ICA sells to CGL majority stake in two Mexican prison projects
- CGL Companies - Hunt Companies
- Empresas ICA
Related M&A Transactions
Empresas ICA, the largest infrastructure and construction company in Mexico, and CGL, an international public facility design, management, and maintenance firm, yesterday announced the formation of a joint venture for managing and developing additional social infrastructure facilities in Mexico.
ICA is contributing two 22-year Service Provider Contracts (SPCs) for providing non-correctional services at two federal penitentiaries in Mexico, in which it has invested approximately Ps. 13,768 million (US$1,060 million) in design, construction, equipment, and putting into service. CGL will pay ICA Ps. 1,511 million, (US$116 million), for a 70% equity interest and ICA will retain 30%. The joint venture will carry out the two existing services provider contracts and plans to develop additional justice facilities in Mexico.
The two services contracts were awarded to ICA in 2010 and began their operating phase in the fourth quarter of 2012. ICA developed the state of the art facilities with the technical assistance of CGL. The facilities are owned and operated by the federal government. Today's agreement is a further development of the collaboration between ICA and CGL.
Buddy Johns, Chief Executive Officer for CGL, said:
"We are extremely excited about our first major investment in the Mexican justice infrastructure market, as well as our continued relationship with ICA as our partner. This relationship creates a team with unparalleled knowledge and experience in this sector. Our investment solidifies CGL's years of commitment to the evolving justice market in Mexico and becomes a platform in which to assist in the future development of other necessary projects throughout the country."
Alonso Quintana, ICA's Chief Executive Officer, said:
"CGL is a recognized global leader in this industry, and today's agreement will accelerate ICA's expansion in the social infrastructure sector. After a number of years of planning, two years of construction and financial structuring, and more than a year of providing non-correctional services, the two SPC's are clearly mature assets that ICA can monetize. We have confirmed the viability of the public-private partnership model for developing social infrastructure in Mexico. The resources received will also assist ICA in continuing our mission of developing infrastructure assets in a variety of sectors."
The joint venture and the change in the ownership structure of the services contracts will require prior approval from the Government of Mexico, bondholders, and Mexico'sCompetition Commission (COFECO). The transaction is expected to close by the end of the first quarter of 2014.
ICA will no longer consolidate the two services provider companies after closing. These subsidiaries generated approximately Ps. 2,852 million in revenues and Ps. 1,435 million in Adjusted EBITDA during 2013. The related project debt Ps. 10,103 million as of December 31, 2013 will also be deconsolidated.