In an unfortunate case of ill-timing given yesterday’s ASX selloff, Atlas Arteria launched a $A3.15 billion capital raising to buy a 66% stake in a small toll road in the US – a deal that could put it beyond reach of a takeover approach from industry super giant IFM Investors.
Atlas Arteria defied a warning from IFM not to do the deal by spending almost $A3 billion ($US2 billion) to buy the Chicago Skyway.
The purchase of the Skyway, which was formerly part-owned by the Macquarie Group, will make Atlas significantly more expensive for IFM to proceed with a potential full offer
Atlas has acquired 66.67% of Skyway Concession Company which runs the toll road, establishing a partnership with Ontario Teachers’ Pension Plan. It’s paid $2.9 billion for the stake, buying it from Canada Pension Plan Investment Board and OMERS Infrastructure.
They both owned 33.33% alongside OTPP which will keep its 33.33% stake and become a partner with Atlas.
If not challenged and the capital raising is successful IFM will have to spend around $3 billion dollars more than it planned if it wants to take control of the tollroad operator.
IFM had threatened to call a general meeting and try to spill the board if Atlas Arteria progressed with its plans for the purchase.
The investment company acquired a 19% stake in Atlas Arteria recently, but is now stuck with either participating in the equity raising or watching its shareholding in the Atlas Arteria diluted.
Atlas plans to raise the capital from an offering at $A6.30 per security around 19% below Monday’s close of $7.81. There will be two parts – the largest to institutions and a much smaller issue to retail security holders.
So on top of any fall due to the wider market sell down when trading in the stock resumes, we know the price will drop by at least the amount of that discount.
The big news from the issue will be the role IFM plays in it and if they take up their piece of the issue – an investment worth close to $600 million.
If IFM doesn’t pay up, Atlas could face a huge shortfall which other fund managers might not be willing to pick up given the uncertainty about markets at the moment and growing fears of a recession in the US and lower road use if unemployment surges in 2023 and 2024.
Atlas on Tuesday announced a distribution of 20 Australian cents a stapled security for the six months to June 30, consistent with guidance provided in our half year results announcement on August 31.
Atlas also reaffirmed a second half distribution of 20 cents a security and also 2023’s 40 cents a security (unchanged from 2022).
Atlas said there could be an extra 23 cents of distributions from cash in Skyway over the next two years that will be released gradually once the deal is done.
That should keep small security holders happy but IFM’s attitude will be key to the future of this deal, its financing and Atlas’s independence.
