Australian Road Operator May Reject Canadian Pension Bids

Transurban, Australia’s biggest toll road operator, plans to raise enough capital to finance its acquisition of Sydney's troubled Lane Cove Tunnel.

(May 10, 2010) — Amid a still tough market for infrastructure fundraising, Transurban Group, which owns toll-roads in Australia and the U.S, will sell shares to pay for an agreed $568.5 million purchase of Sydney’s Lane Cove Tunnel. The transaction could result in the end of a bid by two major shareholders to privatize the company.

Melbourne-based Transurban Group is subject of a takeover offer from two Canadian pension funds — the Canadian Pension Plan Investment Board and the Ontario Teachers’ Pension Plan. The two funds together own about 28% of Transurban, according to Bloomberg data. Both pensions have said they may not proceed with a revised bid if Transurban were to fund its takeover of the Lane Cove Tunnel, opened in 2007, via an equity-raising. In November, Transurban rejected the pension funds’ $6.1 billion unsolicited offer.

Yet, Transurban CEO Chris Lynch recently denied the transaction was a planned defensive move, according to The Australian. He claimed the company was pursuing “business as usual.”

“There is clear strategic value in expanding our interests on the Sydney orbital network given our existing ownership stakes in four of the assets on the network,” said Transurban CEO Chris Lynch in a statement. “Transurban is a natural owner of the Lane Cove Tunnel and we believe the asset sits extremely well within our portfolio of prime toll roads.”

Meanwhile, Canada Pension Plan Investment Board announced the purchase of a minority ownership stake in two prime midtown commercial properties for a combined cost of $663 million, the plan’s first purchases of real estate in Manhattan.

“We remain focused on our U.S. real estate investment strategy, which is to acquire premier commercial properties in key markets,” Peter Ballon, CPPIB’s head of real estate investments in the Americas, said in a press release.

Separately, Stamford, Conn.-based Global Infrastructure Partners (GIP), the owner of London’s Gatwick and City airports, is preparing to raise a second $5-billion fund, Reuters reported. Already, GIP has invested up to $4.5 billion of its first $5.64 billion fund, focusing on energy, transport and waste assets such as ports, power stations, and waste management. Earlier this year, GIP sold stakes in Gatwick to the roughly $328 billion Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund, and to South Korea’s National Pension Service, which had 289 trillion won in assets as of March. Both investors are likely to be contacted over the new fund.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742