Renta 4 | The Ontario government, through its Premier, has announced the possibility of taking control of the ETR 407 highway, in which Ferrovial (FER) has a 43.23% stake (50.01% CPP Investments and 6.76% AtkinsRéalis Canada), given the economic complexities involved in the construction of a tunnel under highway 401 (parallel to the 407 and which has high levels of traffic congestion).
The expropriation of the asset would be done under the contractual possibility of a ransom (it remains to be seen whether the reasons given would be within the contractual terms, and what the sense is of expropriating this motorway for the authorities) which would value the motorway at €23.4 billion, 6% below our current valuation of €24.8 billion.
Assessment: Although the amount to be paid by the Ontario executive is high, a fact that would make this possibility difficult, it is foreseeable that the news will be negatively reflected in Ferrovial’s share price. ETR 407 accounts for about 40% of our valuation. For the moment there are no comments from the company. We will be watching for possible announcements.
We reiterate hold, Target Price €35.60/share.
