Fight over 407 highway stake to delay $3.25 bln deal closing: Reuters

Photo courtesy of Ferrovial SA

A dispute between bidders for SNC-Lavalin Group’s stake in a Canadian toll highway will delay the $3.25 billion (US$2.41 billion) sale after an original purchase agreement was scrapped, the Canadian construction and engineering company said on Friday.

Two shareholders in the Highway 407 toll road operator are trying to acquire SNC’s 10.01 percent stake, with the dispute headed to Ontario Superior Court on June 21 to settle which one of them have the right of first refusal, SNC said in a statement.

SNC said it scrapped the $3.25 billion sale of the stake, announced in April, to Ontario Municipal Employees Retirement System (OMERS).

Canada Pension Plan Investment Board (CPPIB) and Cintra Global SE, a unit of Spain’s Ferrovial SA, both exercised their rights of first refusal to buy the stake under the same terms as the OMERS deal.

SNC shareholders have been closely watching the Highway 407 sale, which will be used to pay down debt, after the company reported a surprise quarterly loss earlier this month and said it would exit 15 countries.

The Montréal-based company’s stock has slipped 41 percent this year following souring relations between Saudi Arabia and Canada, headwinds in its metals and mining business and a political scandal engulfing Canada’s prime minister.

The stake sale, due to close in early June, is now expected to be delayed for a few weeks.

SNC said the stake should go to CPPIB, arguing that Cintra agreed in 2002 to waive its right of first refusal over future sales of shares in Highway 407.

CPPIB, which has a 40 percent stake in Highway 407, declined to comment.

The court could either decide to sell the entire 10.01 percent share in Highway 407 to CPPIB, or divide it between the two companies, according to analysts and a spokesman for Ferrovial, which now has a 43.23 percent stake.

“Contrary to the position taken by SNC and CPPIB, Cintra’s (right of first refusal) has not been waived in these circumstances,” the Madrid-based global operator of services and infrastructure said.

SNC will retain 6.8 percent ownership of Highway 407 after closing. SNC shares rose about 1 percent in Toronto early Friday afternoon.

(Reporting by Allison Lampert in Montreal; Editing by Richard Chang)

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