Transurban and its investment partners have paid $11.1bn to buy the remaining 49 per cent stake in WestConnex, Sydney’s biggest motorway project, in a blockbuster deal for the NSW government.
The $11.1bn payday for the 33km motorway, combined with the original 51 per cent stake sold for $9.26bn in 2018, hands the state government $20.4bn from selling off Australia‘s largest infrastructure project.
Cash from the sale will be invested in the NSW Generations Fund – the state’s sovereign wealth fund – before being used to retire an equivalent amount of debt. The original $9.26bn deal was used to fund the M4-M5 final stage of WestConnex along with future infrastructure across the state.
Transurban said it will launch a $4.2bn-plus equity raising to pay for the acquisition, as previewed by The Australian’s DataRoom column, along with $1.41bn in cash for an overall $5.56bn outlay for its 50 per cent stake.
Some $3.97bn of the $4.2bn will be raised through a one-for-nine rights issue at a price of $13 per security, representing a 8.3 per discount to Transurban‘s last closing price on September 17.
Transurban has also agreed for a $250m share placement to AustralianSuper, a partner in its consortium, at $13.07 a share in addition to the superannuation giant taking up its full entitlement under the deal.
No additional debt funding is required by the consortium and the deal to acquire full control of the toll road is expected to generate $600m in additional capital releases until the 2025 financial year.
The stronger than expected $11.1bn windfall for the remaining 49 per cent adds to a major privatisation drive by the NSW government with big state-run power networks previously sold off including Ausgrid, Transgrid and Endeavour Energy as part of an asset recycling scheme.
“This transaction continues our successful asset recycling strategy, which has been the cornerstone of our record $108.5 billion infrastructure pipeline that has built and upgraded schools, hospitals, road and rail across the State,” NSW Treasurer Dominic Perrottet said.
“This sale is part of our prudent, long-term strategy to bolster the state’s finances, while also supporting the NSW economy by investing in job creating projects that will drive our Covid economic recovery.”
Transurban’s partners in the Sydney Transport Partners consortium include AustralianSuper, the Abu Dhabi Investment Authority and the Canadian Pension Plan Investment Board, while Canada‘s CDPQ will become a new member of the group.
CDPQ will provide 20.5 per cent of the funding for Monday’s deal in exchange for a 10 per cent stake in the consortium while CPPIB will remain at 10.5 per cent.
Transurban expects to pay 15c per security to shareholders for the six months ending December 31, 2021, in line with the first half distribution.
“WestConnex is one of the largest road infrastructure projects in the world with an enterprise value of $33 billion based on this transaction,“ Transurban CEO Scott Charlton said.
“WestConnex is a key component of the NSW government’s integrated transport plan to ease congestion and connect communities in Sydney.”