MILAN/MADRID Italy's Atlantia (ATL.MI) bid 16.3 billion euros ($18 billion) for Abertis (ABE.MC) on Monday to create the world's biggest toll road operator, but still needs the full backing of the Spanish firm's top shareholder if it is to succeed.
Both companies are trying to shift away from their home markets and had previously agreed a deal in 2006, but this fell through due to Italian government opposition.
While Atlantia said Monday's cash-and share offer was friendly and the two have been in talks for weeks, Abertis said the bid had not been solicited and that it would not respond until it is legally obliged to do so.
A source close to its largest shareholder Criteria, the holding company that controls Spanish lender Caixabank, said a response could take weeks or even months.
Giovanni Castellucci, Atlantia's chief executive, acknowledged that he had yet to reach a formal agreement with Abertis or Caixabank.
Atlantia, which is controlled by the Benetton family, wants a tie-up with Abertis, which gets a third of its core earnings from France and has extensive operations in Latin America, to help cut its dependence on low-growth Italy.
Abertis in turn needs to find new business opportunities as some of its motorway concessions in Spain are close to the end of their lifespan. The combined group would have a market value of more than 36 billion euros and generate around 60 percent of core earnings outside Italy.
Criteria, which has a stake of 22.3 percent in Abertis, said in a statement it would carefully consider the offer.
"You can't say it's a done deal yet even though the two sides have talked to each other a lot. The Spaniards have little interest in saying yes right away. But the chances of a counterbid appear very slim," an Italian financial source said.
Under Spanish takeover law, the board of a target company should respond to an offer once it has been approved by the market regulator, which usually takes over a month.
"We did whatever we could to make it friendly," Castellucci told a conference call, fielding questions from analysts on how confident he was that Criteria would accept the offer.
"If we had an agreement, we would have had to say it. We have something different from an agreement...I cannot say more," he said, adding the terms of the offer would not change.
In a sign that the market believed the deal would go ahead, Atlantia's shares rose 2.9 percent to 24.9 euros by 1348 GMT (9.48 a.m. ET), while Abertis stock fell 0.7 percent to 16.330 - just below the 16.5 euros per share overall valuation offered by Atlantia.
The bid - to be funded through a 14.7 billion euros financing package - contains a number of sweeteners for the Spanish side, including a pledge not to de-list Abertis.
Atlantia's bid is structured as a cash offer of 16.5 euros per Abertis share - a touch above the Spanish stock's closing price on Friday but below the 17 euros per share Criteria asked for, according to sources.
The bid includes the possibility for Criteria or other shareholders to opt for a payment in shares and sets a minimum acceptance level of the share offer at 10 percent.
BENETTON FAMILY TOP INVESTOR
Atlantia slides showed the Benetton family would be the top shareholder of the combined group with an estimated 25.5 percent stake. The equity offer, if accepted, would allow Criteria to own 15 percent, higher than previously expected.
Atlantia is offering three board seats for Abertis shareholders. In addition, the new shares it is planning to issue will not be listed and cannot be sold until early 2019 - making the offer less attractive for short-term investors.
New Atlantia shares will be offered on the basis of a swap ratio of 0.697 Atlantia shares for each Abertis one. The Italian company aims to secure at least 50 percent plus 1 share of its Spanish rival.
Credit Suisse (CSGN.S) and Mediobanca (MDBI.MI) advised Atlantia, while BNP Paribas (BNPP.PA), Credit Suisse, UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI) arranged the financing.
(Additional reporting Paola Arosio in Milan, Stefano Bernabei in Rome, Editing by Silvia Aloisi and Alexander Smith)