"People tend to take big things off the table in the lead-up to an election."
August 25, 2006
The Sydney Morning Herald (Australia)
MACQUARIE Infrastructure Group has attempted to overcome concerns in the United States that large chunks of infrastructure are falling into foreign hands, by signing a deal to sell half its US toll-road assets to another Macquarie fund.
MIG said yesterday it had signed an "exclusivity arrangement" to sell half the assets to the unlisted Macquarie Infrastructure Partners (MIP), based in New York.
The move is also an attempt to boost MIG's flailing share price and answer market criticisms of the high prices it has paid for several US toll-road concessions.
MIG chief executive Stephen Allen said the $US762 million ($1 billion) sale to MIP of the group's stakes in the Indiana Toll Road, Chicago Skyway, Dulles Greenway near Washington and San Diego South Bay Expressway would "demonstrate [their] value".
The deal is subject to approval by security holders and follows a review of the company's portfolio. Mr Allen said the redomiciling of MIG to the US or UK had even been considered.
MIG shares rose 10c to $3. But they are still well short of the $3.66 the company is worth based on its valuation (net asset backing) of its toll roads.
The $US762 million sale of half of MIG's US toll road concessions will be valued at their net asset backing, which Mr Allen said would not only provide a new source of funding for expansion but also help "close the gap between the security price and net asset backing".
Following the emotional public debate in Indiana over the $US3.85 billion sale of the state's main toll road to an Australian-Spanish (MIG and Cintra) consortium, Mr Allen said the new MIG-MIP partnership would "address US domestic issues" with foreign ownership.
"We saw from Indiana that the foreign ownership thing is becoming a bigger and bigger issue," he said.
Mr Allen dismissed suggestions MIP would still be considered Australian, given it not only carried the Macquarie name but was still closely aligned with the Australian investment bank.
"Fundamentally MIP is a New York based entity, a constituted US company," he said. "It's true it's managed as a subsidiary of an Australian company but it sits in New York."
Under the deal, both companies would seek new investments in the US together, which could be plentiful if more states jump on the private toll-road bandwagon.
Mr Allen said MIG was still looking at opportunities in Oregon and Texas but he hoped several other states would follow once the upcoming US congressional mid-term elections are over.
Some state governors, such as New Jersey's, recently played down the prospect of any privatisations but Mr Allen said: "People tend to take big things off the table in the lead-up to an election." He said 36 out of 50 state governors would face election in November.
The deal comes as MIG said it had refinanced its M6 toll road in Britain. It also announced a full-year net profit of $424.7 million, down from $772.6 million. "Lower revaluation income" was blamed.
© 2006 The Sydney Morning Herald: