Florentino Perez Spies a Road to $12 Billion Italian Deal

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Florentino Perez may be about to test Italian Prime Minister Mario Draghi’s commitment to free and fair markets. The construction tycoon and president of the Real Madrid soccer club has lately attracted scorn for his plans for a closed-shop European football league. But his bold ideas for expanding Spanish builder Actividades de Construccion y Servicios SA could reveal whether Italy has a more supportive attitude toward competition.

Perez-led ACS said in early April it was considering an offer of as much as 10 billion euros ($12 billion) for Autostrade per l’Italia SpA, the Italian toll-road operator that maintained the Morandi road bridge prior to its horrifying collapse, claiming 43 lives, in 2018. This is a long-running, highly politicized and sensitive situation. Perez, while intervening late, may nevertheless be able to influence how it is resolved.

Autostrade is currently subject to a contentious nationalization plan driven by previous Italian administrations in response to the Genoa tragedy. Its owner, infrastructure company Atlantia SpA, has rejected allegations that it breached its maintenance commitments for the bridge. In response to government threats to strip Autostrade of its operating license, it has proposed a 3.4 billion-euro package of compensation, investment and toll cuts instead.

This hasn’t quelled the furor. Atlantia is 30%-owned by the billionaire Benettons, and the government of Giuseppe Conte wanted to end the family’s involvement with Autostrade altogether. The result was a plan for postal-savings bank Cassa Depositi e Prestiti SpA to buy it.

Atlantia has argued a sale of Autostrade should be determined by market forces. The process has been anything but competitive. A CDP-led consortium, including funds run by Blackstone Group Inc. and Macquarie Group Ltd., is the sole buyer. An alternative plan for an Autostrade demerger was nixed by the Benettons last month, against the wishes of most other shareholders. The Benettons said a deal with CDP offered more certainty. The impression is that they now want closure without further fuss or delay.

CDP’s offer is worth 9.1 billion euros, Bloomberg News reported. It’s not too late for that to be revised upward. Even after factoring in the costs of the settlement, some of which are spread over time and tax deductible, it’s some way from the 14 billion-euro value analysts ascribed to the business before the disaster. Minority investor TCI Fund Management Ltd. reckons Autostrade is worth 12 billion euros. The reality is that only a market listing of the shares, or a fairly run auction, can determine a solid price.

Even if CDP can agree terms with Atlantia’s board, its offer would then need shareholder approval. If its plans falter at either hurdle, the whole process will be back to square one. The question then is whether Draghi would restart an uncontested nationalization, something he may not have initiated had he been in power in 2018.

The Genoa bridge has been reconstructed but the official report into the tragedy has yet to conclude. Clearly, Atlantia faces questions over whether it oversaw inadequate maintenance. If failings by Autostrade are proven, Atlantia should pay heavily, especially given the high dividends it shelled out over the years. It also has a duty to fund works across the network necessary to prevent a repeat.

But it’s far from clear how a sale, uncompetitive or otherwise, is necessary. A forced nationalization imposes a backdoor financial penalty, but these costs should arguably be levied on Autostrade directly and transparently. A sale while the investigation is pending — and the final bill for upgrading the network is unclear — also carries risks. The unpalatable outcome would be that Atlantia shareholders got a clean break from the situation, while passing on still uncertain costs to new owners.

If Draghi still believes new ownership is necessary, rather than subjecting Autostrade to tougher monitoring ahead, he might struggle to justify a process that excluded other bidders. Perez would then have a chance of a deal. But he would also face a challenge: demonstrating that ACS, no stranger to leverage, would be a better owner, and that the demands of debt-servicing and dividends would come second to the needs of the business.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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