After a highly competitive auction process, Australian toll road operator Transurban has teamed with superannuation fund Australian Super and Tawreed Investments – a subsidiary of Abu Dhabi Investment Authority – to acquire Queensland Motorways in a A$7.057 billion (€4.7 billion; $6.6 billion) deal.
Various media reports had cited expected sale proceeds of anywhere between A$5 billion at the lower end and A$6.5 billion at the upper end. The eventual sale price has thus exceeded the expected upper limit by some margin.
A A$6.3 billion sale would have given Queensland Motorways an equivalent valuation to last year’s auctions of Botany, Brisbane and Kembla ports – which, at 25 times 2013 earnings before EBITDA, was considered a very high valuation for infrastructure assets. At that price, the internal rate of return for Queensland Motorways was estimated at around nine percent.
“There was a very high level of interest in the sale process, with a number of competing consortia comprising committed and competitive local and international institutional investors and strategic industry players,” said Damien Frawley, chief executive officer of vendor QIC, the fund manager.
QIC’s global infrastructure group was handed the asset by the Queensland state government in May 2011 for a market-value price of A$3.088 billion on an enterprise value basis inclusive of stamp duty. QIC was tasked with turning around the previously under-performing asset on behalf of the state’s defined benefit superannuation fund.
Queensland Motorways comprises a 70-kilometre network of tolled roads, bridges and infrastructure, including the Gateway, Gateway Extension and Logan motorways, Brisbane’s Go-Between Bridge, the CLEM7 tunnel and planned Legacy Way motorway, due to open in 2015.
QIC’s ownership saw the substantial expansion of the road network through deals struck with Brisbane City Council and the purchase of the CLEM7 motorway for A$618 million.
Other competing consortia were reported to include one led by Australian fund manager IFM Investors alongside Canada’s Borealis and Singapore’s GIC; and another one led by Australian fund manager Hastings Funds Management and including Spanish developer Abertis, the Kuwait Investment Authority and Dutch pension APG. A group of Malaysian investors comprising UEM, Khazanah and the country’s Provident Employees Fund, was also understood to be in the running.
Investors were attracted by the asset’s long-term stable cash flows that are expected to improve further with network upgrades and some cost cutting. There is also a favourable demographic trend, with south-east Queensland’s population increasing by 2.5 percent a year between 2001 and 2011.
QIC was advised on the sale by Macquarie Capital and UBS. Allens Linklaters provided legal advice and PwC provided tax and accounting advice.
The sale is expected to complete by the third quarter of this year, subject to certain conditions being satisfied.