Sydney-based Babcock & Brown Infrastructure has announced it will move to fully acquire WestNet Rail - the company that administer's the state's freight rail lines - after acquiring a 51 per cent stake in them last year.
Sydney-based Babcock & Brown Infrastructure has announced it will move to fully acquire WestNet Rail - the company that administer's the state's freight rail lines - after acquiring a 51 per cent stake in them last year.
The call option over the balance of WestNet Rail can be exercised between June 2007 and March 2008, with payment to be made in in either cash or stapled securities.
The full text of a BBI announcement is pasted below
Babcock & Brown Infrastructure (ASX: "BBI") is pleased to announce an update regarding growth opportunities for the BBI portfolio
On 30 March 2007, BBI announced that it had joined the Babcock & Brown (ASX:BNB) and Singapore Power International Ltd consortium whose offer for the whole of the issued share capital of Alinta was conditionally accepted and recommended as the preferred offer by the Alinta Board.
Progression of the Scheme booklet continues and it is anticipated that this will be released in mid May.
As a party to the transaction, BBI will acquire certain energy transmission and distribution assets and the Western Australian Operations and Maintenance (O&M) businesses, currently owned by Alinta.
BBI has agreed to acquire these assets through a combination of the issue of BBI Stapled Securities and the assumption of limited recourse debt. Importantly, upon consummation of the transaction, BBI will have in excess of A$450 million of additional debt capacity which it will be able to apply to invest in existing or new opportunities that meet BBI's investment criteria and drive improved cash flows for Security Holders.
BBI is pleased to announce its intention to utilise a significant portion of the additional funding that will be created with the consummation of the Alinta transaction, as noted below:
Acquisition of the remaining 49% interest in WestNet Rail
BBI today confirms that it intends to exercise its option to acquire the remaining 49% interest in WestNet Rail. BBI acquired its original 51% interest in WestNet Rail in June 2006. At the acquisition date BBI's 51% proportionate interest of WestNet Rail's enterprise value equated to approximately A$435 million (plus transaction costs and upfront provisions) and BBI funded approximately A$220 million of equity to acquire it's original 51% equity interest. The call option over the balance of WestNet Rail can be exercised between June 2007 and March 2008 with payment to be made in either cash or BBI Stapled Securities. This investment will not increase BBI's overall gearing level. The timing and form of the consideration used to exercise the call option will be confirmed upon finalisation of the Alinta Scheme Booklet.
New Port Opportunity
As noted in the BBI Asset Update issued yesterday, BBI is actively evaluating several opportunities in the European port sector.
BBI's financial advisor, Babcock & Brown, has secured a 51% interest in a port facility in Spain. The port has an enterprise value (EV) of approximately A$220 million.
Babcock & Brown's proportionate 51% share equates to an EV of approximately A$112 million. It also has a call option to acquire the remaining 49% interest in the port. Babcock & Brown has offered BBI an option to acquire this 51% economic interest in the port (including the call option over the remaining 49%) at the same acquisition price paid by BNB.
This 51% economic interest is expected to be immediately accretive to BBI Security Holders. This investment will not increase BBI's overall gearing level. BBI's intention is to exercise this option to acquire the 51% economic interest in the port, subject to the completion of the Alinta scheme or finalisation of other acceptable financing arrangements.
Summary
"BBI's history of prudent, value accretive acquisitions, quick integration and ongoing economic management of the assets has delivered strong and growing distributions for our Security Holders since our IPO in 2002" said BBI CEO Steve Boulton.
"Our operating model of acquiring assets with strong growth characteristics, our strategic relationship with Babcock and Brown and the utilisation of established and experienced asset management executives within BBI and at each asset level to control and drive business performance and cash flows continues to deliver stable and predictable cash flows for Security Holders".
"BBI is also able to differentiate itself from industry peers with distributions being 100% tax deferred. We maintain confidence in our business with a three year guidance for distributions of not less than 14 cents per security for the 2007 financial year and a 7% compound annual growth rate for distributions for the 2008 and 20091 financial years"
"We continue to position BBI in the "sweetspot" for Security Holders looking for good yield, strong growth and stability all based on our long term investment philosophy" said Mr Boulton.
