Queensland Investment Corporation enters the race for Melbourne’s EastLink

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

If Transurban thought it may have an open road to buying a stake in Melbourne’s EastLink, it could be mistaken.

Sources say Queensland Investment Corporation is planning to enter the competition and has been in discussion with bankers in recent months.

The thinking around the market is that the $44bn toll road giant Transurban has been asserting itself before the contest ramps up, trying to deter other parties from competing.

And while the Australian Competition & Consumer Commission recently expressed concerns about its market dominance, it did not suggest that it would be blocked from buying the asset.

The fact that Transurban has hired four advisers – Barrenjoey, Morgan Stanley, Azure Capital and Macquarie Capital – to work on an acquisition says it all.

But competition concerns from the ACCC and the Victorian government have always been seen as its greatest risk.

Queensland Investment Corp has owned toll roads before: Queensland Motorways, which was sold to Transurban in 2014 for $7bn.

It is believed that about 55 per cent of EastLink will be for sale, although some of the nine shareholders have 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 earlier this year, 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, in September purchased a 66.67 per cent stake in the Chicago Skyway Toll Bridge for $US2bn.

Transurban owns or has stakes in every toll road in Australia except EastLink, the Sydney Harbour Bridge and the Sydney Harbour Tunnel.

EastLink is thought to be worth between $3bn and $4bn.

The Melbourne toll road was bought by eight investors in 2011 for $2.2bn. Investors include NZ Super and Korean investors NPS and Mirae, and they are believed to be keen sellers. The other investors are APG, USS, Denmark’s Arbejdsmarkedets Tillaegspension, Teachers Insurance, CIC and Annuity of the US.

Some also believe APG could buy the additional interest.

For the year to June 2022, 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.

EastLink cost $2.5bn to build. The Mitcham-Frankston motorway links the Eastern Freeway in the eastern suburbs to the Frankston Freeway in the southeast.