Transurban has raised $3 billion in equity through Right Issue to the institutional investors resulting in the issue of approximately 278 million new shares. The company which has raised the additional capital to fund the $9.3 bn acquisition of Sydney motorway WestConnex, stated that its Institutional placement has witnessed strong demand. According to the official statement, the institutional stakeholders subscribed to around 96% of the entitlements available.

The entitlements which were left unsubscribed by the institutional investors have been sold and cleared in the institutional shortfall bookbuild at $11.80 per New Security which was $1.00 more than the offer price of $10.80 per security. Under the Institutional Entitlement Offer, the new securities issued would be allotted in 13^th September 2018 and trading would most likely start on the same day.

Retail Entitlement Offer
The Retail Entitlement offer will start on 7^th September 2018 wherein all the eligible retail shareholders in Australia and New Zealand can participate in the offer. Both Offer price and Offer ratio are same as the Institutional Entitlement Offer. Stakeholders who are interested to participate must do so by 5.00 p.m. on 18^th September 2018. The retail shareholders,eligible for retail entitlementswould get the details about number of shares they are entitled to in their personalized Entitlement and Acceptance form.


Entitlement Offer – Key Details (Source: Company Report)

Strategically aligned Deal
Transurban led consortium, Sydney Transport Partners won the bid for acquiring majority stake in Sydney Motorway Corporation, the company concerned with the construction of the $16.8 bn toll road WestConnex. The completion of the project would lead to smooth travel from West and South Sydney without much congestion. Sydney Transport Consortium includes Transurban (50%), Australia Super (20.5%), the Canada Pension Plan Investment Board (20.5%), and Tawreed Investments (9%).

Transurban stated that WestConnex is aligned with their strategy as population would grow around WestConnex by 2.4% between 2016 and 2026. The company stated that around 40% of the Sydney population is expected to live within the five kilometers of WestConnex. As a result, WestConnex would form a significant connection between Sydney’s West and South-west, the Sydney CBD and the corridor to Sydney Airport and Port Bay. Additionally, WestConnex would derive major benefits from proposed links to the North and South such as:
 

• F6 Extension
• Western Harbour Tunnel
• Sydney Gateway

WestConnex is expected to increase the Transurban’s lane kilometer in Sydney by about twofold in terms of scale. The company is expecting that its distribution growth would be supported immediately by distributions from WestConnex. Transurban is eyeing distribution to be around 100% free cash flow overtime.


Distributions (Source: Company Reports)

Year 2018 has been good for the company with growth of  $162 mn in toll revenue to $2249 mn compared to $2,083 mn in FY17 and EBITDA grew by 10.2%.

Transurban shares tumbled 3.56% closing at $11.630 on September 05, 2018, as the $135 million odd auction of the shares was covered at $11.65. The shortfall auction started on Monday with a book of 11.75 million shares. The stock has generated positive return of 3.61% over past six months and looks good on the chart going forward. We maintain a “Buy” at the above market price.

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