Britain’s Top Port Operator to Sell $2.4 Billion Stake

March 31 (Reuters) – The Canada Pension Plan Investment Board (CPPIB) and Hermes Infrastructure are to purchase a 30 % stake in Associated British Ports for about 1.6 billion kilos ($2.4 billion).

Associated British Ports is Britain’s main port operator, with 21 ports in England, Scotland and Wales. The deal will permit the Hermes-CPPIB consortium to accumulate an extra 3.33 % within the firm, relying upon pre-emption rights, the consumers mentioned in an announcement on Tuesday.

Infrastructure property are enticing to establishments like pension funds due to the long-term funding alternative and secure returns that they signify.

Hermes Infrastructure, a part of British-based fund Hermes Investment Management, and CPPIB will purchase the stake from GS Infrastructure Partners and Infracapital. Borealis infrastructure and Government of Singapore Investment Corp will stay shareholders.

The worth values the corporate at a a number of of about 20 instances earnings earlier than curiosity, tax, depreciation and amortisation (EBITDA), based mostly on 2014 figures and bearing in mind accrued earnings, mentioned Peter Hofbauer, head of Hermes Infrastructure.

That is lower than different latest comparable transactions – Newcastle port, Australia’s greatest coal export terminal, offered final yr for 27 instances earnings, though the commodity-rich nation has extra potential for progress.

It is the second infrastructure deal this month for Hermes, which together with one other Canadian pension fund has agreed to pay 585 million kilos for a 40 % stake within the Eurostar rail hyperlink.

“The institutional investors we talk to still see infrastructure as very appealing,” Hofbauer mentioned. “It’s locking in a real rate of return.”

Associated British Ports had core earnings of 291.9 million kilos in 2013, and had a compound annual progress fee (CAGR) of 6 % between 2006 and 2013, Hofbauer added.

The firm is run within the landlord mannequin, whereby it owns all of the land and is the statutory authority of the enterprise. That means it may well make earnings merely from leasing the land, in addition to bringing ships out and in and monitoring security.

“In the infrastructure business we don’t yet have a port asset, and we like this landlord model,” mentioned Cressida Hogg, managing director and international head of infrastructure at CPPIB.

The deal to purchase to purchase the stake is predicted to shut in the summertime. Macquarie Capital and Deutsche Bank acted as advisers to CPPIB and Hermes.

($1 = 0.6775 kilos) (Reporting by Ankush Sharma in Bengaluru and Freya Berry in London; Editing by Anupama Dwivedi and Pravin Char)