownership to be handed over to a foreign company nor can we allow that the programme of investments in them is not carried out, as has happened for a variety of reasons, in recent years."
The financial muscle that Abertis and Autostrade derive from joining forces will be their main calling card when attacking markets in the U.S. and Asia. Everything indicates that there will major projects in those two regions in coming years. Abertis already had its first experience in the U.S. at the start of this year -- its Toll Road in Indiana. However, it wound up withdrawing from the struggle, won by its rival Cintra which is also from Spain. Last year, Cintra was also awarded the Skyway of Chicago highway, and it is a strategic partner with the State of Texas in the Trans Texas Corridor, an ambitious project that will involve global investments of between $29 billion and $36.7 billion. The project will set a standard for all future roads that modernize communications in Texas.
Cintra’s success has awakened the interest of other companies. However, one doubt is floating in the air: Will European companies know how to compete in the Anglo-Saxon market? The doubt seems reasonable when you compare the protectionism of Europe with the free market in the U.S. In fact, analysts have long noted the Anglo-Saxon mentality of Cintra, a subsidiary of Ferrovial, as one of its key strengths when competing in the U.S. Guillén has no doubts that Abertis will be able to crack the U.S. market. “Obviously, Abertis already knows how to operate in many markets. It will do well in Europe and in the U.S. Spanish contracting companies are among the best in the world,” he adds.
Garralda emphasizes the rationality of the Anglo-Saxon market versus the European market, where guarantees of employment, the nationality of the company, and controlled prices can wind up playing a greater role than economic supply. Nevertheless, he is sure that Abertis and Autostrade “have the skills required for working as well on Anglo-Saxon terrain as their competitors do.”
In contrast, the Chinese market offers other sorts of question marks. Excessive protectionism by the government and barriers against the operations of Spanish construction firms combine to explain a comment that Salvador Alemany made recently. He said expansion in Asia is only a “medium term” goal of his company, not a short-term goal. Legal security is another important factor in the highway construction business, where companies seal agreements with governments that last for decades.
The Chinese government will have to provide the legal guarantees and the necessary markets so foreigners decide to begin to drive on their roads. In Garralda’s opinion, “China is probably the country that will offer the most exploitation opportunities in the world. The problem is the role of the public sector. If a free market system such as the American system depends on public administration, imagine the Chinese Communist system, which is so interventionist. They could easily make the decision to take a different approach, or I imagine that the Chinese could get cold feet and be very careful when it comes time for the country to act.”
Do these companies also maintain the pavement ?
Do they look after the pavement ? What do they do for their fees besides operate toll booths ?
In the end it's about "who" makes the money and has the control. France was no different with its energy firm recently. Look at Airbus and even EADS all together! Europe has a significant degree of state ownership in its economy. Many firms you think are private and appear that way superficially are not when you scratch and dig bellow the surface.
Not to pick on Germany, but because I lived there 24 years and am part German I understand a little bit about that place and feel more comfortable speaking about it than Italy. Yet Italy is no better. However in Germany if you ever fly into Frankfurt you are landing at a state owned airport in Frankfurt (near 70% of shares are in some level of governments hands). You can then take a train or a bus to you destination on a state run public transportation grid running on a state controlled power grid brought to you by HEAG……….. The share of government is huge!
I asked because it was the dream of several oil companies (asphalt) to become managers of US roads in the 1980s...
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