Transurban Group (ASX: TCL) shares are up after announcing a $2.8 billion asset sale.
Here’s what Transurban is selling
Transurban has decided to sell a 50% stake of its Transurban Chesapeake assets to AustralianSuper, Canada Pension Plan Investment Board (CPP) Investments and UniSuper for a total of AU$2.8 billion. There’s also a potential earn-out between FY24 to FY26 of up to AU$93 million.
As a refresher, Chesapeake comprises the Greater Washington Area (GWA) operational assets, which includes 495 Express Lanes, 95 Express Lanes and 395 Express Lanes, as well as three projects in delivery and development (the Fredericksburg Extension, 495 Express Lanes Northern Extension and the Capital Beltway Accord).
These incoming partners are already involved with Transurban with other assets in Queensland and Sydney. Each of them bring significant infrastructure investment experience and relationships to the partnership.
These Chesapeake partners have exclusive development rights to invest alongside Transurban on future brownfield and greenfield growth opportunities in the US as well as enhancements to existing concessions.
Management comments
Transurban CEO Scott Charlton said: “We are pleased to welcome our partners AustralianSuper, CPP Investments and UniSuper in Transurban Chesapeake and continue the excellent working relationship we have already established with each of them in our Australian markets.
“This transaction realises significant value for security holders while enabling accelerated growth in North American and Australia, where we see a number of opportunities starting to materialise.
“The Transurban Chesapeake partners are committed to growing alongside Transurban in North America and we look forward to pursuing new opportunities with their financial and strategic support.”
This deal is expected to close by the end of FY21, subject to the usual closing conditions, consents and approvals.
Trading update
Transurban also gave a traffic update. It said that despite COVID-19 impacts, traffic increased through October and November.
In Melbourne on CityLink, traffic has shown progressive improvement as government restrictions have been gradually eased over that period, and in Sydney the NorthConnex tunnels opened to traffic on 31 October 2020. Traffic on Transurban’s North American roads remains subdued given the continued impacts of COVID-19, particularly on the Express Lanes assets.
Summary thoughts
Transurban is an interesting business. I think there is a bit of a recovery play here, if traffic keeps recovering in Australia. It seems like a smart move to take some money off the table in the US with COVID-19 and the unpredictability of what’s going to happen in the next few years there.
However, I’m not sure about the long term growth potential of Transurban shares. Interest rates can’t really go much lower, and automated cars may throw a curve ball.
If you’re looking for ASX dividend shares, I’d rather invest in something like Brickworks Limited (ASX: BKW).
