Sacyr Vallehermoso to sell Itínere unit to Citigroup in EUR 7.89 bln deal - Update

(RTTNews) - Spanish builder Sacyr Vallehermoso, S.A. (SYV, SYRVF.PK) said Monday that it agreed to sell its highway operating unit Itínere Infraestructuras, S.A to a Citigroup Inc. (C) fund for 2.87 billion euros, together with 5.01 billion euros debt, aiming to considerably reducing its piled up debt.

The deal, for a total value of 7.89 billion euros, is expected to ease mounting pressure on Sacyr to sell its around 20% stake in Spanish-Argentine oil major Repsol YPF.

Sacyr, Spain's fifth-largest construction company, noted that the transaction is expected to reduce its debt by 37% to 12.48 billion euros from 19.73 billion euros as of January 1, 2008, thus strengthen the company's financial situation.

Under the agreement, Citi Infraestructure Partners L.P will launch a takeover bid for 100% of Itínere's capital at 3.96 euros per share. Sacyr will transfer 42.83% of its Itínere shares initially, and will hand over 11.58% of Itínere's share capital later, following the materialization of the offer.

The company noted that the offer by Citi is subject to a suspensive clause requiring the approval of the transaction by the relevant competition authorities and financial entities, and the deal is conditional upon obtaining of a final participation in Itínere of more of 50% of its capital.

Madrid, Spain-based Sacyr added that it will acquire some concession assets from Citi in the ramp-up and construction phases, with anticipated relevant capacity to create value in the future, for 450 million euros.

Sacyr also said its 8.34% shares in Itínere will be handed over to savings banks Bilbao Bizkaia Kutxa, or BBK, and Caja Vital in exchange for the exit put that these hold. Kutxa has already exercised it put option. The company noted that the perfection and execution of the transaction will have to occur in 30 days, regardless of the negotiations that the parties could carry out in connection with actions and commitments made to close the operation.

Itinere operates highway concessions in Brazil, Chile, Spain, Portugal and is currently constructing highways in Chile, Costa Rica, Spain, Ireland and Portugal.

In a side by side deal, Citi Infraestructure has reached an agreement with Spanish concessions group Abertis Infraestructuras, S.A. (ABE, ABFOF.PK) and Italy's Atlantia S.p.A (ATL, ATLA.L) to resell certain highway concessions in Spain, Portugal, Brazil and Chile. Citi, which is badly hit by the current economic downturn, itself, is under pressure to sell assets and pay down debt.

Separately, abertis, Spain's biggest highway operator, said it will acquire a number of Itinere's stakes in companies in which it is already a shareholder for a total of 621 million euros from Citi. The deal will be executed once Citi Infrastructure made a public offer to acquire the Itinere shares owned by Sacyr.

Meanwhile, Atlantia, the Italian infrastructure group formally known as Autostrade, announced that a series of Itinere companies will be bought for total of 420 million euros from Citi fund. The agreement is for five concessions that manage a total of 702 km of toll motorway in Chile and Brazil, two companies that manage maintenance and road works on certain sections in Chile, together with minority interests in three Portuguese concessions.

In the transaction with Citi, Spain-based Mediobanca has acted as Sacyr's exclusive financial advisor.

The debt of Sacyr had piled up after the company increased borrowings to expand in energy and counter a slump in domestic construction. In Spain, global credit crunch as well as a sudden slump in the domestic real estate market are hitting constructors, making them struggling to repay debt taken on during the property sector's high times.

The latest deal with Citi is expected to help Sacyr to reduce its indebtedness, thus helping to save its 20% stake in Repsol, which was bought in 2006 for 6.5 billion euros. Russia's OAO Lukoil has reportedly expressed interest in buying a stake in Repsol, but is facing massive criticism over a Russian company acquiring the largest part of the country's leading oil group.

According to reports, Sacyr's managing director Ana de Pro told a news conference that the company would continue to seek a buyer for its Repsol stake despite the Itinere deal.

Sacyr noted that the transaction with Citi excludes Itinere's stakes in non- highway concessions, such as hospitals, Airport, and transport hubs, and the company will continue to operate the concession's sector with 24 assets in 5 countries, including Spain, Chile, Ireland, Portugal, and Costa Rica. The deal also excludes stakes in eight highways including Madrid South and Madrid Levante.

C closed Friday's regular trading session at $8.29, up $1.24, on a volume of 251 million shares. In the pre-market activity, shares declined $0.40 or 4.83% to $7.89. The shares have been trading in a broad range of $3.05 - $35.29 for the past 52 weeks.

SYRVF.PK last traded at November 6 at $10.21.

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