China’s CCCC buys stake in Portugal’s Mota-Engil

Storage silos stand beyond a pile of earth and pipes at the Genting tunnel construction site, part of the stalled East Coast Rail Link (ECRL) project built by China Communications Construction Co., in Bentong, Pahang, Malaysia (Joshua Paul/Bloomberg)

Mota-Engil announced today (Thursday) that it is in the final stages of negotiating a strategic partnership and investment agreement with “one of the largest infrastructure groups in the world (top 5), with significant worldwide activity,” which will become “a relevant shareholder and a long-term partner” of the group now controlled by the family of António Mota, Noticias Financieras has reported.

In the statement sent to the Securities Market Commission (CMVM), Mota-Engil does not identify the new shareholder, but Portuguese financial outlet Negócios knows from the description made that these are China Communications Construction Company (CCCC), the fourth largest construction company in the world with which the Portuguese group signed a strategic partnership in April 2019, and with whom it has competed in consortium with large projects this year.

According to the same note, under this agreement, Mota Gestão e Participações (MGP), the holding company of the family that now accounts for almost 65% of the Portuguese group, “agreed to sell a relevant stake in the company’s share capital at a price that reflects an appreciation that is far above the current market price,” Noticias Financieras added.

Still under the terms of the agreement – which Mota-Engil says it expects to be completed “soon”, still requiring the regulator’s authorizations and compliance with several other previous conditions – the new partner “will commit to subscribe to a relevant participation in a capital increase of up to 100 million new shares that will soon be submitted to deliberation at a general meeting,” but also to establish “a partnership and investment agreement with the Mota-Engil group to jointly develop commercial opportunities.”

After this increase in the share capital, the group adds in the same statement, MGP will be attributable to a stake of about 40% of Mota-Engil’s share capital, “a sign of total commitment and alignment with its historical position in the group,” and the new shareholder “will reach a stake slightly more than 30%.”

It also stresses in the statement that “this new shareholder structure and the framework of this partnership, which is based on the group’s assessment of around 750 million euros (USD886.7 million), will strengthen the financial, technical and commercial capacities of the Mota-Engil group in order to increase its activities in all markets and open new opportunities for new developments.”

Mota-Engil currently has more than 237.5 million shares, which at the price that closed Wednesday’s session (1.448 euros) means a market cap of almost 344 million euros.

According to Noticias Financieras, the group Portuguese closed last year, on the occasion of Marcelo Rebelo de Sousa’s visit to China, a strategic partnership with CCCC, which this year began to pay results.

Also in February, the construction company led by Gonçalo Moura Martins won a contract of 270 million euros in Colombia for a hydroelectric project owned by the CCCC and China Three Gorges, and in April, the consortium that leads (with 58%) with its Chinese partner secured the contract for the construction of the first batch of Tren Maya in Mexico, worth 636 million euros.

Now the grouping they formed was pre-qualified in a tender for the construction of a bridge in Lagos, Nigeria, worth USD2.25 billion. An amount that more than doubles the largest project in the history of the Portuguese group.

Mota–Engil rose  4.14% to 1.508 euros in the Portuguese bourse Thursday, after announcing the deal with CCCC. The agreement was known minutes before Mota–Engil revealed that it posted losses of €5 million in the first half of this year, which compared with profits of €8 million in the same period in 2019.

According to Bloomberg, CCCC, listed in Hong Kong and Shanghai, is involved in building transportation infrastructure like ports, roads, bridges and railways as well as dredging and heavy machinery manufacturing. It also runs international project contracting, import and trading services.

Chinese companies have been keen to expand in Portugal over the past few years. State-owned energy giant China Three Gorges Corp. is the largest shareholder in Portuguese utility EDP-Energias de Portugal SA. Fosun International Ltd. is the biggest shareholder in lender Banco Comercial Portugues SA and has also bought insurance companies in the European country.

MDT/Agencies