CP2 opposes possible merger of Cintra with Ferrovial

Specialist global infrastructure investment manager, CP2 Limited has expressed serious concerns about the potential merger of Cintra Concesiones de Infraestructuras de Transporte, S.A. ("Cintra") and Grupo Ferrovial S.A. ("Ferrovial").

In a joint letter to Cintra�19;s board, CP2 with other institutional shareholders, Universities Superannuation Scheme, New Jersey Division of Investment and Magellan Asset Management, said that the deal would give them "unwanted exposure to operations in new sectors and geographic regions."  The shareholders also point out that, in a global market environment in which corporates are seeking to deleverage, a merger would expose Cintra shareholders to a much increased level of financial risk.

Peter Doherty, Managing Director of CP2 said: 

"Being a publicly owned company listed on the Madrid exchange in our view obligates Cintra to act in the best interests of all of its shareholders.  We do not see how a merger with Ferrovial satisfies this requirement or how a transparent merger process can be completed.

The merger rationale is far from compelling from Cintra's point of view and it seems designed to address the immediate financial challenges of Ferrovial.

Whilst our holding in Cintra represents less than 2 per cent of our funds under management, there is an important principle to protect here."

Ferrovial, which has a 67% shareholding in Cintra, announced it was studying the possibility of a merger with the toll-road company on 19 December 2008. 

Apart from giving Ferrovial full access to about 400 million Euro in cash, the consolidation of Cintra could provide tax benefits to the heavily-indebted parent group. Ferrovial has argued that Cintra now fits well with the company, after the £16bn acquisition of BAA in 2006 transformed the group into an infrastructure management group.

"Since its initial public offering, Cintra has represented a logical investment opportunity for specialist toll road investors," the shareholders say in their letter. 

"However, the merger transaction that is currently being evaluated by the respective boards would fundamentally change the nature of our investment".

The letter goes on to say that any merger exchange ratio would have to incorporate a very substantial premium in order to adequately compensate Cintra shareholders in these circumstances.

CP2 manages approximately $3 billion in investments in infrastructure on behalf of pension and endowment funds, including the Harvard Management Company in the United States, the Universities Superannuation Scheme and Railpen in the United Kingdom, ATP in Denmark and the New Zealand Superannuation Fund. 

The firm's investments include holdings in Transurban Group, DRIVe, ConnectEast, ZurichAirport, CopenhagenAirport and Sydney's airport rail link.  

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