CPPIB on the road again in Oz with Intoll

This comes just two months after the Canadian pension fund teamed up with fellow North American LP Ontario Teachers Pension Plan (OTPP) in an A$6.6 billion ($5.8 billion)  bid for Intoll competitor Transurban Group.

"The directors of Intoll have not formed a view as to the adequacy of the proposal," said Paul McClintock, Chairman of Intoll. However, perhaps encouraged by the attractive premium in CPPIB's offer, Intoll's management has engaged far more positively with the bidder than Transurban did. CPPIB has reportedly been granted three weeks for due diligence on the asset, but the pension fund said it did not expect exclusivity, and noted that other bidders might emerge. Other analysts observed that the proposal undervalued the assets, but Intoll's stock has long lagged well below the CPPIB offer price, with little expectation of near-term recovery.

Intoll previously comprised part of the Macquarie Infrastructure Group (MIG), a pedigree with precedent for CPPIB, which took over the Antipodean bank's Macquarie Communications Infrastructure Group for just over $5.27 billion in March 2009. At its peak, MIG managed 11 major toll road developments across seven countries, but in February this year, it was split into Intoll and Macquarie Atlas, a listed entity managing assets regarded as riskier and poorer performers, due mainly to high leverage levels.

Intoll retains a 25% interest in the Westlink M7 motorway near Sydney, and a 30% stake in Canada's Highway 407/ETR near Toronto. A CPPIB spokesperson described the assets as straightforward, predictable, inflation-protected and generating strong cash flows. The large contribution of the Canadian highway, which CPPIB says "comprises the substantial majority of Intoll's asset value," is thought to fit CPPIB well from a currency viewpoint.

Intoll reported a 14% y-o-y jump in its Canada toll road revenues and an 8.5% increase from the M7 in 2Q10, shortly after the CPPIB bid was revealed. CPPIB's partner on the Transurban bid, OTPP, previously held a 12% stake in MIG, but sold this after failing to persuade the then management to split the assets along the lines finally achieved this year. Other remaining stakeholders in Intoll include Macquarie Group, with 18%, Lazard Asset Management with 11%, and the Abu Dhabi Investment Authority with 10%.
McClintock concluded that Intoll: "will engage with CPPIB in order to determine whether an acceptable transaction can be agreed."

UBS is advising Intoll on the transaction, with Mallesons Stephen Jaques as legal advisor. Goldman Sachs is advising CPPIB.

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• Australasia
• Infrastructure
• LPs