Future Fund, Australia’s largest sovereign wealth fund, said today that it has decided not to continue talks to take over Australian toll road operator Transurban.
The sovereign fund had been in talks to join a consortium comprising the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers’ Pension Plan (OTPP) that was planning to acquire the toll road operator. Future Fund had started discussions with the two Canadian pensions in early December 2009.
By that time, the two pension funds, which already own 25 percent of Transurban, had already submitted a bid for the toll road operator valuing it at A$6.8 billion (€4.6 billion; $6.2 billion). Transurban rejected that bid “on the basis that it was incomplete, highly conditional and did not provide sufficient value for Transurban’s security holders,” the company said in a statement.
But Transurban said in a report noting Future Fund’s withdrawal from the bid talks that it held confidential discussions with CPPIB and OTPP during the week commencing March 15, hinting that the two pensions may yet revise their original bid. However, it stresses that, to date, it has not received any other bid from CPPIB and OTPP.
Opinions are divided on what, exactly, Future Fund’s withdrawal says about the future of the bidding process. A senior trader at a Sydney brokerage firm told the Wall Street Journal:
“Surely the Future Fund walking away shows you it’s likely the Canadians are going to walk. They haven’t said anything for four months and there are plenty of other infrastructure assets for sale globally that offer higher growth.”
But RBS analyst Luke Macnab told the newspaper that “our view hasn't changed; we think they’ll come back with a bid,” adding that “the Future Fund wasn't there when the original bid was made, and they’re not there again, so nothing has really changed”. Macnab believes a deal will eventually be struck at around A$6 per share.
In their original takeover bid, the two Canadian pensions gave Transurban’s shareholders the chance to choose between a cash offer of A$5.25 per share, equity in an unlisted group, or a combination of both options. The funds said the A$5.25 price point represented a 20 percent premium to Transurban’s share price at the time the offer was made, last November.