An unfolding bid saga in Australia is neatly illustrative of a few trends in infrastructure investing right now.
A brief recap for the uninitiated: Aware Super, the A$125 billion (€76.4 billion; $89.7 billion) superfund formed this year from the merger of First State Super and VicSuper, is attempting to usurp a takeover bid by telecoms firm Uniti for fibre network provider OptiComm.
After seeing Uniti up its initial bid to match Aware Super’s first offer, the superfund returned this week with a significantly improved offer of A$6.50 per share. This was significantly above the A$5.85 mark of the previous bids and valued the Australian Securities Exchange-listed OptiComm at around A$675 million.
Today (October 15), Uniti nudged itself back in front with a A$6.67 per share offer.
Regardless of whether Aware Super returns with a third bid, the first trend this highlights is the increasing power of Australian superannuation funds to hit hard and take out large infrastructure businesses on their own, without the help of a fund manager.
We’ve seen investors in other countries build direct capabilities and have been watching closely as several Aussie funds have begun to do the same. But this is thought to be the first time an Australian superfund has made a take-private bid for 100 percent of a listed infrastructure company entirely on its own.
In fact, it seems to be the first time this has happened for any company in any sector – when AustralianSuper took Nativas private last year, for example, it partnered with private equity firm BGH Capital.
The ‘urge to merge’ among Australian funds is not going away. It is being encouraged by regulators and politicians, and there a recognition that increased scale can be a path to better returns. And, as funds grow larger, their inclination to do direct investments on their own is only going to increase.
The second trend highlighted by AwareSuper’ improved offer is the desirability of digital infrastructure.
The coronavirus has shown how vital internet connectivity is to modern life. In Australia, OptiComm is the main competitor to the federal government-backed National Broadband Network – meaning that to own it is to secure a place at the table as the country builds out its digital infrastructure for the long term.
And the third trend is infrastructure investors’ willingness to take on operational risk in the search for returns.
OptiComm is certainly an infrastructure business. However, it will require many more years of building out its network before it can begin to look like a more typical, passive, yield-generating infra asset.
For now, it will require hands-on management and operational expertise. It’s not impossible for Aware Super to do this, of course, but a business like Uniti looks a more natural owner on paper.
The superfund is looking to go big and go digital – and is willing to move up the operational risk curve a bit to do so. Expect others to follow.