Infrastructure M&A in Europe
From rivals to partners
When Italian toll-road operator Atlantia made a bid for Spanish rival Abertis Infraestructuras, Germany’s HOCHTIEF asked Freshfields to help it make a counter offer – and later advise on an unusual and novel three-way acquisition.
Since 2017, many jurisdictions have either introduced new controls on foreign investment or made greater use of existing mechanisms to protect national assets.
This has driven more intra-regional deals, including ones such as this, which created a pan-European infrastructure business with global reach.
Taking the toll road
Abertis manages over 8,600km of motorway in Europe, the Americas and Asia. In May 2017, it received a bid from Atlantia valued at €16.3bn. The deal would have created the world’s biggest toll-road operator.
Our client HOCHTIEF is a Frankfurt-listed business experienced in building infrastructure, including motorways. The chance to also manage parts of the road system was attractive, so in October 2017, it lodged a counterbid of €17.1bn.
This had the potential to be one of the largest public takeovers of a foreign company by a German group and was the first major competing takeover offer made in Spain for more than 10 years.
As the target was based in Spain, the deal was subject to Spanish takeover law. This meant that HOCHTIEF had to file its offer document with the Comisión Nacional del Mercado de Valores (CNMV), the Spanish markets regulator.
HOCHTIEF’s bid – in the form of a cash-and-stock offering – would have required it to issue new shares. This meant registering for a share capital increase with BaFin, Germany’s market regulator.
The Freshfields team had to reconcile the demands of the regulators and the HOCHTIEF board. We also had to ensure that the German registration document dovetailed with the Spanish offer document, which itself had to be produced in English for non-Spanish-speaking investors.
From competitors to partners
In the months after HOCHTIEF announced its counterbid, the media had been speculating that Atlantia would increase the value of its offer.
But the two bidders, along with HOCHTIEF’s majority shareholder ACS, a Spanish construction group, had begun negotiating a three-way joint venture that would play to their respective strengths in construction and infrastructure management.
When news of the negotiations broke, the parties confirmed the talks by notifying the CNMV. That put pressure on the parties to firm up their plans.
Five days after CNMV notification, they signed an outline agreement for the joint venture and, 10 days later, the definitive investment agreement – just over two weeks to complete a process that normally takes months.
A 'soft' delisting
That wasn’t the end of it though.
Under Spanish takeover law, in order for the parties to acquire 100 per cent of Abertis, Abertis shareholders had to tender over 90 per cent of the company’s shares. This would allow the parties to compulsorily purchase the remaining shares – a process known as a ‘squeeze out’.
But the threshold was not achieved, which meant the remaining option was a ‘soft’ delisting of the Abertis shares not tendered to HOCHTIEF. This is a somewhat rarely used procedure that requires a shareholder meeting rather than a new prospectus.
The three-way arrangement meant the parties didn’t have to spend any more time and effort on what, for either HOCHTIEF or Atlantia, would ultimately have been a fruitless exercise. And with Spain’s ACS on board, political concerns that the country’s toll-roads would be fully foreign owned were eased.
As for Freshfields, the transaction, described by the Financial Times as ‘clever and complex’ [paywall], shows how quickly we can adapt to novel circumstances – such tripartite takeovers are rare and require a keen understanding of the parties’ rationale.
The deal also shows our pan-European strength. The client was German, but Spain was the focus of our efforts. Further support came from our lawyers in Italy once Atlantia became involved. Our offices in France, the United States and the UK also had a hand in proceedings, plus partner firms that helped with merger control and other regulatory filings.
In May 2019, the transaction was recognised at the International Tax Review's European Awards as a 'European Impact Deal'.