ROME Italian motorway group Atlantia's (ATL.MI) planned takeover of Gemina GEMI.MI, which controls Rome airport operator ADR, will include a sizable stock component as well as cash, sources close to the matter said on Thursday.
The deal, worth around 1.1 billion euros ($1.5 billion) at current market prices, would help ADR on a multi billion-euro investment plan to relaunch its flagship Fiumicino airport by giving it better access to capital markets.
Atlantia and Gemina, both controlled by the Benetton family's holding Sintonia, said on Wednesday they were in talks to merge following months of speculation about a possible tie-up.
"There will certainly be a sizeable paper component, not just cash, to lower the risk of a (negative credit) rating impact," one of the sources said, asking not to be named.
The sources said that based on a value for Gemina of around 1.2 euros per share, as indicated by several analysts, the cash outlay for Atlantia would be less than 700 million euros.
Sintonia would not tender its Gemina shares in any Atlantia offer, sources said earlier on Thursday.
Atlantia saw its shares falling as much as 4 percent on Thursday on worries of a larger cash outlay and came off their lows after details over the planned bid emerged.
Shares in Gemina closed up 1 percent at 1.19 euros, having risen more than 90 percent since talk of a possible takeover emerged in July.
Atlantia, which has a market value of around 9.1 billion euros, was not immediately available to comment.
The merger is not expected to endanger Atlantia's current dividend pay-out policy, the sources said, adding the aim was to have shareholders of both companies vote on the deal by the end of April.
Sintonia, whose minority investors include Singapore sovereign wealth fund GIC GIC.UL and Goldman Sachs (GS.N), controls about 46 percent of Atlantia and 36 percent of Gemina.
Some analysts have cast doubt over whether the deal makes much strategic sense for Atlantia which has previously indicated a strategy of expansion in less mature markets.
"In our view there are no relevant operating synergies between both concession operators," UBS said in a note.
The broker added however the lower cost of debt for Gemina could create some value, justifying a premium.
Moody's this week placed its Ba2 junk rating on ADR under review for an upgrade to reflect a new regulatory framework that will allow tariff hikes over the coming years.
The planned expansion of Fiumicino - which sees 12 billion euros of investment by 2044 including 2.5 billion in the next 10 years - would bring the airport more into line with international hubs in Madrid, London and Singapore.
By acquiring Gemina, Atlantia would become more similar to large competitors like Vinci (SGEF.PA), Ferrovial (FER.MC) or Abertis (ABE.MC) which have both motorway and airport assets.
Atlantia unit Pavimental could also obtain up to 40 percent of the work to expand Fiumicino, a source close to the deal has said.