Transurban Group has strongly defended the rejection of the takeover bids from three shareholders a fortnight ago.
In a letter to securityholders, released yesterday to the ASX, the toll road giant said it had a “clear view” of the long-term value of the company and the bid from its three biggest shareholders didn’t reflect its growth prospects.
Chairman David Ryan said in the letter “We have a first class suite of assets that is among the best in our sector globally, we have an attractive pipeline of growth projects at various stages of delivery and we have a healthy balance sheet that provides significant funding certainty in relation to our growth projects.”
“We did not believe that the premium being offered to acquire Transurban under the proposals was sufficient to compensate security holders for this value.”
"From the time of the initial approach by Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan (OTPP) to acquire Transurban last year, the Board has sought to make clear that it was willing to engage in a transaction if it provided appropriate value for all security holders.
The proposals were given very serious consideration by the Board.
"In addition, we undertook discussions with CPPIB, OTPP and the other party to the proposals, CP2 Limited, to ascertain whether the proposal could be improved to provide greater value and certainty for security holders.
"This did not prove possible. Accordingly, we were not able to recommend either of the two proposals to security holders," Mr Ryan said.
The Board has a clear view of the long term value embedded in the Transurban Group. This, together with our view that the proposals were considered insufficiently certain given the other conditions included in the proposals, underpinned the Board’s decision that it could not recommend the proposals.
The Melbourne-based company rejected a $7.2 billion ($5.57, but less the 12c a share final distribution, so effectively $5.45) takeover offer from local fund, CP2 Ltd and Canadian groups, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan.
The two Canadians had bid $5.25 a security last November, but were also rejected.
Ontario Teachers’ sold its stake in Transurban after the rejection, and Canada Pension is re-evaluating its holding in the company.
Ontario Pension sold its stake because it had decided not to hold listed investments in its infrastructure fund, but unlisted or direct holdings.
The half a billion plus equity raising to help fund the company’s acquisition of the Lane Cove Tunnel in Sydney was the catalyst for the last offer and then the disagreement with the three shareholders.
They had wanted the deal funded by debt (ignoring that debt is still a four letter word to many investors in this sector).
The company bought the tunnel for A$630.5 million, about a third of its construction and financing costs, Transurban said in the letter.
The tunnel will allow Transurban to tighten its grip on road transport in a large part of Sydney through its ownership of the M2 toll road, 50% stake in the M7, stake in the M5 and a holding in the Eastern Distributor.
Transurban securities fell, and then recovered to end up 3c at $4.41 yesterday.
