By Francesca Landini and Stephen Jewkes
MILAN (Reuters) - Having sold its motorway business in Italy, Atlantia is investing in smart traffic technology to help drive development of cleaner transport and open up new markets such as the United States.
Controlled by the Benetton family, the infrastructure group is seeking to finally put behind it a dispute triggered by the deadly collapse of a motorway bridge operated by its Autostrade per l'Italia business in Genoa in 2018.
It sold that business and has started using some of the 8 billion euro ($8.7 billion) proceeds expected in the coming months from the transaction to expand into smart traffic tech.
In January, it bought Siemens Yunex Traffic division for 950 million euros - a move that made it the only major motorway operator in Europe with a smart traffic business.
Now, as first mover, it has the opportunity to expand this business and consolidate a fragmented market.
The company, which will update investors about its future strategy on March 11, sees the traffic technology business as important in its own right but also complementary to its existing operations.
"The value of any highway and airport business without technology is destined to fall. In 5-6 years this could become another core business of Atlantia," a source familiar with the matter said.
Atlantia's main operations are motorways, airports and digital toll payment company Telepass. The group controls Spanish highway operator Abertis, runs a series of airports in Italy and France, has a 15% stake in channel tunnel operator Getlink and owns 51% of Telepass.
The source said the group was scouting bolt-on technology opportunities like special purpose acquisition companies (SPACs) owned by private equity or spun-off ancillary businesses developed internally by groups like BMW and Bosch.
Yunex will allow Atlantia to understand quickly the market in which it competes with around 300 other smart tech groups, the source said.
"Carmakers could be interesting partners given the clear synergies," the source said.
PLUGGED IN
Atlantia's drive comes as governments around the world look to high tech to cut vehicle congestion and pollution to make big cities more liveable and businesses more efficient.
Plugging in traffic data services and connecting up vehicles will allow cars to map their own routes to cut travel times and carbon emissions and give city administrators more bang for the buck from existing infrastructure.
Under pressure from the European Union to cut emissions, many European cities will need technology to optimise traffic flows.
"The best route will be chosen by the car and not Google (NASDAQ:GOOGL) Maps – whether that is with or without a driver," the source said.
Yunex, which operates in more than 500 cities worldwide, has developed a raft of services including a system where traffic lights, cameras and sensors relay data to a control room that crunches the data to reduce congestion and accidents.
In the western German city of Wiesbaden, a Yunex system introduced in November with government funding gives drivers route and speed recommendations on digital roadside displays controlled by a traffic management centre.
The Wiesbaden control room can manage flows to ease traffic jams on major roads or give priority to public transport buses, ambulances and fire engines.
EYES ON AMERICA
Atlantia said in January it expected the Intelligent Transport Systems (ITS) market to grow at an average rate of 10% a year to 2026 underpinned by a global shift towards more sustainable transport.
It is banking on the move to open up new business lines inside cities across the globe including Latin America, where its Abertis subsidiary has a strong presence although outside metropolitan areas, and the United States.
ITS technology will be needed to set up tolling systems and to analyse and manage traffic volumes.
"The U.S. market is particularly interesting given the demand for innovation technology to map connections between airports and highways," a second source said.
Yunex is already operating in U.S. cities like Boston and counties like Miami-Dade in Florida where it provides its traffic management system.
The second source said the business could offer double the returns of Atlantia's traditional motorway concession business.
In Europe, Atlantia plans to replicate Yunex operations in its main geographic markets - Italy, France and Spain - by offering services to monitor urban traffic and manage highway intersections and tunnels both on its network and on other clients' infrastructures.
Getlink could become one of Yunex's new customers, a third source said. Two of the sources added that Atlantia, which has not made any public statement on its intentions, was weighing options to increase its stake in the channel tunnel operator.
In January, Atlantia said it expected sales at Yunex to reach 1 billion euros in the next five years from 635 million euros last year.
The shift to tech, which includes Atlantia's recent investment in electric air taxi maker Volocopter, could also reduce the regulatory risk associated with the group's portfolio of concession-based businesses.
"Following the bridge disaster, it is now clear to everyone that the regulatory risk is difficult to assess and manage," another source familiar with the group's strategy said.