Group Five, AIF join up in strategic alliance

GROUP Five has entered into a strategic alliance with Aberdeen Infrastructure Funds (AIF), one of the largest asset managers in the world, to jointly pursue new brownfield and greenfield road private public partnership (PPP) infrastructure investment and operating projects in Europe, Turkey and North America.

Eric Vemer, the chief executive of the listed construction and engineering group, said yesterday that the transaction would accelerate the growth of Intertoll, Group Five’s investments and concessions business, whose revenue primarily comprises fees for operation and maintenance of toll roads.

Vemer said with the availability of projects of 1 billion (R15bn) and larger, Group Five needed to partner with a company of scale. “This transaction will marry the pockets and investment in long-term infrastructure assets of Aberdeen and our skill and experience in developing and operating concessions.

“This is a significant milestone for us in our articulated strategy of value creation in our investments and concessions cluster. This strategic partnership allows Intertoll to entrench its position in the road operation and maintenance market and allows us access to a wider range of opportunities in a way we would not have been able to achieve on our own,” he said.

The transaction involves Intertoll effectively selling 49.99 percent of its underlying European PPP infrastructure investment portfolio to AIF for 43 million in cash.

Intertoll Europe’s PPP project investment portfolio currently has a 15 percent holding in Gdansk Transport Company in Poland, a 10 percent stake in Mecsek Autópálya Koncessziós and 12.7 percent holding in M6 Duna Autópálya Koncessziós, both in Hungary.

Vemer said this disposal was concluded at an 11 percent premium to the value of the investments as reported in the year to June despite the rand strengthening by between 15 percent and 20 percent since the group’s year end.

He stressed Group Five only sold 49.9 percent of its underlying equity investment in its European toll road concessions and was keeping 100 percent of the operations.

The transaction involves Intertoll Europe and AIF establishing Intertoll Capital Partners as the investment vehicle to implement the strategic initiative, with Intertoll holding 50.01 percent and AIF 49.99 percent of the venture. Vemer said the deal created a preferred relationship with AIF.

He said concessions had a long growth horizon and the partnership would allow them to grow faster but did not have any firm guidance on the percentage growth of Intertoll relative to other Group Five businesses. However, Vemer said it would put Group Five “in a new league” and a position of strength when it sat at the negotiating table.

Jon Hillary, Group Five’s executive director of investments and concessions, said the partnership would enhance prospects of securing new projects without having to continually invest large amounts of its own capital. “Proceeds from the transaction will enable us to co-invest alongside AIF at a level appropriate to our capital base.”

Gershon Cohen, the head of infrastructure at Aberdeen, said working collaboratively with Intertoll would allow Aberdeen to access more projects and increase the deployment of capital in its chosen geographies. The parties have agreed to a minimum five-year lock-in period in terms of the transaction agreements.

The implementation of the transaction is still subject to certain conditions, including regulatory approval from South African, EU, Hungarian and Polish authorities.