CPPIB on the (Aussie) road again
In a deal that looks set to transform the regional infrastructure and private equity investment numbers for 2010, Canada Pension Plan Investment Board (CPPIB) has received a formal recommendation from the board of Australian toll road player Intoll Group for a A$3.4 billion ($3.01 billion) privatization offer. This greatly increases the chances of success for the scheme of arrangement by which CPPIB seeks to acquire all the issued capital of the company. CPPIB’s offer, a 2.5% increase on its original bid price in mid-July, now represents a 36.3% premium on Intoll’s last day of public trading at that time.
"The directors of Intoll have carefully considered the proposal and unanimously recommend that Intoll security holders approve the schemes of arrangement," with CPPIB, Intoll chairman Paul McClintock stated. Currently, no competing bid has emerged.
Intoll was formerly part of the Macquarie Infrastructure Group until its demerger in January. Intoll has a 25% interest in the Westlink M7 motorway near Sydney, and a 30% stake in Canada's Highway 407/ETR near Toronto. Macquarie Group itself still owns an 18% stake in Intoll, with Lazard Asset Management owning 11% and the Abu Dhabi Investment Authority a nearly 10% stake, and former CPPIB bid partner Ontario Teachers Pension Plan (OTPP) owning 1.8%.
Intoll is now seeking to extract value from what AVCJ sources describe as "the volatility of listed infrastructure firms," as well as what McClintock and the board clearly regard as lukewarm recognition by Australia's public markets for the value of its road assets. "The listed market has significantly undervalued Intoll stapled securities over an extended period of time," McClintock added. "CPPIB is offering a highly attractive premium ... one which better reflects the directors' view of the value of the assets." Some other commentators, though, found the bid price disappointing and questioned whether Intoll's board had truly achieved maximum value.
For CPPIB, meanwhile, this promises a more successful sequel to its recent and ultimately abortive attempt with OTPP to pick up rival roads player Transurban Group for A$6.6 billion ($5.8 billion). AVCJ sources also remarked that Intoll and CPPIB have been scrupulously respectful to each other, unlike the confrontational situation that developed at Transurban, and that there is every sign that the deal will go through.
With no rival bids in sight, though, most analysts expect the deal to go through. Ernst & Young has been appointed as independent expert for Intoll stakeholders on the offer. UBS is advising Intoll, with Mallesons Stephen Jaques as legal advisor. Goldman Sachs is advising CPPIB.
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