Aecon sells highway stake to Israeli infra fund

An investor group led by Israel Infrastructure Management will buy the Canadian construction company’s 25% interest in Derech Eretz Highways, the concessionaire for the Cross-Israel Highway, for C$77.8m.

Canadian construction company Aecon Group has sold a 25 percent interest in a highway concession company to an Isareli infrastructure fund for C$77.8 million (€56.8 million; $73.5 million).

Aecon said in a statement it is selling its interest in Derech Eretz Highways, the concession company for the 87-kilometre toll road, to an investor consortium headed by Israel Infrastructure Management, or IIM.

The deal does not include Aecon's 30.6 percent interest in the highway's operating company.

IIM, a Tel Aviv-based infrastructure fund manager, first invested in Derech Eretz in January 2009 by buying mezzanine notes from institutional investors in the project. Terms of that transaction were not disclosed.

Derech Eretz was formed in 1997 to bid on a concession to build, operate and, after 30 years, transfer to Israel's ownership the north-south highway now known as the Cross Israel Highway.

After Derech Eretz won the concession, Aecon served as the contractor for the project and retained a 25 percent stake in the concession company. The remaining 75 percent is held by Israeli conglomerate Africa Israel Investments and Shikun & Binui Holdings, an Israeli construction firm, at 37.5 percent each.

Both Africa Israel and Shikun & Binui must waive rights of first refusal and tag-along rights before the sale to IIM can go forward, Aecon said. The state of Israel and Derech Eretz’s senior lenders must also approve the deal.

IIM said in a statement that Derech Eretz is investing about $1.3 billion in the highway. Of that, 90 percent, or about $1.17 billion, is debt, according to a presentation by IIM.

IIM was founded by Yaron Kestenbaum, former director of the Division for Public Private Partnership Projects in the Israel Ministry of Finance, according to the firm's website. The firm closed on its maiden fund, the Israel Infrastructure Fund, on NIS 400 million (€80 million; $103 million) in April 2008, Infrasturcture Investor previously reported.

The firm has so far acquired interests in electricity company Dalia Power, natural gas pipeline East Mediterranean Gas, air cargo business Swissport, and Citypass, a light rail service operator. All the business are based in Israel. A sixth investment, telecommunication tower operator TowerVision, is based in India.

Kestenbaum was unavailable for comment at press time.