Pension fund buys toll operations
NOTE: Rick Perry's son, Griffin, works for one of the players below, UBS. Perry also appoints the board that invests Texas public employee retirement funds who have invested millions in toll roads recently. It's a tainted web he weaves with quite a money trail to follow. Increasingly, pension funds, particularly public pension funds, are investing in risky toll road operations. When toll revenues are dipping globally, and with public pension funds needing bailouts, it defies logic to see yet more risky moves with retirees nest-eggs.
Canada Pension Agrees to Buy Intoll for $3 Billion
By Angus Whitley and Doug Alexander - Aug 27, 2010
Canada Pension Plan Investment Board agreed to buy Intoll Group for A$3.44 billion ($3 billion) to gain stakes in toll roads in Toronto and Sydney in the pension fund’s largest purchase.
The offer from Canada’s second-biggest pension manager values Intoll shares at A$1.52 each, 36 percent higher than before an initial approach was announced on July 15, the Sydney- based company said in a statement today.
The deal gives the Canadian fund a 30 percent stake in the 407 ETR near Toronto, and follows its failure earlier this year to buy toll-road operator Transurban Group. Intoll shares had fallen 9.3 percent since being created by the split of Macquarie Infrastructure Group in January and the opening takeover proposal.
“It’s good for shareholders to realize value,” said Xu Han, an analyst at UBS AG in Sydney. “The market is pretty skeptical about long-range infrastructure investments.”
Intoll agreed to the bid after Canada Pension increased the Australian dollar component of the offer. The July 15 bid had been 23 Australian cents and C$1.186 for each Intoll share. The value of that proposal had slipped to A$1.495 from A$1.535 at today’s foreign-exchange prices, Intoll said.
Shares Rise
Intoll shareholders including Abu Dhabi Investment Authority and Lazard Asset Management Ltd. can also accept stock in Canada Pension’s bidding vehicle and 22.4 cents cash a share, Intoll said. The shares today climbed 1.4 percent, the most in six weeks, to A$1.475 at the 4:10 p.m. local time close in Sydney trading.
Canada Pension will finance the takeover of Intoll with existing cash resources, according to a statement.
Canada Pension is betting it’s better placed than equity investors to profit from the toll roads as it seeks to match its long-term liabilities with assets set to deliver steady returns in economies that weathered the global recession.
Canada Pension’s joint offer for Transurban in November and a revised bid in May collapsed after they were both rejected and co-bidder Ontario Teachers’ Pension Plan sold out.
Canada Pension has been increasing investments in infrastructure in the last five years, and at the end of June had about C$6.1 billion worth of utilities in its C$129.7 billion investment portfolio, according to filings.
Australian Assets
Canada Pension owns a stake in Australia’s broadcast transmission provider Broadcast Australia and all of Macquarie Communications Infrastructure Group, which the fund bought last year for about C$1.52 billion.
The fund’s other infrastructure assets include stakes in British gas distributor Wales and West Utilities, U.S. electrical utility Puget Sound Energy and Chile’s electrical transmission company Transelec S.A.
Canada Pension has also been increasing its private equity investments and last month bid about $4.5 billion to buy British auto-parts firm Tomkins Plc with Onex Corp., Canada’s biggest publicly traded buyout firm.
Worldwide, companies have announced $203 billion of takeovers in August, including Intel Corp.’s purchase of security-software maker McAfee Inc. and BHP Billiton Ltd.’s $40 billion hostile bid for Potash Corporation of Saskatchewan Inc. Those deals are set to make this month the busiest of the year, according to data compiled by Bloomberg.
Westlink M7
Intoll was formed in January after Macquarie Infrastructure split into two in a bid to buoy valuations. As well as the stake in the 108-kilometer Canadian highway, Intoll owns 25 percent of the Westlink M7, a 40-kilometer toll road in Sydney’s west. Intoll said today it swung to a profit of A$1.51 billion in the 12 months to June 30 from a year-earlier loss of A$1.7 billion.
“The listed market has significantly undervalued Intoll stapled securities over an extended period of time, Chairman Paul McClintock said in the statement.
To boost Intoll’s value, McClintock said the company had considered a dual listing on the Toronto Stock Exchange as well as buying an additional 10 percent of the 407 ETR.
“It is not clear that these strategies would deliver the same certain return of value,” he said in the statement. Intoll directors recommend shareholders opt for Canada Pension Plan’s cash offer, he said.
A completed sale of the business to the Canadian fund would mark an exit for Macquarie Group Ltd., Australia’s largest investment bank and the biggest shareholder in Intoll, according to Bloomberg data.