Citi Infrastructure to buy Itinere in €7.9bn deal

The deal will be the largest yet for the infrastructure heavyweight and its first in the toll road sector after its consortium's $12.8bn bid for the Pennsylvania Turnpike expired in September.

Citi Infrastructure Investors, the infrastructure investment arm of Citi Alternative Investments, has agreed to acquire toll road developer and operator Itinere Infraestructuras from Spanish construction company Sacyr Vallehermoso for €7.9 billion.

Itinere: on the
way to Citi

Subject to antitrust approval, the transaction will be the biggest deal yet for Citi Infrastructure and its first toll road transaction after its $12.8 billion consortium bid for the Pennsylvania Turnpike expired in September.

Citi plans to use Itinere as its platform for the toll road sector, a strategy that is similar to its acquiring a 50 percent stake in airport manager YVR Airport Services as a platform for transactions in the airport sector. 

The €7.9 billion enterprise value for Itinere is comprised of €5 billion of net assumed debt and €2.9 billion for Itinere’s equity, which is 80.2 percent owned by Sacyr and quoted on Spain's SIBE (Sistema de Interconexión Bursátil Español).

The equity purchase will be carried out in a series of steps over the next 18 months. First, Citi will launch a formal tender offer for 100 percent of Itinere at €3.96 per share. Sacyr will then tender an initial 31.3 percent of its shares followed by additional 11.6 percent contingent on the sale back to Sacyr of certain concessions in Itinere’s portfolio that Citi does not want because of their location or development phase. Citi also will acquire an additional stake of between 7.2 percent to 9.9 percent from other shareholders and will have the right to purchase Sacyr’s remaining shares of Itinere over the next 18 months.

The deal will reduce Sacyr’s indebtedness from €19.7 billion to €12.5 billion – a key motivation for the sale. The company's shares have tumbled more than 70 percent in the last year over fears that it would be unable to service its debt.

Based in Spain, Itinere has interests in 2,871.8 kilmetres of operational toll roads across Brazil, Chile, Portugal and Spain. It also has interests in 689.2 kilometres of toll roads under construction in Chile, Costa Rica, Ireland, Portugal and Spain.

Citi is structuring the transaction such that the portfolio of assets under its control will consist entirely of mature toll roads. Toward that end, it has executed additional agreements with toll road operators Abertis Infraestructuras and Atlantia to sell the toll roads that are still under construction or development. 

The transaction was spearheaded by London-based partner Juan Bejar, who, along with New York-based Felicity Gates co-heads Citi Infrastructure Investors. Bejar joined Citi last year from Spanish infrastructure developer Ferrovial.

Since its inception in 2007, Citi has acted in several of the largest infrastructure deals announced this year, including the £5.5 billion (€6.7 billion; $8.5 billion) take-private of Kelda, the owner of Yorkshire Water, its $12.8 billion Pennsylvania Turnpike bid alongside Abertis and other investors and, most recently, its successful $2.5 billion privatisation of Chicago’s Midway Airport.

Citi is currently investing out of its debut fund, which is still in fundraising and will reach a final close between $4 billion and $4.5 billion in the first quarter of 2009, according to a person familiar with the matter.

It will finance the Itinere transaction with both debt and equity, the person said, but would not comment on an exact breakdown.