IFM buys $3.3bn Italian toll-road stake

Infrastructure giant IFM Investors has scooped up a controlling stake in a $3.3bn Italian toll road as it targets expansion in Europe.

IFM Investors has scooped up a controlling stake in a €2bn ($3.3bn) Italian toll-road

Infrastructure giant IFM Investors has scooped up a controlling stake in a €2bn ($3.3bn) Italian toll-road as it targets expansion in Europe despite COVID-19 economic ructions.

IFM, which manages $156bn of investments, struck the deal through its Madrid-based infrastructure arm Aleatica which owns toll roads, ports and an airport, spread through Spain and Latin America.

IFM first invested in Aleatica in 2014 and it now spans 19 assets across five countries.

Aleatica will control a 56 per cent stake in Autostrade Lombarde — which owns three-quarters of the 62km Brebemi toll road connecting Milan and Brescia in the Lombardy region — after buying out the share from Italian bank Intesa SanPaolo.

The deal has been in the works for more than a year and IFM said it expected toll roads to return to growth as restrictions ease.

“Aleatica’s traffic has been negatively impacted by COVID — with trucks less impacted than cars, since the movement of essential goods has continued during this time,” IFM investment director Aaron McGovern told The Australian.

“Aleatica assets were among the first to feel the impact but we’re now seeing as the economy is reopening there’s quite a significant pick-up in traffic. Overall, we believe it’s a resilient investment given the characteristics of Aleatica’s assets, including regulated or contractual protections.”

Australian toll road operator Transurban saw traffic drop 70 per cent across its three roads in Washington and Montreal during the peak of mandated lockdowns, in line with peer toll road operators in Europe which dived between 60 and 80 per cent due to restrictions.

IFM, which manages $65bn of toll road investments, said the Italian asset opened in 2014 and held a long-term concession that expires in 2040.

“These are somewhat unprecedented economic times but I think in general the asset class of infrastructure is holding up reasonably well,” Mr McGovern said.

Still, navigating through the balance of this year remains uncertain. “There’s still clearly signs of transaction activity although people are generally still having a cautious outlook,” he said.

Former Transurban executive Ken Daley was appointed Aleatica’s director general in October. He also sits on IFM’s global infrastructure fund board.

Mr McGovern is an Aleatica board member while IFM executive director Michael Kulper, Transurban’s former North American boss, also sits as a director of the Spanish utility. Aleatica delivered a 7 per cent lift in revenue to €390m in 2019 with earnings before interest, tax, depreciation and amortisation lifting 14 per cent to €220m.

Revenue and earnings rose by 1 per cent and 9 per cent respectively in the first quarter of 2020 on the prior corresponding period.

IFM has been looking to step up its Australian investments with the funds management arm of industry funds keen to work with state and federal governments on big ticket infrastructure projects to help drive the economic recovery. It’s also been touted as a potential buyer of a stake in Australia’s largest gas export plant, the North West Shelf.

The fund, which invests in infrastructure, debt, shares and private equity for more than 20 industry super funds and several large offshore pension funds, has $65bn in investments offshore, including major stakes in infrastructure projects in the US, Britain and Europe.

IFM’s infrastructure portfolio includes stakes in major airports around the country, a stake in NSW electricity company Ausgrid and ports in NSW.

IFM in March cut by an average of 7.6 per cent its Australian unlisted holdings, which includes a number of airports and ports, aged-care facilities and education groups, due to coronavirus ­volatility.