Nov. 5 (Bloomberg) -- Transurban Group, owner of toll roads in Australia and Virginia, rejected an unsolicited takeover offer from Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan.

The Melbourne-based company, with a market value of A$6.6 billion ($6 billion), said the proposal was “incomplete, highly conditional and non-binding,” according to a statement to the Australian stock exchange today. Transurban jumped as much as 21 percent in Sydney, still 38 percent below a 2007 peak.

Canada Pension and Ontario Teachers, which manage more than $190 billion of assets, are seeking to buy infrastructure and alternative assets after losing on stock investments last year. The two funds currently hold a combined 28 percent stake in Transurban, according to Bloomberg data.

“They’re already a big shareholder in Transurban, and they understand the assets very well,” said Mark Freeman, chief investment officer at Australian Foundation Investment Co., Transurban’s fifth-largest holder according to Bloomberg data. “The revenues are fairly secure and reasonably predictable.”

When asked whether AFIC would sell its holding, Freeman said it would assess offers and that “our starting proposition is that we’re very comfortable with our investment and we’re long-term holders.”

Transurban owns toll roads including the Pocahontas 895 in Virginia and the Hills M2 in New South Wales, Australia’s most populous state, where the population is increasing by 1.6 percent a year, according to the nation’s statistics bureau.

‘Willing to Engage’

Ontario Teachers in August raised its stake in Maple Leaf Sports and Entertainment, owner of the Toronto Maple Leafs and Toronto Raptors sports teams. Canada Pension spent A$1.64 billion in June to buy Macquarie Communications Infrastructure Group, an investor in radio transmission towers, raising its initial offer by 20 percent to win shareholder approval.

Transurban’s board “remains willing to engage on bona fide proposals which provide appropriate value and certainty to security holders,” it said today.

Transurban shares traded at A$5.15 at 1:39 p.m. in Sydney, a 17 percent rise. They peaked at A$8.56 in May 2007. The benchmark S&P/ASX200 Index fell 0.5 percent.

“The market had missed the value, that was pretty obvious,” said Andrew Chambers, an analyst at Austock Group Ltd. in Melbourne. We wouldn’t support any takeover at less than A$5.80 a share.’’

Transurban’s head of investor relations Henry Byrne declined to comment beyond the statement. Ontario Teachers spokeswoman Deborah Allan and Canada Pension Plan spokeswoman May Chong didn’t immediately respond to telephone messages left after hours.

Existing Stake

Transurban is already Ontario Teachers’ largest investment in a listed company in Australia, and third biggest stock investment worldwide, according to the pension fund’s latest annual report. The fund sold a stake in Macquarie Infrastructure Group, an Australian company that owns toll-road stakes in six countries, for A$342.6 million on Oct. 28, it disclosed in a regulatory filing.

Ontario Teachers held C$87.4 billion ($82 billion) in net assets at Dec. 31 last year, according to its Web site. Canada Pension Plan had a C$120 billion dollar investment portfolio at June 30.

Transurban posted a loss of A$16.1 million for the year ended June 30, according to a company statement issued Aug. 26.

The company’s assets include the 22-kilometer (14 miles) CityLink highway in Melbourne, which handled an average of 675,113 vehicles a day in the three months ended September, according to an Oct. 12 statement. The company also owns half of the Westlink M7 in Sydney, used by some 126,405 vehicles daily.

In the U.S., Transurban is part of a group developing high occupancy toll lanes on the Capital Beltway around Washington. The company is in talks on a similar project for a highway linking the U.S. capital to Virginia.

To contact the reporters on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

Last Updated: November 4, 2009 22:46 EST