QIC, GIP lead winners of $7.3bn Port of Melbourne lease

The winning bid, also backed by Future Fund and OMERS, smashed expectations by a significant margin.

A team of Australian and North American investors is set to acquire the 50-year lease of Port of Melbourne for more than A$9.7 billion ($7.31 billion; €6.55 billion).   

The Lonsdale consortium, which comprises Brisbane-headquartered QIC, New York-based Global Infrastructure Partners, Australia’s Future Fund and Canadian pension OMERS, was selected as preferred acquirer for the port, outbidding another group led by IFM Investors in a privatisation process kicked off in March this year. 

Victorian Premier Danial Andrews said the bid “reflects strong bidder interest and the port’s value as the biggest container and cargo port in the country”. The deal had previously been estimated at between A$6-8 billion. 

More than A$970 million, or 10 percent of the lease proceeds, will be used to fund regional and rural infrastructure projects in the state, according to a statement released today. 

“Port of Melbourne is a high quality asset and an important link between Australia and its trading partners,” said Peter Costello, chair of the Future Fund. 

“We believe this investment brings significant diversification benefits for our clients as a landlord port with a well-defined regulatory regime in a globally scare infrastructure subsector,” added Ross Israel, QIC’s global infrastructure head. QIC will manage the Future Fund’s interest in Port of Melbourne, as well as interests on behalf of the Golden Reef Infrastructure Trust and the QIC Global Infrastructure Fund. 

“We will now work with the Commonwealth over the coming months to finalise the additional 15 percent that Victoria is entitled to under the Commonwealth’s asset recycling initiative,” Andrews added. The commercial close of the transaction is expected on 31 October. 

As part of its successful bid, the Lonsdale Consortium said it would invest substantial capital to expand the existing capacity of the port to service the freight needs of the Victorian state for 50 years.

Two members of the winning consortium are already involved in the Australian port sector. QIC manages a 26.7 percent stake in Port of Brisbane and a 24.4 percent indirect interest in DP World Australia, while GIP manages a 15 percent stake in NSW Ports. GIP will also hold 43 percent of Pacific National once another consortium it is part of completes its recent acquisition of logistics business Asciano.

Last October, China’s Landbridge Group was chosen as preferred bidder for the 99-year lease of Port of Darwin in an A$506 million transaction. The government of Western Australia is also seeking to finalise the privatisation of Fremantle Port by the end of this year.