Ferrovial Shares Decline Amid Uncertainty

Shares of Ferrovial (NASDAQ:FER) (BME:FER) are trading lower due to uncertainty regarding a potential buyback of the 407 Express Toll Route in Canada.

As of 6:10 am (1010 GMT), Ferrovial’s stock was down 3.5% at €36.84.

The decline follows comments from Ontario Premier Doug Ford (NYSE:F), who hinted that the provincial government might consider repurchasing the toll road to reduce traffic congestion around Toronto.

This speculation has alarmed investors as the 407 ETR constitutes around 40% of Ferrovial’s valuation.

Ford stated that “all options are on the table,” suggesting various strategies for alleviating congestion, including paying commercial trucks to use the 407 or raising speed limits on major highways. However, a complete buyback remains a focal point.

Ford estimated the toll road’s worth at approximately CAD $35 billion, adding to the market’s uncertainty.

According to Article 23 of the concession agreement, the Ontario government could potentially initiate the buyback but must offer fair market value for the asset.

Analysts from Jefferies noted that unlike other recent road buybacks, such as SH-288 in Texas, where the asset was acquired below its value, the 407 ETR agreement would require full compensation for Ferrovial.

They concluded, “Ultimately, this outlook is positive for the 407, but also means new capacity will likely be a longer-term priority for the government.”

Ford predicted that the highway is expected to hit maximum capacity within the next 20 to 25 years, which is viewed as a long-term advantage for the road’s operators, suggesting increasing demand for the asset.