Transurban Group (ASX:TCL) announced that it has reached an agreement to acquire AirportlinkM7 for $1.87 billion and will raise $1.025 billion via a retail entitlement offer.
Acquire AirportlinkM7 for $1.8 billion
Transurban’s subsidiary Transurban Queensland has reached an agreement to acquire AirportlinkM7 for $1.87 billion. On top of the total payment, the company has to pay a $108 million stamp duty fee and $23 million worth transaction costs. AirportlinkM7 is an urban tunnel that connects Brisbane Airport and the Australia TradeCoast with the CBD. The tunnel also connects Brisbane’s northern, southern and western suburbs.
Transurban Queensland will be responsible for the management and operations of AirportlinkM7. According to Transurban CEO Scott Charlton,: “We expect to achieve EBITDA margin enhancement through integration with Transurban following this acquisition.” The CEO also mentioned that this acquisition will help the company enhance its efficiencies. The asset is described as a "quality asset" and has 38 years concession remaining. Ttoll prices have increased since 1 July 2015 and enhanced the earnigns profile of the tunnel.
Equity Raising of $1.025 billion
Transurban is set to raise $1.025 billion through a fully underwritten pro rata accelerated renounceable retail entitlement offer. The entitlement comprises of 1 for 18 securities at an offer price of $9.60 per security. The offer price represents a 4.9 per cent discount to the adjusted close price of $10.10 on 23 November 2015.
The funds raised will be used to contribute to the equity and transaction costs of AirportlinkM7 acquisition and repayment of corporate debt facilities. The company also aims to achieve financial flexibility for further investment opportunities. The entitlement offer will commence on 15 December 2015. The company has also reaffirmed the distribution guidance of 44.5 cents per share for FY16.
The stock is in a trading halt until 27 November 2015 as the company is completing the institutional component of the entitlement offer. TCL closed at $10.32 on 23 November 2015 and is up 20 per cent for the year.
Author: Simon Herrmann
Nov 24, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.