Ontario Teachers Said to Sell Transurban Stake as $6.3 Billion Bid Fails

Ontario Teachers’ Pension Plan sold its stake in Transurban Group after the Australian toll-road operator rejected a A$7.2 billion ($6.3 billion) bid from the Canadian fund and other investors, two people familiar with the sale said. Transurban shares fell.

Ontario Teachers’ sold 160 million shares for A$4.44 each to more than 50 institutional investors late yesterday, said one of the people, declining to be identified as the details weren’t made public. Transurban fell 5.1 percent to A$4.44 at 11:40 a.m. in Sydney trading, the biggest drop since May 2009.

The Melbourne-based company, which owns toll roads in Australia and the U.S., on May 12 rejected a sweetened A$5.57-a- share joint offer from Ontario Teachers’, Australian fund manager CP2 Ltd. and Canada Pension Plan Investment Board, its three largest shareholders. CP2 has said a higher bid is “very unlikely,” while Canada Pension hasn’t commented on its plans.

“There’s no doubt the market sees an overhang here and it’s very hard to predict what will happen next,” said Andrew Chambers, an infrastructure analyst at Melbourne-based Austock Group Ltd., who has a “buy” rating on the stock. “At these levels, we think it’s looking quite cheap and it will be trading higher than this in a year’s time.”

Higher Bid Unlikely

Ontario Teachers’ declined to comment on the sale in a statement. Dow Jones reported the stake sale earlier. JPMorgan Chase & Co. managed the placement, the people said.

“It is very unlikely that CP2 would ever come back at a higher price,” Peter Doherty, managing director of Sydney-based CP2, Transurban’s biggest shareholder, said in an interview on Australian Broadcasting Corp.’s Inside Business program on May 16.

Analysts at Macquarie Group Ltd., Royal Bank of Scotland Group Plc and Southern Cross Equities Ltd. said last week a higher bid or hostile offer were unlikely.

The spurned offer came six months after Transurban rejected a A$5.25-a-share unsolicited bid from the Canadian funds.

The two Canadian funds and CP2, which had owned a combined 42.4 percent of the company, were vying for control of assets including the Pocahontas 895 in Virginia and four Sydney toll roads, as they seek long-term income to match their future payouts. Upon rejecting the proposal, Transurban said it would go ahead with an A$542.3 million share sale to help fund its purchase of the Sydney Lane Cove Tunnel.

Share Swings

Ontario Teachers,’ Canada Pension and CP2 then had their stakes diluted after declining to buy shares in the share sale.

Transurban shares were at A$4.37 before the Canadian funds made their first offer, and have swung between a high of A$8.51 in May 2007, to a low of A$3.68 in September.

Transurban gets more than 98 percent of revenue from Australia. Citylink, the company’s first toll road, connects Melbourne’s airport with the eastern and western suburbs. It also has a controlling stake in the construction of high- occupancy tolling lanes on the Capital Beltway that circles Washington DC.

Each existing road recorded increased revenue in fiscal 2009, the most recently completed year. Only one of the toll- road concessions the company owns expires in the next 15 years.

Ontario Teachers’, responsible for investing and managing pensions for about 289,000 active and retired teachers in Canada’s most populous province, held C$96.4 billion ($93.3 billion) in net assets, according to its website.

To contact the reporter on this story: Angus Whitley in Melbourne at awhitley1@bloomberg.net

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