EastLink toll road sale process revs up

One of the entrances to Melbourne’s EastLink toll road.

Parties interested in securing a stake in the 39km Melbourne toll road EastLink are expected to be approached next month with promotional material about a sale process that is expected to formally start around June.

It is believed that about 55 per cent of the asset will be for sale, although some of the nine shareholders yet to decide whether they will sell out.

A review has been carried out by Royal Bank of Canada – which is involved in the sale process – for shareholders to weigh up options.

EastLink is a 39km toll road that connects the Eastern, Monash, Frankston and Peninsula Link freeways in the eastern suburbs of Melbourne.

While reporting results last month, toll road operator Transurban confirmed its interest, while rival Atlas Arteria told its investors it would not be participating in the sale process.

Atlas, which counts IFM as a 19 per cent shareholder and suitor, in September purchased a 66.67 per cent stake in the Chicago Skyway Toll Bridge for $US2bn, an asset that requires a lot of capital spending.

So far, it is likely Canadian and Australian infrastructure funds will line up, along with Transurban.

A deal by the $44bn giant would see Transurban become even more dominant with owning toll roads in Australia than it already is, with it owning stakes in or outright every toll road in Australia except EastLink, the Sydney Harbour Bridge and the Sydney Harbour Tunnel.

Chief executive Scott Charlton has flagged his departure and a new boss is yet to be named.

Investors in EastLink include NZ Super and Korean investors NPS and Mirae, and they are believed to be keen sellers.

EastLink is thought to be worth between $3bn and $4bn and includes its own tag business.

The Melbourne toll road was bought by eight investors in 2011 for $2.2bn.

The other investors are APG, USS, Denmark’s Arbejdsmarkedets Tillægspension, Teachers Insurance, CIC and Annuity of the US.

For the year to June, the toll road’s holding company, Horizon Roads, reported a $60.45m net profit, compared to $1.3m profit in the previous year as Covid-19 weighed on earnings.

Revenue was $318m.

Investment bank Goldman Sachs has previously worked on a process for investors keen to exit the asset, with CIC looking to sell in 2019, but the deal never went through due to tax complications.

EastLink cost $2.5bn to build and consists of the 39km Mitcham-Frankston motorway, which links the Eastern Freeway in the eastern suburbs to the Frankston Freeway in the southeast.