TRANSURBAN will raise $2.34 billion through a rights issue, and $400 million through a placement to its bid partners Australian Super and Abu Dhabi Investment Authority, to help fund its $7.05bn consortium acquisition of Queensland Motorways.
In total, Transurban will raise $2.74bn for the deal, which announced late last night.
The 10-for-43 entitlement offer is set at a price of $6.75 per security, which represents a 7.2 per cent discount to Transurban’s closing price of $7.27 yesterday and a 5.8 per cent discount to the theoretical ex-rights price of $7.17.
The entitlement offer comprises an institutional entitlement offer and a retail entitlement offer.
New securities for the entitlement offer will be sold via a bookbuild process, for both the retail and institutional components of the offer.
The institutional entitlement offer opens on April 24 and closes on April 29, with a bookbuild set for April 30.
The retail entitlement offer opens May 6 and closes on May 23.
Settlement of the entitlement offer is expected on June 3.
In outlining the funding details of the acquisition, Transurban maintained its full-year distribution guidance of 35c per security, which is expected to include a 7 cent fully franked dividend component and be 95 per cent free cash covered.
Transurban also set its fiscal 2015 distribution guidance at 39c per security.
The Transurban-led group beat out another bidding group led by Melbourne-based infrastructure investors Hastings, Spanish infrastructure operator and investor Abertis, the Kuwait Investment Authority and Dutch pension fund APG.
Reporting by DataRoom has shown that Transurban will also need to borrow up to $2.4 billion in debt to fund the deal, as well as the equity raising.
In the winning consortium, Transurban has a 62.5 per cent stake, Australian Super a 25 per cent stake and Abu Dhabi 12.5 per cent.
The winning bidders will pay 27 times 2013 earnings for the collection of Brisbane toll roads.
Transurban has not raised equity since 2010 and this deal will be treated in part as a catch up for a range of other acquisitions and operational changes such as the City Link road widening in Melbourne.
Just $70 million separated the winning and losing bids on the deal.
Last year when Port of Brisbane was sold to a Canadian pension fund for $1.4 billion just $14 million separated the winning bid.
“What we like most about the asset is the long term concession which runs till 2051 which compares to the Melbourne concession which expires in 2034.” Transurban chief Scott Charlton said this morning.
Asked about the infrastructure market in Australia he said: “If you look at this deal there were four bids worth close to $28 billion, which tells you there is plenty of money there and governments should just get on with it and sell to meet the demand.”
On Monday bids are due for the Port of Newcastle which New South Wales Premier Mike Baird has talked about as a $700 million deal, but based on this transaction the port could go for much more.
Superannuation fund money was the key supporting factor in all the deals and some 85 per cent of Transurban is owned by Australian and offshore funds.
The new asset will have $2.8 billion in debt with the rest equity, although some of this will come from debt raised by the bidders.
Transurban will now be the operator of the key toll roads in Sydney, Melbourne and Brisbane which will give it cost advantages in tolling systems and back office support.
Mr Charlton said while the price looks big at 27 times 2013 earnings before interest tax and depreciation of $262 million, the multiple is actually just below the 28 times paid by QIC for the portfolio of 70 kilometres of toll roads in May 2011 when the asset was valued at $3.08 billion.
Toll roads work by spending big dollars first and gradually recouping the money as traffic builds up once the road is built and at the end of the day it is a monopoly asset.
Transurban also sees upside from the deal given it runs its toll roads at a higher earnings margin than QML.
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