Transurban wins WestConnex bid

Transurban will pay $9.3bn for 51pc of Sydney’s giant WestConnex toll road, after beating a rival consortium’s bid.

The WestConnex project.

A consortium headed by toll road giant Transurban will pay $9.26 billion for a 51 per cent stake in Sydney’s giant $16 billion WestConnex motorway project, after beating a rival bid led by infrastructure heavyweight IFM Investors.

It comes after Transurban yesterday won clearance for its bid from the competition regulator.

Transurban and its consortium partners — AustralianSuper, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority sovereign wealth fund — will pay $9.26 billion for the stake, NSW Treasurer Dominic Perrottet and Transurban confirmed.

Transurban will raise $4.2bn through a rights issue and a further $600m through a placement to its partners AustralianSuper and Abu Dhabi Investment Authority, marking a much larger raising than the market had been expecting of around $3bn.

The equity raising is structured as a 10 for 57 entitlement deal at an offer price of $10.80 a share, a 10.4 per cent discount to Transurban’s closing price of $12.06 yesterday.

It will fund the 33-kilometre motorway initially with equity upfront before releasing capital as construction of the remaining stages is completed and cash flows start to build.

The overall $9.3bn being paid to the NSW government will be split four ways with Transurban paying $4.1bn its 50 per cent stake. AustralianSuper and Canada Pension Plan Investment Board will tip in $1.7bn each for their respective 20.5 per cent stakes and Abu Dhabi Investment Authority $700m for 9 per cent. Some $1.1bn of additional debt raised by the consortium will round out the purchase price.

Transurban has retained the commitment made at its full-year results to pay a 59c a share dividend for the 2019 fiscal year.

The blockbuster deal, which covers a 42-year concession, will fund the M4-M5 final stage of WestConnex and future infrastructure across the state.

“The transaction not only funds the completion of the congestion-busting WestConnex, but will allow the government to inject billions more towards infrastructure projects like new schools and hospitals,” Mr Perrottet said.

“This project means people will be able to travel from the west and south west of Sydney with ease, spend less time in traffic, and get home to their families faster.”

Transurban (TCL), which beat a rival bid led by IFM Investors with Canadian pension fund OMERS and Dutch fund APG, received clearance from the Australian Competition and Consumer Commission yesterday to proceed with its bid.

Transurban’s dominance of toll roads - it currently runs seven of the state’s nine toll road concessions and 15 of 19 toll road concessions in the country - had raised concerns it would fail to get competition clearance from the ACCC.

However, a deal to share traffic data with its rivals satisfied the ACCC that others could successfully compete for new toll road concessions, with ACCC chairman Rod Sims saying the company’s scale in itself was not a competition problem.

WestConnex is seen as a critical project to drive the next phase of Transurban’s growth, as new competitors like IFM look to muscle in on the Sydney-based company’s lucrative toll road revenues.

“WestConnex is a critical component of the NSW government’s long-term, transport and planning solution and is strategically significant for Sydney Transport Partners, “ said Transurban CEO Scott Charlton.

Transurban has previously argued it has no pricing power as this is controlled by the state government, while the road should not be thought of as a monopoly because there are alternative routes available for road users.

The deal is the latest plank in the NSW government’s $40bn privatisation scheme ahead of a state election in March 2019.

The controversial under-construction motorway, which links western Sydney with the inner city, has been plagued by cost overruns and community opposition.