South Korea's NPS in consortium to acquire EU toll road operator
Deal for 81% stake in Brisa Auto-Estradas de Portugal is one of the largest foreign investments in Portugal in recent years
6 May 2020 | Michael Marray

A consortium led by South Korea's National Pension Service (NPS) and APG Asset Management of The Netherlands is acquiring an 81% stake in Brisa Auto-Estradas de Portugal.

Swiss Life Asset Management is also a member of the consortium. The acquisition will be made through a vehicle directly and indirectly wholly owned by the consortium, and jointly controlled by APG and NPS.

The Brisa network is at the heart of the Portuguese road system. It is the biggest of the Portuguese highway concession holders, operating and maintaining 1,628 kilometres of roads. The deal values Brisa at around 3 billion euros.

The sellers are London based Arcus Infrastructure Partners (Arcus), and family controlled conglomerate Jose de Mello Group (JdM). Arcus is selling its entire 40.6% stake. JdM is also selling a 40.6% interest, though said that it views the arrangement as a long term strategic partnership, and will keep its remaining 17% stake. The transaction is expected to close at the end of the third quarter.

This deal is one of the largest foreign investments in Portugal seen in recent years.

"This partnership is a sign of confidence in Portugal and the Portuguese economy in a context of great adversity," comments Jose de Mello, group president Vasco de Mello. "It represents a unique opportunity for Brisa to strengthen its position and leverage its expertise in mobility."

The Jose de Mello Group was advised on the overall process and transaction by Rothschild & Co, and by Caixa Banco de Investimento regarding financing arrangements. Legal advice was provided by Vieira de Almeida & Associados, Clifford Chance and Loyens & Loeff. Freshfields advised the buyers.

According to local media, a number of high profile global infrastructure players submitted bids for Brisa, including a consortium led by China State Construction Engineering Corp, Spanish toll-road operators Abertis Infraestructuras SA, and Globalvia, the latter owned by pension funds OPTrust (Canada), PGGM (Netherlands) and USS (UK).

Arcus’ financial advisors were Morgan Stanley and Millennium Investment Banking. Its legal advisors were Clifford Chance on English and Luxembourg law, and CS Associados on Portuguese law. Deloitte provided accounting and tax advice.

This transaction marks the sixth and final exit for the Arcus European Infrastructure Fund 1 (AEIF1), following the sale of Alpha Trains in December 2019.

In mid-April Arcus reached the final close of its second fund, AEIF2, at around 1.22 billion euros. Campbell Lutyens acted as global fundraising adviser for Arcus. Clifford Chance acted as the global legal and regulatory counsel. PwC acted as the tax adviser for the fundraising.

Arcus said that the new round of fundraising attracted commitments from high-profile institutional investors in Europe, North America, the Middle East and Asia including the European Investment Bank.

The final closing of AEIF2 enables Arcus to continue its programme of investing in mid-market value-add infrastructure businesses in the telecom, transport and energy sectors across Europe.

The current portfolio of investments for AEIF2 comprises controlling positions in four infrastructure businesses, with good geographic diversification across Switzerland, the Benelux region, Norway and the United Kingdom.

Arcus currently manages eight assets with an aggregate equity value in excess of 3.6 billion euros (as of December 31 2019) through funds and separate managed accounts.

Global demand for infrastructure assets is likely to continue to be strong in 2020. The latest economic crisis is going to prolong the era of ultra-low interest rates, and institutional investors need to find higher yielding assets for their portfolios.

Korean investors have been among the most active Asian infrastructure players, while funds and insurers from the US and Europe are also active buyers in Asia.

APG, Canada Pension Plan Investment Board (CPP) and Asia Pacific-focused logistics real estate platform ESR recently entered into a strategic agreement to establish a new development joint venture with a total equity allocation of US$1 billion.

The joint venture will invest in and develop industrial and warehouse logistics portfolios in the Seoul and Busan metropolitan areas, the two markets with the largest populations and highest consumer spending in South Korea.

The investment and development of a logistical warehouse in Bucheon, completed in 2018, is an example of an earlier collaboration between the same partners. It is now used by tenants such as Samsung, Chanel and Sisley.

APG, CPP Investments and ESR have agreed to initial investments in the joint venture in the amounts of US$350 million, US$450 million and US$200 million, respectively. The partners have allocation expansion options that could bring the total equity investment capacity to as much as US$2 billion over time.

"Following the success of our first joint venture with ESR and CPP Investments in Korean logistics, we are delighted to be able to repeat the partnership," says Graeme Torre, head of real estate, APG Asset Management Asia.   

"This will allow us to capture the next wave of growth and opportunity in a sector that even in these uncertain times, is demonstrating resilience," he adds. "Throughout our global portfolio we look for investment opportunities that allow us to meet the long term return and sustainability objectives of our pension fund clients."

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