The Australian Infrastructure Fund, which holds interests in several state airports, said on Friday it had agreed to a AUD$2 billion (USD$2.10 billion) offer from the sovereign wealth Future Fund, sending its shares to a 5-year high.
The Future Fund is offering around AUD$3.22 per share to acquire all of AIX’s assets, including its interests in Perth, Melbourne, Queensland and Northern Territory airports.
AIX chairman Paul Espie said the proposal was “sufficiently compelling” to enter into the memorandum of understanding and open its books for due diligence.
David Neal, chief investment officer of the Future Fund, said AIX’s assets were attractive “because of their strong correlation with Australian economic growth, inflation protection and relative high levels of earnings certainty.”
“These characteristics provide a strong fit with the Fund’s mandate to achieve high, risk adjusted returns over the long term.”
The Future Fund was established in 2006 to accumulate assets and invest them on behalf of the Australian government to fund state pension payments.
It is overseen by an independent board of guardians, which must grant approval for the deal to become binding.
The Fund has been building its portfolio over the past five years, lifting its infrastructure investments to more than AUD$4.3 billion, or 5.6 percent of the total.
Neal said the Fund continued to seek opportunities to increase its exposure to “quality Australian and international infrastructure assets.”
The proposal represents a 10 percent premium to the AIX directors’ published valuation of its assets as at 30 June 2012.