Ferrovial Shares Decline as Ontario Considers Potential 407 ETR Buyback

Shares of Ferrovial are experiencing a decline as the company navigates uncertainty regarding a potential buyback of the 407 Express Toll Route in Canada.

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

The drop in share price follows remarks from Ontario Premier Doug Ford, who indicated that the provincial government may consider repurchasing the toll road to help alleviate traffic congestion in the Toronto area.

This speculation has raised concerns among investors, as the 407 ETR constitutes approximately 40% of Ferrovial’s overall valuation.

Ford has stated that “all options are on the table,” highlighting the government’s willingness to explore various strategies to address congestion. These options include paying commercial trucks for using the 407 and potentially raising speed limits on major highways. However, the complete buyback of the 407 remains a primary topic of discussion.

Ford has estimated the road’s value at around CAD $35 billion, which has sparked further uncertainty in the market.

According to Article 23 of the concession agreement, the Ontario government could theoretically pursue this buyback but would be obligated to pay fair market value for the asset.

Unlike recent road buybacks, such as the SH-288 in Texas, which were conducted at prices below asset value, analysts note that the terms of the 407 ETR agreement would require Ontario to compensate Ferrovial fully.

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

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