Transurban to Buy Brisbane Toll Road for A$1.87 Billion

  • Company plans to raise A$1.03 billion in rights offer
  • Acquisition price is half the road's construction costs

Transurban Group agreed to buy a 7-kilometer highway in Brisbane for A$1.87 billion ($1.35 billion), half of the construction costs, to widen its network of toll roads in Queensland state.

Transurban Queensland, controlled by Transurban, is buying the BrisConnections-owned AirportLinkM7 and wants to raise A$1.03 billion selling shares to help fund the deal, the Melbourne-based toll-road company said in a statement Tuesday.

BrisConnections collapsed in 2013 after traffic volumes on AirportLinkM7, which connects the airport to nearby suburbs and the central business district, missed expectations. Two years on, revenue from the road has more than doubled after toll discounts were removed on most sections.

“BrisConnections has been a horror story and this is another fantastic acquisition,” said Evan Lucas, a market strategist at IG Ltd. in Melbourne. “Transurban has gone past the risk of building the asset and hoping like hell that the cars will come. Cash flows are assured.”

Ring of Roads

Buying the airport link almost completes a ring of Transurban-operated highways surrounding Queensland’s biggest city. Transurban’s toll roads already envelop almost all of Sydney and in the U.S., the company runs two roads west of Washington DC.

A consortium led by Transurban last year agreed to buy Queensland Motorways Ltd. for A$7.1 billion, gaining a 70-kilometer network of toll roads, bridges and other infrastructure in the state.

To fund the latest Brisbane acquisition, Transurban plans to sell stock to shareholders at A$9.60 apiece, offering one new share for every 18 owned. That’s a 7 percent discount to the last closing price of A$10.32.

Transurban shares, which were halted in Sydney, have climbed 20 percent this year, taking the company’s market value to A$20 billion.

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