The Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan have agreed to acquire stakes in Mexican construction engineering company Impulsora del Desarrollo y el Empleo en América Latina (IDEAL).
Under the terms of the deal, CPPIB and Ontario Teachers’ will launch a tender offer on the Mexican stock exchange for shares in IDEAL at 43.96 pesos ($2.25) per share. CPPIB will come away with a 23.7% stake in IDEAL, while Ontario Teachers will own 16.3% of the firm. The current majority owners of IDEAL’s outstanding shares will maintain a majority shareholding in the company.
IDEAL’s portfolio includes 18 infrastructure concessions in Mexico, which are comprised of 13 toll roads, three logistics terminals, and two wastewater treatment plants. There is also an electronic toll collection service business and an operations business. IDEAL, Ontario Teachers’ and CPPIB are already partners in the Arco Norte and Pacifico Sur toll roads.
An infrastructure investment trust called Fideicomiso de Inversión en Energía e Infraestructura (FIBRA-E) will be created as part of the deal by a subsidiary of IDEAL. It will be funded by certain shareholders of IDEAL, CPPIB and Ontario Teachers’. The FIBRA-E will be managed by a subsidiary of IDEAL and will purchase partial stakes in four of IDEAL’s toll roads.
After the FIBRA-E is formed, CPPIB and Ontario Teachers will lead a secondary offering, which they said will reduce their ownership to small minority positions while also introducing other investors.
“This investment in IDEAL provides CPPIB with the valued opportunity to access a diversified portfolio of assets with stable cash flows, while also providing the opportunity for future growth through development opportunities in Mexico’s infrastructure sector,” Scott Lawrence, CPPIB’s head of infrastructure, said in a statement.
The transaction is subject to customary closing conditions, including by certain competition and regulatory authorities.
CPPIB has been plowing money into infrastructure in recent years, and at a far faster rate than with any of its seven other investment programs. The fund’s investment in asset class has soared by more than 100 times to C$33.3 billion in 2019 from C$300 million in 2006.
Ontario Teachers’, however, has slightly cut back its infrastructure investments down to C$17.1 billion as of June 30 from C$17.8 billion as of the end of 2018, and C$18.7 billion as the end of 2017.