May 19 (Bloomberg) -- Pennsylvania officials said a $12.8 billion bid from Citigroup Inc. and Abertis Infraestructuras SA won an auction to lease the state's only toll road in what would be the biggest agreement of its kind in the U.S.

New York-based Citigroup, the biggest U.S. bank by assets, and Barcelona-based Abertis, which operates toll roads in Europe and Latin America, topped two other offers. The next-highest bid was $12.1 billion by New York's Goldman Sachs Group Inc. and Transurban Group, Australia's second-largest toll-road operator.

Pennsylvania Governor Edward Rendell wants to lease the 537-mile (864-kilometer) turnpike for 75 years if the U.S. government rejects the state's application to put tolls on Interstate 80. Money from a turnpike lease would help the state close a $1.7 billion gap in transportation funding.

``This bid will allow us to increase spending on roads, bridges and transit above what is in the current plan, Act 44, which includes plans to tolls I-80,'' Rendell said at a press conference in Harrisburg. ``This is a very good deal.''

Rendell first proposed leasing the turnpike last year and dropped his plan amid opposition from the Legislature. To fund transportation spending, he signed into law Act 44, which allowed the state to establish tolls on the 311-mile I-80. Those tolls are opposed by elected officials including U.S. Representatives John E. Peterson and Phil English, both Republicans.

Turnpike Plan

That opposition led Rendell to revive his turnpike lease plan less than a month after signing the bill. Pennsylvania won't lease the turnpike if I-80 tolls are approved, Rendell has said. The state is being advised by Morgan Stanley.

If a turnpike transaction takes place, the road will be controlled by a newly created company, Pennsylvania Transportation Partners, said Roy Kienitz, Rendell's deputy chief of staff. Abertis said in a statement it will have a 50 percent stake in the company, Citigroup will own 41.7 percent, and Criteria CaixaCorp SA, an investment company based in Madrid, will have the remaining 8.3 percent.

Citigroup fell 13 cents today to $22.99 on the New York Stock Exchange. Trading in Madrid on Abertis stock was suspended by regulators just prior to today's announcement, after rising 20 cents to 21.08 euros. Trading will resume tomorrow, according to the exchange's regulator.

Macquarie-Cintra Bid

A bid of $8.1 billion was submitted by Sydney-based Macquarie Infrastructure Group and Cintra Concesiones de Infraestructuras de Transporte SA, based in Madrid. Since their offer wasn't within 10 percent of the highest bid, the companies were prevented from making a best and final offer at the end of last week, Rendell said.

Citigroup bid on the Turnpike through Citi Infrastructure Investors, a unit of its alternative investments group. That fund is raising $3 billion fund infrastructure investments. Last week, they announced the purchase of a 50 percent stake in a Canadian company to invest in airports worldwide.

``We bid on because it is precisely the sort of asset we are keen to acquire for our investors,'' Felicity Gates, co-head of the fund, said in an interview. She declined to comment on the expected rate of return on the company's investment. ``Typically, our investors are looking for very long-term, stable returns. There is much greater predictability about the cash flows from this type of asset than one in an earlier phase of its life.'' The Turnpike officially opened in 1940.

Gates said she expects the companies will extend a June 20 deadline for acceptance of their bid if necessary. If the transaction does take place it is expected to close before the end of this year, Gates said.

Deal Terms

The offer for the Pennsylvania Turnpike is more than triple the winning bid submitted in the largest toll road deal in the U.S. In 2006, Macquarie and Cintra won a 75-year lease of the 157-mile Indiana Toll Road after bidding $3.85 billion.

Terms of the Pennsylvania lease agreement would allow the operator of the turnpike to raise tolls by 25 percent Jan. 1. Tolls then increase 2.5 percent annually or match the rise in the consumer price index if it is higher. The state needs legislative approval before it can sign a final agreement.

The driver of a passenger vehicle pays $22.75 to travel 358 miles on the turnpike from Pennsylvania's border with Ohio to the New Jersey state line. That trip will increase under the terms of the agreement set by the state to at least $36.40 in 10 years.

Will Take Time

Rendell is a Democrat and his party controls the House of Representatives. Republicans control the Senate.

Legislative approval for leasing the turnpike won't come quickly, said G. Terry Madonna, a political science professor at Franklin & Marshall College in Lancaster, who tracks state politics and government.

``I would be stunned, stunned if they got this done by June 30,'' Madonna said in an interview prior to today's announcement. The state needs to pass a budget by then for the start of the 2009 fiscal year on July 1. The Legislature is considering a health-care plan to provide coverage for all state residents and energy measures proposed by Rendell.

To contact the reporter on this story: Adam L. Cataldo in New York at acataldo@bloomberg.net.

Last Updated: May 19, 2008 17:19 EDT