Canadian engineering firm SNC Lavalin has announced that it wants to acquire the minority stake in Toronto’s 407 ETR toll road that owner Ferrovial had planned to sell to a Canadian pension fund.
Last week, Spanish infrastructure group Ferrovial, which is the majority shareholder in the Canadian road via subsidiary Cintra, said it had entered into an agreement with the Canada Pension Plan Investment Board (CPPIB) to sell a 10 percent stake in the 407 ETR for €640 million.
But now SNC Lavalin – which already owns 16.77 percent of the 407 ETR – has announced that it plans to use its right of first refusal as an existing shareholder to acquire the minority stake from Ferrovial.
To do this, the engineering firm has formed a special purpose vehicle – named TransAxio Highway Concession – that plans to undertake an initial public offer (IPO) on the Toronto Stock Exchange in order to raise the required funds for the purchase. A syndicate of banks led by CIBC is backing the offering, the firm added.
There had been rumours earlier in the sales process that suggested SNC Lavalin might be interested in acquiring the 10 percent Ferrovial was selling in the Canadian road.
If the engineering firm is successful, then it will become the road’s third-largest shareholder (26.77 percent). Ferrovial will still sit at the top of the road’s shareholding tree with 43.23 percent, followed by CPPIB with the 30 percent of the road it is on track to acquire from previous shareholder Intoll.
Had that latter transaction already received final approval from Intoll’s shareholders, SNC Lavalin may not have been able to use its right of first refusal to make a counter-offer for the 407 ETR.
In late August, the directors of Australian-listed toll roads operator Intoll accepted an all-cash takeover offer of €2.4 billion from CPPIB, but the deal has yet to be ratified by Intoll’s shareholders. Intoll owns 30 percent of the 407 ETR and 25 percent of Sydney’s Westlink M7 toll road.
Toronto’s 407 ETR is one of Ferrovial’s star assets. During the first half of the year, it generated sales of €214 million, a 12 percent increase in relation to the previous comparable period. Traffic during the first six months of 2010 grew by 6 percent, Ferrovial said, adding that on June 30 2010, the 407 ETR beat its previous traffic record, set in October 2007, when it was used by 454,275 vehicles.
The road still has 88 years left on its concession contract and has recorded annual toll increases of 7 percent over the last 10 years.