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Tuesday, 4 September 2018
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Transurban Capital Raising

Transurban has announced a $4.2 billion equity raising via a 10 for 57 accelerated pro-rata renounceable entitlement offer at 1080c with retail entitlements trading. The last trade price was 1210c. It is currently in a trading halt and will resume trading tomorrow.

The capital raising is all part of their purchase of a 51% equity stake in Westconnex $9.3 billion of which they are taking 25.5%. This is a New South Wales government three stage tollroad project that will become operational in 2028.

As well as the capital raising they are also raising $600 million by replacement to certain STP (Sydney Transport Partners) consortium members. The deal has FIRB approval and is expected to be completed at the end of September. The TCL has been in a trading halt since the announcement.

The current share price is 1210c in which case the offer of stock at 1080c is an offer of stock at a 12% discount. Retail shareholders will also be able to trade in these “Rights” (from tomorrow I think) which at this point will be worth and will trade at around 130c (1210c minus 1080c). You will be able to buy and sell the rights – rather than explain that in a long-winded explanation read the paperwork - CLICK HERE FOR THE TCL ANNOUNCEMENT

Full details of the Retail Entitlement Offer will be set out in an information booklet ("Retail Information Booklet"), copies of which will be available on the ASX website at from 5 September 2018 and at from 7 September 2018.

You have to take up the rights to new stock at 1080c by 18 September - or sell them on-market.

Here is the timetable:

TCL is a slow moving easy to understand stock. There is no rush to do anything. You can chose not to do the paperwork and simply sell the rights in the market and not pay for new stock, or you can take it up. You need do nothing until closer to the closing date September 18.

It will be interesting to see if the stock gets marked up or down on the deal when it starts trading again tomorrow. One broker says it will take ten years before they know whether it was a good deal or not. The deal depends upon long-term traffic volumes. Another says it is a “generous” price. Another broker says they have paid a “very full price”. Another says distributions (dividends) may not be fully covered by cash flow for the next three years but will still grow by 5% per annum. Another says management have a good track record and shareholders should have confidence in their ability to complete this deal. Another points out that there will be significant construction, operating and funding risks. Another says that there was upside to the dividend if the bid was unsuccessful, in which case the bid restricts distributions going forward.

Here are the broker recommendations and target prices post the deal.  

Do you buy TCL - if you want to be bored to death for a 4.8% yield - as some retirees do - yes. The Marcus Today fund is more interested in growth and it will not come from stocks like this.

The numbers (ignore the high PE numbers - like all infrastructure stocks earnings are reduced by depreciation and amortisation on massive assets in order  to minimise tax):

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