The Macquarie International Infrastructure Fund has acquired a 90 per cent equity stake in South China Highway Development, which in turn owns a 90 per cent of Hua Nan Expressway in Guangz
The Macquarie International Infrastructure Fund has acquired a 90 per cent equity stake in South China Highway Development, which in turn owns a 90 per cent of Hua Nan Expressway in Guangzhou, the capital of China’s Guangdong province.
The total acquisition price for Hua Nan Expressway is RMB3,957m, which comprises RMB2,271m of proportional senior debt and an equity commitment of RMB1,686m, including transaction costs. The Macquarie Fund acquired its stake in South China Highway Development from Preciseway Management and Topwise Consultants.
The historical enterprise value/ebitda multiple for the transaction is 11.6 times for 2006 and the prospective multiple is 12.6 times for the current year. Tolling rights for the road expire in 2026.
‘The acquisition of Hua Nan Expressway gives MIIF substantial ownership and control of a high-quality toll road and allows the fund to participate in the growing transportation infrastructure sector in China,’ says Macquarie Infrastructure Management (Asia) managing director Gavin Kerr.
‘This is a significant milestone highlighting MIIF’s ability to buy quality Asian infrastructure assets at competitive prices, and demonstrates its strong commitment to investing in infrastructure in Asia.’
Hua Nan Expressway is a fully operational 31-kilometre dual-carriageway urban toll road comprising six to eight lanes that through the centre of Guangzhou. The city, 120 kilometres north-west of Hong Kong, is a centre for manufacturing, industrial, commercial and hi-tech industries and has a metropolitan population of more than eight million people.
The areas adjacent to the expressway have experienced particularly strong population and economic growth. ‘Hua Nan Expressway is a strong and stable road business, producing significant operating cash flow,’ Kerr says. ‘Opened in two separate phases, Hua Nan Expressway has posted annual growth in tolled traffic volume of 13 per cent since 2004 and we expect it to continue delivering attractive returns throughout the life of its tolling rights.’
The Macquarie fund will finance the acquisition through proceeds from the divestment of non-Asian assets and its existing committed debt facilities of approximately SGD700m. The estimated drawn debt balance following the acquisition of Hua Nan Expressway and the divestment of Brussels Airport and TanQuid is approximately SGD281m.
‘As manager of MIIF, Macquarie continues to develop a strong pipeline of Asian investment opportunities, which we anticipate will lead to further investments in yield accretive Asian infrastructure assets,’ Kerr says. The Guangzhou investment will make up 18.7 per cent of the fund’s investment portfolio, 35.8 per cent of which will subsequently be located in Asia.
The Macquarie International Infrastructure Fund is the flagship Asian-listed infrastructure fund of the Macquarie Bank Group, which through its listed and unlisted funds has been investing in toll roads since 1996. It now owns or operates 35 roads with an enterprise value of more than USD33bn in China, South Korea, Japan, Australia, Canada, the US, Portugal, Germany, France, South Africa and the UK.
More than 1.7 million cars travel on toll roads owned or operated by Macquarie every day. Macquarie’s investment banking funds division, which has equity under management in excess of AUD58bn, now owns more than 100 assets in 25 countries.
