By Paola Arosio, Francesca Landini and Matthias Inverardi
MILAN/DUESSELDORF (Reuters) - Italian toll-road operator Atlantia (MI:ATL) is prepared to raise its takeover bid for Spanish rival Abertis to up to about 17.8 billion euros ($21 billion) should a rival offer by builder ACS materialise, three sources close to the matter said.
Atlantia this week formally launched a cash and share offer that values Abertis (MC:ABE) at around 17 billion euros - or about 17 euros per share - in a deal that would create the world's biggest toll-road operator.
However, Spain's ACS (MC:ACS) is expected to launch a rival cash-and-paper bid for Abertis next week, sources have told Reuters.
The sources on Friday said Atlantia was prepared to offer up to 18 euros per share, if necessary.
Under Spanish rules, ACS needs to disclose a counter-bid by Oct. 19, or five days before the end of Atlantia's current offer. Such a move would put Atlantia's bid on hold for weeks or months as Spanish market watchdog CNMV would have to examine ACS's offer and decide whether it can go ahead.
"Atlantia does not have a problem increasing its offer," said one of the sources.
Another source said Atlantia could raise its bid to 18 euros per share without hurting its credit rating and significantly increasing its cost of funding.
Atlantia's current offer won unconditional approval from the European Commision and from Chile's antitrust authority on Friday, meaning it has cleared all regulatory hurdles.
But the takeover of Abertis, which manages politically sensitive concessions for motorways across Spain, by a foreign company has raised some concerns in Madrid, according to sources.
Political interference in the past blocked a planned tie-up between Atlantia and Abertis - a merger deal was scrapped in 2006 because of Italian government opposition.
Sources said on Thursday that ACS's offer was expected to be roughly half in cash and the rest in newly issued shares in German construction group Hochtief (DE:HOTG), which is controlled by ACS. The value of ACS's potential offer was not known.
Milan brokerage Banca IMI (LON:IMI) said on Friday an offer with no premium versus Atlantia's offer would be unattractive, as investors were unlikely to prefer receiving Hochtief shares.
"Abertis shareholders would be directly exposed to the less predictable construction sector and, strangely, would even be financing the offer as Hochtief would issue new shares potentially to be underwritten by Abertis' shareholders themselves," the broker said in a note.
However, an Italian source said that, by presenting a rival bid, ACS would be able to buy time and work on improving the financial structure of its offer. ACS declined to comment.
Atlantia is currently offering 16.50 euros in cash or 0.697 Atlantia shares for each Abertis share. The deal is conditional on Abertis shareholders who own between 10 percent and 23 percent of the Spanish company's capital accepting the share offer. At current market prices, Atlantia would value Abertis' 990.4 million shares at between 16.6 billion and 17 billion euros.
Though the offer has been described as "friendly" by Atlantia, shareholders in Abertis have yet to express a view on the proposal.
Abertis's top shareholder is Criteria Caixa, the financial arm of a politically connected and powerful banking foundation that controls Catalonia's largest lender Caixabank (MC:CABK).
"Apparently, La Caixa would be willing to sell, but it wants a compelling case with a better price," analysts at Mediobanca said in a note to clients.