CPPIB bids for Macquarie’s Intoll

The Canadian pension has offered to take over the toll road operator – a spin-off from Macquarie Infrastructure Group – for A$5bn. Intoll holds two mature roads including Canada’s 407 ETR. It is CPPIB’s second bid for an Australian-listed toll road operator this year after it failed to acquire Transurban.

After its efforts to acquire Australian toll road operator Transurban were rebuked, the Canada Pension Plan Investment Board (CPPIB) has now set its sights on buying Australian-listed roads operator Intoll – a spin-off from the Macquarie Infrastructure Group (MIG).

Intoll emerged from the division of MIG as the vehicle containing Macquarie’s less risky and more mature toll road assets:  Canada’s 407 ETR, in which it owns 30 percent, and Sydney’s Westlink M7, in which it has a 25 percent stake. MIG’s other roads – the UK’s M6, France’s APRR, the Chicago Skyway, the Indiana Toll Road and San Diego’s South Bay Expressway – were grouped into Macquarie Atlas Roads.

Intoll informed the Australian Stock Exchange today that it had received a non-binding offer from CPPIB valuing the company at A$1.535 (€1.057; $1.353) per share, or about A$5.1 billion, representing a 37.7 percent premium to Intoll’s A$1.115 closing price on Wednesday. Intoll’s shares rose by more than 30 percent today on news of the offer.

The toll road operator – which counts Macquarie (18 percent), Lazard Asset Management (11 percent), and Abu Dhabi Investment Authority (9 percent) as shareholders – has agreed to allow CPPIB to conduct due diligence on it over the next three weeks on a non-exclusive basis.

CPPIB said its offer for Intoll equates to a multiple of 29 times Intoll’s estimated earnings before interest, tax, depreciation, and amortisation (EBITDA) for 2010, “which compares favourably to the multiples implied by other toll road transactions,” the pension added. It said it would fund the offer from its existing resources.

Under the terms of the Canadian pension’s offer, Intoll’s shareholders can choose between an all-cash offer for their securities, the option of rolling over their stakes into a newly formed unlisted vehicle, or a combination of both.

CPPIB has said it wants to progress the transaction “as quickly as possible” and intends to negotiate an agreement with Intoll during the three-week due diligence period. Goldman Sachs is advising CPPIB on the deal with UBS advising Intoll.

In May this year, Australian-listed toll roads operator Transurban rejected a A$7.2 billion takeover bid from CPPIB, the Ontario Teachers’ Pension Plan Board and Australian investor CP2, saying the offer was too low.