Future Fund in A$2bn takeover of Australian Infra Fund

The Hastings-managed, airport-centric fund owns a number of Australian airports including Perth, Melbourne and Queensland, as well as a stake in Hochtief Airport Capital, among other assets.

Australian sovereign wealth fund Future Fund has tabled a bid for the Australian Infrastructure Fund (AIX), an airports-focused vehicle co-managed by Hastings Funds Management.

The non-binding proposal sees Future Fund offer A$2 billion (€1.7 billion; $2.1 billion) to acquire AIX’s assets, which include stakes in Perth (30 percent), Melbourne (12 percent) and Queensland (49 percent) airports as well as 28 percent of the holding company for Darwin, Alice Springs and Tennant Creek airports. All the airports are located in Australia and Future Fund already owns 16.8 percent of Melbourne Airport.

In addition, AIX holds 40 percent of Hochtief Airport Capital – a closed private investment company which also counts Canada’s Caisse de depot et placement du Quebec and KfW IPEX-Bank as shareholders – which holds stakes in Athens, Düsseldorf, Hamburg and Sydney airports. 

Finally, AIX is also an investor (6.3 percent) in Statewide Roads, which used to manage Sydney’s M4 toll road – returned to the government in 2010 after its concession expired – but is now just the manager of a service centre on the M4. 

Future Fund’s offer equates to A$3.22 per AIX share and is subject to due diligence and a number of conditions, besides AIX shareholder approval. According to Future Fund, it “represents a 10 percent premium to the AIX director’s published valuation of its assets as at June 30, 2012”.

“The proposal from Future Fund was sufficiently compelling for the boards to enter into a memorandum of understanding and to facilitate the due diligence inquiries of the Future Fund. The indicative purchase price represents a significant premium to recent trading in AIX securities,” AIX chairman Paul Espie commented in a statement.

David Neal, Future Fund’s chief investment officer, said that “Australian infrastructure assets are attractive to the Future Fund because of their strong correlation with Australian economic growth, inflation protection and relative high levels of earnings certainty. These characteristics provide a strong fit with the Fund’s mandate to achieve high, risk-adjusted returns over the long term.”

The A$77 billion Future Fund has built a A$4.3 billion infrastructure portfolio over the last five years, equivalent to 5.6 percent of its Tangible Assets programme. Neal added the fund continues “to seek opportunities to increase our exposure to quality Australian and international infrastructure assets”.