Transurban to raise $2.74bn

Group will raise $2.34bn in rights issue, $400m in placement to fund $7bn Queensland Motorways buy.

Transurban will raise $2.34 billion through a rights issue, and $400 million through a placement to its bid partners in order to fund its $7.05bn consortium acquisition of Queensland Motorways.

In total, Transurban will raise $2.74bn for the deal, announced late last night, in which the group partnered with AustralianSuper and a unit of Abu Dhabi’s sovereign wealth Tawreed Investments to purchase the 70-kilometre network of roads in the Brisbane area.

ASX-listed Transurban and its partners are paying about 28 times Queensland Motorways’ 2013 earnings before interest, tax, depreciation and amortisation, a price significantly above what analysts were expecting.

The 10-for-43 entitlement offer is set at a price of $6.75 per security, which represents a 7.2% discount to Transurban’s closing  price of $7.27 yesterday and a 5.8% discount to the theoretical ex-rights price of $7.17.

The entitlement offer comprises an institutional entitlement offer and a retail entitlement offer.

New securities for the entitlement offer will be sold via a bookbuild process, for both the retail and institutional components of the offer.

The institutional entitlement offer opens on April 24 and closes on April 29, with a bookbuild set for April 30.

The retail entitlement offer opens May 6 and closes on May 23.

Settlement of the entitlement offer is expected on June 3.

In outlining the funding details of the acquisition, Transurban maintained its full-year distribution guidance of 35c per security, which is expected to include a 7 cent fully-franked dividend component and be 95% free cash covered.

Transurban also set its fiscal 2015 distribution guidance at 39c per security.

The Transurban-led group beat out another bidding group led by Melbourne-based infrastructure investors Hastings, Spanish infrastructure operator and investor Abertis, the Kuwait Investment Authority and Dutch pension fund APG.

Reporting by DataRoom has shown that Transurban will also need to borrow up to $2.4 billion in debt to fund the deal, as well as the equity raising.

In the winning consortium, Transurban has a 62.5% stake, Australian Super a 25% stake and Tawreed 12.5%.