SNC-Lavalin eyes 407ETR sell-off

Toronto's 407 ETR could be on the block as part of an SNC-Lavalin asset selloff.

SNC-Lavalin Group might reduce its ownership stake in – or part outright with – its prized toll road possession, the Ontario 407 Express Toll Route (407 ETR), in a sell-off of its infrastructure concessions portfolio.

SNC-Lavalin, a construction and engineering concern with a global public-private partnership (PPP or P3) practice, “will look at the potential disposal […]and reducing its equity” in its non-core and principal infrastructure,” according to a press announcement.

The publicly-traded company revealed its upcoming asset sale was part of a “strategic plan”.

In addition to the asset sale, SNC-Lavalin is also going to expand into oil and gas, mining, and water management as part of the plan, as well as integrate its business development, client management and information technology (IT).

The would-be sale could bear on 407 ETR, the first-ever electronically operated toll road and an SNC-Lavalin investment dating back to 1999. SNC-Lavalin, as a member of consortium 407 International, is a 16.77 percent owner of the 66-mile route.

Cintra Infraestructuras, a subsidiary of Spain's Ferrovial, is 42.23 percent owner of 407 ETR, while the Canada Pension Plan Investment Board (CPPIB) has a 40 percent interest in the road. An SNC-Lavalin spokeswoman declined to divulge if Cintra or CPPIB have right of first offer on a potential sale.

“The 407 shareholder agreement is a confidential document,” the spokeswoman said.

Not counting 407 ETR, SNC-Lavalin is concessionaire to Rayalseema, a toll road in India. For social infrastructure, the company can count McGill University Heath Care, a design, build, finance and maintain (DBFM) project, and the Montreal Acoustic Concert Hall P3.

In transportation infrastructure, the company has a technical service agreement with Malta International Airport and is part-owner in Canada Line. SNC-Lavalin is also an investor in energy infrastructure with transmission company Atalink its largest related asset.

Despite the sell-off, SNC-Lavalin will continue to invest in public infrastructure, concentrating on the US P3 market, as well as South America. Greenfield infrastructure that fits with its engineering and construction business will also be pursued.

The strategic plan was devised in the wake of a scandal-plagued 2012 for Montreal-headquartered SNC-Lavalin Group in which its chief executive Pierre Duhaime stepped down and its stock plummeted 20 percent to its current price: C$41.52 ($41.02; €31.66) per share.

The company was tied to a far-fetched caper to smuggle the son of deposed Libya dictator Muammar al-Gaddafi into North America, and was accused of corruption in Bangladesh and Cambodia.

Duhaime was arrested and charged with fraud. The World Bank, meanwhile, banned SNC-Lavalin from bidding on its business for a decade.