How much did Transurban pay to climb to 60.5 per cent ownership of WestConnex, the country’s most valuable privately owned toll road?
That was the question doing the rounds in infrastructure circles on Thursday morning after the ASX-listed player announced it had quietly sewn up a deal to pay $4.5 billion for Canada Pension Plan’s 25 per cent stake in Westlink M7 and NorthConnex as well as its 10.5 per cent slice of WestConnex. No price breakdown was provided.
But people briefed on the agreement who requested anonymity to speak freely said Transurban, advised by Goldman Sachs, had paid between $2.1 billion and $2.4 billion in equity value for the WestConnex stake.
Throw in around $11 billion in debt that WestConnex holds, and it looks like Transurban and Canada Pension Plan Investment Board seem to have decided a price tag of between $31 billion and $34 billion was fair. There was no big auction, no data room, just one-on-one talks that came to a head just as NSW finalised its toll review.
There are two big takeaways from that number.
First, the dealmakers who for years have argued that Transurban and friends overpaid for WestConnex’s privatisation in 2018 and 2021 seem to have been vindicated. The road was worth $33 billion five years ago and is sitting at the same level now. No big growth to see here.
Yes, rates have gone up, and there are fewer years left on the concession before it expires in 2060 – a natural erosion to WestConnex’s price tag. But its traffic forecasts were hit hard by the pandemic and tested again by the delays in the opening of the Rozelle Interchange and the Western Harbour Tunnel.
Not to mention the three-year torment of the Allan Fels-led review, which in its initial days, at least, looked like an existential threat to toll privatisations and had infrastructure dealmakers shaking in their boots.