Spark eyes added TransGrid stake

The $3.7bn Spark Infrastructure is believed to be preparing to call in Macquarie Group for assistance on a possible $2bn acquisition of a stake in the NSW electricity transmission network business TransGrid.

Spark was part of a consortium that bought TransGrid from the NSW government in 2015.

The consortium outlaid $10.3bn for the operation in one of the state’s major asset privatisation programs.

The listed Spark committed to owning 15 per cent of TransGrid, while the Utilities Trust of Australia, which is now managed by Morrison & Co, purchased 20 per cent. Canada’s Caisse de depot et placement du Quebec has 25 per cent and two Middle Eastern sovereign wealth funds, the Abu Dhabi Investment Authority and the Kuwait Investment Authority’s Wren House, each have 20 per cent.

It is understood Wren House is now selling its stake, and under the terms of ownership existing TransGrid shareholders have first option.

Should Spark be interested, it is expected to raise equity, which would explain Macquarie’s involvement. The other shareholders will no doubt be closely watched to see if they secure advisers.

Wren House, thought to be advised by UBS, is believed to be asking top dollar for the interest and it may be out of Spark’s reach, given some shareholders were critical of how much it paid for TransGrid in 2015. The consortium paid 1.6 times the asset’s regulated asset base at the time, which was considered a large amount.

Onerous regulations mean the asset now has a return on equity of about 5 per cent, which is considered low, so achieving Wren House’s asking price may not be easy.

Interestingly, another suitor is said to be waiting in the wings should none of the shareholders be eager to pick up the interest.

Wren House is offloading its position because of new restrictive tax rules on foreign investors.

Elsewhere, equity capital markets will continue to be busy this week, with some betting that Jacobs Engineering’s 9.8 per cent stake in Worley, worth $734m, could be offloaded as early as Monday.

The move comes as groups with major stakes in companies capitalise on the strong market, with Wesfarmers divesting a $1.1bn stake in Coles, Viva Energy selling its entire 35.5 per cent holding in Viva Energy REIT and private equity firm Catalyst last week offloading shares in Adairs.

JPMorgan is thought to be gunning for a role on the Worley block trade, and UBS is also close to Worley.

It comes as market observers question whether oOh!media and Seven West Media could soon tap the market for equity, although the chief executives of both companies have dismissed suggestions that such a move is on the cards.