Ferrovial and Cintra Merger
The website doesn’t give much information but the key here is that these multinational companies merged. This is how complex it gets. The world of multinationals is a context where allegiences are not national they are typically to elite groupings competing to maximise profits and influence in a world literally of their own making. This is the world of concentrated wealth, assets and control. These types of mergers are reflective of the lucrative market of public sector with the aim of accessing the tax base (secure funds) where governments contract its services (not strictly projects) to multinational companies who are conglomerates (multiple and unrelated sectors e.g roads, social security, detention centres, prisons etc.) not related diversification (same sector). They can have breadth and depth in respect of crossing many sectors and buying up channel partners (manufacturing to retail). They have tremendous buying power and transfer pricing within. Companies based at the national level may not have that type of power to gain economies of scale (reduce costs) and can out compete local organisations. It also means it is likely the profits go off shore.
I’ve been investigating detention centres, this lead me to Broadspectrum, which lead to Ferrovial and then this lead to Cintra. This is the nature cross ownership and can be hard to identify from the perspective of the public who are told the first company is Australian. Indeed it is not given its parent company.
https://www.cintra.es/en/cintra/
Ferrovial website:
Cintra shareholders ratify merger with Ferrovial, to be completed early in DecemberPUBLISHED ON 22/10/2009
- Ferrovial’s shareholders gave the green light on Tuesday. The transaction is scheduled to be completed at the beginning of December.
- The new Ferrovial will focus on Greenfield transport infrastructure projects. Consequently, the merger will facilitate coordination between infrastructure construction, development, and management.
- Rafael del Pino, Chairman of Cintra: “The new company will be larger, have a stronger balance sheet and be sounder, while its shares will enjoy greater liquidity and stability.”
- Enrique Díaz-Rato, CEO of Cintra: “The merger responds to the challenges posed for the future development of the infrastructure sector.”
Madrid, 22 October 2009. The merger of Ferrovial and Cintra has overcome one of the last remaining hurdles. Cintra’s shareholders today approved its merger with Ferrovial. The parent company’s shareholders approved the operation on Tuesday and, once all the legal requirements are fulfilled, the transaction is expected to be completed towards the beginning of December.
The merger will create a world leader in infrastructure management and services. The new Ferrovial will have a presence in 49 countries, a workforce of 107,000 people and assets that amounted to 48.2 billion euro at 2008 year-end. Addressing the shareholders, Cintra’s Chairman Rafael del Pino highlighted the benefits of the merger for them: “The new company will be larger, have a stronger balance sheet and be sounder, while its shares will enjoy greater liquidity and stability.”
Investors have already perceived the benefits of the merger, since Cintra’s shares have appreciated by more than 50% since the merger was announced in late July.
The transaction is being effected as a reverse merger, in which Cintra increases capital to absorb Ferrovial. Once the merger is complete, the resulting company will be renamed Ferrovial, S.A. Cintra will subsidiarize its concessions while maintaining its prestigious brand and its material and human resources.
Enrique Diaz-Rato, CEO of Cintra, explained: “The integration of both companies represents the best way to adapt ourselves to changes in the competitive market environment and thus respond to the challenges posed for the future development of the infrastructure sector, leading to a new group whose value is greater than the sum of its parts.”
The merger is advantageous for both companies on a number of levels. On the operations front, it will enable greater coordination between infrastructure development and management, performed by Cintra, and construction, performed by Ferrovial Agroman.
The merger will also have financial advantages since it will optimize the use of cash flow within the group. Circulation of cash flow is currently hampered by the difference in ownership between Cintra and the other Ferrovial companies. The merger will also be beneficial for raising funds on the capital markets because of the advantages of a larger company.
It will also give Cintras shareholders a stake in a larger, sounder and better diversified company. The merged company will have 55.4% free float, i.e. providing greater liquidity and reducing the share’s volatility.
The share exchange ratio in the merger is 4 shares of Cintra for each share of Ferrovial. In the case of Cintra, Merrill Lynch concluded that the share exchange ratio was fair. The calculation method was also ratified by the independent expert appointed by the Mercantile Register.
The Shareholders’ Meeting today appointed the 13 members who will make up the new company’s Board of Directors. Alongside the 11 current directors of Ferrovial, José Fernando Sánchez-Junco, current independent director of Cintra, and Iñigo Meirás Amusco have also been appointed. Iñigo Meirás was on Tuesday named CEO of Grupo Ferrovial.
Cintra also unveiled its new corporate image at today’s Shareholders’ Meeting. The toll road operator’s logo has been changed to adapt to the Ferrovial brand structure. The new logo maintains its classic toll road image while adapting to the Ferrovial font and characteristic yellow color. SUMMA, a leading branding consultancy, developed the new corporate identity in cooperation with Ferrovial’s Corporate Communications Department.
CINTRA
Cintra is one of the world’s leading private sector infrastructure developers. It operates 23 concessions measuring a total of 2,841 km. In 2009, it has been awarded three new toll highways – two in Texas and one in Poland – which are pending financial closure and signature of the concession agreements. The 26 toll roads are located in Spain (7), Ireland (2), Greece (2), Portugal (3), Chile (5), Canada (1), the USA (5) and Poland (1).