Transurban Declines Takeover Bid, Seeks Better Offer

Submitted by Jim Thesiger on 6 November, 2009 - 04:57

Transurban Group (TCL), the company that operates toll roads in Australia and United States has declined a $6.7 billion takeover bid offered by two Canadian pension funds. However, the group has kept its door open for a better deal. According to some experts, the takeover bid could hit $7.5 billion mark. The two Canadian pension funds are currently looking forward to restart talks with the toll road giant regarding the takeover. Transurban gained 19.3 percent to its stocks price and closed at $5.24. The shares were down 20 percent this year before the approach. Ontario Teachers Pension Plan and Canada Pension Plan Investment Board, two major players in the pension industry of Canada submitted a confidential takeover bid for $5.25 per share for those holdings that they don’t own. It is to be mentioned that these two companies jointly owns 28 percent of Transurban already.

The bid represents a premium of 25 percent to volume-weighted average share price of Transurban for the last three months. Canada Pension Plan Investment Board purchased the Macquarie Communications Infrastructure Fund in June in exchange of $1.4 billion after the key investors pushed it for a higher bid. Canada Pension Plan is currently in control of $119 billion in assets while Ontario Teachers is enjoying $90 billion plus funds under its management. The two Canadian pension funds stated on Thursday that the takeover bid submitted by them has offered compelling value for the Transurban security holders.

However, Transurban mentioned that the bid was turned down based on the current terms but the door was still open for the bidders to come up with a better offer with more certainty for the security holders. The advisers of the Canadian funds are believed to have approached for fresh talks with Transurban Group regarding the deal. It is to be mentioned that Transurban is currently holding a stronger position in the market in comparison with other toll-road investors with newly appointed chief executive Chris Lynch is set about for recapitalisation of the company balance sheet along with reforming its debt. Mr. Lynch, who previously worked with BHP Billiton has reduced expenditure and revamped the business model of Transurban in an attempt to make sure that rather than from debt, the group can pay the distributions to the stockholders from cash flow.