Ferrovial to step up acquisition drive

MADRID Fri Feb 22, 2013 11:57pm IST

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MADRID (Reuters) - Spanish infrastructure group Ferrovial (FER.MC) is on the hunt for more acquisitions, ending a five-year drive to cut debt, as it seeks to diversify further from its crisis-hit domestic construction business.

Ferrovial, an owner of Europe's biggest airport group Heathrow, has transformed itself from a debt-laden construction company to an acquisitive global infrastructure giant with a cash pile of more than 1 billion euro ($1.3 billion).

After years of asset sales that reduced its majority stakes in Heathrow Airport Holdings - formerly BAA - and Canada's main 407-ETR toll road, the company has nearly halved its net debt to 12.9 billion euros from 24 billion in 2008.

"We have strengthened our balance sheet and now have a healthy financial situation. That allows us to look for investment opportunities while rotating (selling) mature assets," chief executive Inigo Meiras told Reuters on Friday.

The ratio of its debt to earnings before interest, taxes, depreciation and amortization (EBITDA) has fallen steadily in recent years to 5.5 in 2012, according to Thomson Reuters data.

Meiras, 49, kicked off the acquisition drive on Thursday with a 385 million pounds ($588 million) deal to buy British maintenance and utility company Enterprise, doubling the company's presence in Britain.

Now Ferrovial is eyeing infrastructure opportunities in Australia, Canada, Colombia, the Middle East and the United States, he said, and will present a letter of interest for the privatization of Chicago's Midway airport.

A previous attempt to lease Midway, with 19.5 million passengers last year, to private investors fizzled in 2009 as the economic downturn dried up financing for the $2.5 billion, 99-year deal.

This time round Chicago mayor Rahm Emanuel is planning a lease of 40 years or less that would include a revenue-sharing provision, allowing the city to retain ownership.

Analysts have said Ferrovial may bid in a consortium with a stake of 35-45 percent and a net investment of around 200 million euros.

HAPPY WITH HEATHROW

Ferrovial sprung from a family-owned railroad construction business founded in 1952 to one of the world's largest infrastructure companies, with airport, toll road, construction and services assets in more than 15 countries.

With its construction arm in Spain suffering from a sharp economic downturn and virtual halt in public tenders, the company has relied increasingly on its overseas business, with Heathrow and the 407-ETR its main growth drivers.

Ferrovial, with revenue of 7.7 billion euros in 2012, ran into debt trouble after scooping up BAA in 2006, only to be later forced by British competition authorities to sell London's Gatwick and Stansted airports in a depressed market, sparking a series of court appeals by the Spanish company.

But it has also managed to sell stakes in Heathrow at a profit, and may have left a negative chapter in Britain behind with the purchase of Enterprise.

Meiras said Ferrovial was to keep its 34 percent stake in Heathrow Airport Holdings after selling it down from more than 50 percent in the past 18 months to cut debt. "We have achieved our goal in Heathrow and are happy with our current stake."

According to a recent shareholder pact, Ferrovial can cut its stake in Heathrow to 25 percent, and analysts have tipped the possibility of more sales, given the valuations seen in previous sales.

BONDS AND DIVIDENDS

Ferrovial has said it will maintain a stable dividend policy but was unlikely to repeat the 1.25 euro payout on 2011 profit, which was double the year earlier figure after capital gains from Heathrow stake sales.

The company launched its first ever bond issue in January, selling 500 million euros of five-year bonds, and could make more issues in the medium term - Spanish companies, which traditionally relied on banks for financing, are now seeking funding in capital markets given the dearth of bank credit.

Ferrovial shares, up 6 percent this year after a 20 percent rise in 2012, closed on Friday 0.1 percent higher at 11.92 euros.

($1 = 0.7563 euro = 0.6551 pound)

(Editing by David Goodman and Dan Lalor)

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