IFM Investors has acquired the Indiana Toll Road Concession for $7.52 billion (USD5.725 billion), the largest overseas infrastructure deal in IFM’s history.
IFM Global Infrastructure Fund has agreed to acquire 100 per cent equity interest in the toll road’s concessionaire and operator, ITR Concession Company (ITRCC), who filed for bankruptcy in September, 2014. The ITRCC will have exclusive rights to collect toll revenue from this “strategic” piece of American transportation infrastructure.
Brett Himbury, chief executive at IFM investors, said that the toll regime was a great match for super funds in Australia because of its link to liability, but declined to comment on the current earnings to price ratio. Reported earnings in 2013 (USD196 million), however, would mean a ratio of just over 29 times earnings to price. Assuming a 5 per cent increase in 2014, this figure would reduce to between 27 – 28 times earnings to price.
“ITR (Indiana Toll Road) represents a rare opportunity to acquire a large, high-quality, US-denominated transportation asset, giving our investors direct linkage to US GDP and CPI. ITR is a core infrastructure asset with defensive characteristics, demonstrated by strong financial resilience during the recession,” Kyle Mangini, Global Head of Infrastructure at IFM Investors, said.
She added the concession life is 66 years and the ITRCC will also earn rental income from roadside ‘travel plazas’ along the ITR.
The ITR itself is a 157 mile divided highway in the state of Indiana, USA. The road spans northern Indiana, from its border with Ohio to the Illinois state line near Chicago, feeding directly into two toll roads at the state lines – the Chicago Skyway in the west and the Ohio Turnpike in the east. The road forms a critical transportation link between highways leading to major east coast cities and Indiana, the City of Chicago, and the western United States. The ITR is also critical to the Midwest region, which accounts for over 20 per cent of US national GDP and is a significant origin and destination market.