Transurban clinches Australia’s last big privatisation with $6.7bn WestConnex bid

The consortium led by the toll-road operator – including Australian Super, CPPIB and Tawreed – beat competition from an IFM-led team, as Transurban gains control of 16 of the country’s 20 toll roads.

A Transurban-led consortium will pay A$9.26 billion ($6.7 billion; €5.8 billion) for a 51 percent stake in the WestConnex motorway project after beating a group led by IFM Investors.

New South Wales Treasurer Dominic Perrottet announced today that Sydney Transport Partners had won the auction for a 51 percent stake in Sydney Motorway Corporation, the entity tasked with developing and operating WestConnex.

The concession will last for 42 years and includes the existing M5 West motorway, which transfers to WestConnex ownership in December 2026 when the existing concession expires.

Transurban’s share of Sydney Transport Partners is 50 percent, supported by AustralianSuper (20.5 percent), the Canada Pension Plan Investment Board (20.5 percent) and Tawreed Investments (9 percent). The team beat a rival consortium led by IFM Investors, supported by pension OMERS and Dutch fund APG.

The winning bid was cleared by the Australian Competition and Consumer Commission yesterday following concerns that a victory by Transurban would lead to less competition when bidding for future toll road concessions. The ACCC accepted a proposal by Transurban to publish traffic data that it used to produce modelling that informs its bids, arguing that making these data public would level the playing field for future bids.

Roads monopoly?

The competition watchdog did acknowledge, though, that Transurban had an advantage in the bid process for WestConnex due to its exclusive access to traffic data gleaned from its interests in existing toll roads. Transurban now controls eight out of 10 toll roads in New South Wales and 16 out of 20 across Australia.

Financial close for the transaction will come in September subject to Foreign Investment Review Board approval, although this is unlikely to cause any concerns.

Transurban said it would fund its share of the deal via a A$4.2 billion share rights issue, plus A$600 million through a share placement to AustralianSuper and Tawreed Investments.

Perrottet said in a statement the money raised from the sale would go towards funding the M4-M5 link, which is the third and final stage of the A$16.8 billion WestConnex project, as well as future infrastructure in the state.

The largest road construction project in Australia and the last large-scale asset in the country’s privatisation pipeline at the moment, WestConnex will comprise 33 kilometres of interconnected toll roads and motorway upgrades once complete, linking Sydney’s west and south-west with the CBD.

The NSW Government will retain a 49 per cent residual stake in Sydney Motorway Corporation, with distributions directed into the NSW Generations Fund. The fund was seeded with A$3.3 billion in the 2018-19 state budget and will be used by the government to keep debt at sustainable levels consistent with a triple-A credit rating, as well as for community improvement projects.