UPDATE 4-Canada Pension bids $3.4 bln for Australia’s Intoll

* Pension fund offering A$1.535/shr cash offer

* Bid is cash or scrip, subject to exchange rates

* Intoll shares rise 31 percent on offer

* CPPIB granted 3-week due diligence

* Intoll recommends shareholders take no action
(Adds Abu Dhabi Investment Authority background)

By Michael Smith

SYDNEY, July 15 (BestGrowthStock) – Canada’s second-biggest pension
manager has revived efforts to buy an Australian toll-road
operator with a C$3.5 billion ($3.4 billion) bid for
Sydney-based Intoll Group (ITO.AX: ), whose shares jumped 30
percent on the friendly offer.

Canada Pension Plan Investment Board (CPPIB) made an
indicative offer for the former Macquarie Bank (MQG.AX: )
spin-off on Thursday, just months after the collapse of its
joint bid for another Australian toll-road group Transurban
(TCL.AX: ). [ID:nSGE64A0MW]

Infrastructure assets such as toll-roads and airports are
hot targets for global pension funds because of their stable,
long-term revenue streams. With ageing populations, the funds
must be able to pay higher contributions in coming decades.

Canadian pension funds with their deep pools of capital and
an ability to hold investments for long periods, are seen as a
new breed of financial investor that can out-muscle buyout
firms. [ID:nLDE63Q11N]

“For long term investors like pension funds they are
looking for long-duration assets with inflation hedging but
also some diversification. Toll road assets provide all that,”
White Funds Management analyst Will Seddon. White Funds owns
Intoll shares.

Toronto-based CPPIB, which has been an active investor
globally in the past year, made a cash offer of A$1.535 per
share — subject to exchange rate movements — which was 38
percent above Intoll’s A$1.115 close on Wednesday.

Intoll shares rose 31 percent on news of the offer on
Thursday. The stock was trading at A$1.45 at 0630 GMT.

“The offer looks good in comparison to the previous close
but there is still room to go higher if anyone else comes out
of the woodwork,” said Seddon said.

Intoll agreed to allow CPPIB, which is keen to negotiate a
friendly takeover, to conduct due diligence for a three-week
period. CPPIB has not asked to be granted exclusive due
diligence which means other bidders could still take a look.

Abu Dhabi Investment Authority, which raised its stake in
Intoll to 9.9 percent in May, declined to comment on the offer.

The sovereign wealth fund’s strategy for investing in
infrastructure assets is to take minority stakes and it does
not look to control or operate the assets.
Other major Intoll shareholders include Macqaurie which owns
18 percent and Lazard Asset Management with 10.7 percent.
Ontario Teachers Pension Plan Board, which teamed up with CPPIB
to bid for Transurban, owns 1.8 percent.

LOST OUT IN TRANSURBAN

CPPIB lost out on buying Transurban earlier this year when
the toll-road operator turned down that $4.4 billion bid,
opting instead to go ahead with a share sale. CPPIB still owns
a 12.9 percent stake in Transurban.
Intoll, which manages interests in the Westlink M7 motorway in
Sydney and the 407 ETR in Toronto, separated from Macquarie
Infrastructure Group in January and cut its management ties
with Macquarie Group.

Spanish company Ferrovial (FER1.MC: )in March put 10 percent
of the 407-ETR motorway up for sale. It said last month it
expected binding offers between July 12-20. [ID:nWEA7842].

Under the offer, Intoll shareholders would also have the
option rolling over their stake into a newly-formed unlisted
entity, or a combination of that and the cash offer.

CPPIB said the offer price implied an enterprise value for
Intoll of A$5.1 billion, representing a multiple of 29.2 times
earnings before interest, tax, depreciation and amortisation
(EBITDA).

At Wednesday’s closing share price, Intoll was trading at
16.9 times forward earnings. This compares with 15.5 times for
Spain’s Abertis (ABE.MC: ), 29.62 for Ferrovial and 14.7 for
Jiangsu Express (600377.SS: ) and 14.42 for China’s Zhejiang
Express (0576.HK: ).

“We believe Intoll’s toll road assets are a good fit with
CPPIB’s portfolio and long-term investment mandate, and are
well-situated strategically to benefit from future urban growth
in Toronto and Sydney, Australia,” said CPPIB’s senior vice
president, private investments, Andre Bourbonnais.

UBS is advising Intoll on the deal. Goldman Sachs JBWere is
advising CPPIB.
(Editing by Valerie Lee)

UPDATE 4-Canada Pension bids $3.4 bln for Australia’s Intoll