Transurban Group has bought Sydney’s Lane Cove Tunnel for $630.5 million and revealed plans to raise more than half a billion dollars from shareholders to pay for it and planned upgrades of two other Sydney roads.
The company, which also owns the M2 in Sydney, which connects with the bankrupt tunnel, says it will also raise non-recourse project debt.
The M5 in Sydney’s southwest is also 50% owned by TCL and the M7 in Sydney’s west, 50% controlled by TCL, also links to the M2, meaning the company will have a strong presence in one of the fastest growing parts of Sydney.
It also has 75% stake in the Eastern Distributor in Sydney’s inner eastern suburbs, linking to the airport.
Trading in the shares were halted yesterday to allow the fund raising to happen. The shares closed at $4.92 on Friday.
"Transurban is the natural owner of the Lane Cove Tunnel and we believe the asset fits extremely well within our portfolio of prime toll roads,” Transurban chief executive Chris Lynch said in the statement.
More importantly the fund raising and purchase of the tunnel will make TCL that much more expensive for three shareholders who hold 42% of the capital of Transurban and who are said to be looking at a new offer of $5.50 a share.
Canadian Pension Plan, Ontario Pension Plane and Sydney-based CP2 have reportedly agreed to a higher priced offer for TCL.
Now it’s back to square one for these groups, but they meet the TCL board and management this afternoon to talk about the mooted new bid..
The acquisition of the tunnel covers the assets and remaining 27 year motorway concession for the Lane Cove Tunnel.
The tunnel’s operator, Connector Motorways Pty Ltd, was placed in receivership in February with debts of more than $1.1 billion.
The tunnel opened in 2007 as a private-public partnership with the NSW government, but suffered from lower than forecast traffic numbers.
TCL gave an assurance the acquisition and capital raising would not change its distribution guidance for the second half of the current financial year.
"The capital raising takes into account Transurban’s broader capital funding requirements for growth projects including the planned upgrades of the Hills M2 and M5, which Transurban is currently negotiating with the RTA,” the group said in yesterday’s statement.
"The Transurban Board has confirmed its previous distribution guidance for the 2010 financial year following the announcement of the acquisition of the Lane Cove Tunnel and the capital raising, with the second half distribution forecast at 12 cents per security.
"The new securities issued as part of the Entitlement Offer will be entitled to any second half distribution."
The capital raising involves retail and institutional components, offering eligible security holders one new stapled security for every 11 held at $4.60, a 6.5% discount to the closing price on Friday.
The offer is expected to raise $542.3 million. Proceeds will be used also for other funding requirements, including upgrading the M2 and M5 motorways in Sydney.
