Today's announcement by toll road owner and operator Transurban (ASX: TCL) that it has acquired the senior secured debt of Sydney's 2.1 kilometre Cross City Tunnel (CCT) for $475 million should act as a reminder to investors of the strategic appeal of 'monopoly-type' assets.
While monopoly-type assets are generally viewed as a right to print money, albeit usually in a regulated way, toll roads have not been without their controversy in recent years due to some high profile collapses. The listed BrisConnections, a toll road linking the city of Brisbane with Brisbane Airport and Brisbane's Clem7 tunnel both collapsed under a mountain of debt, while Sydney's CCT and Lane Cove tunnel are also both in the hands of receivers.
In the case of the CCT, Transurban has agreed to acquire all of the company's senior secured debt, which was owned by the Royal Bank of Scotland (RBS). The announcement is really no surprise for investors given Transurban has previously been touted as the logical buyer of CCT given it links to the Eastern Distributor, a road in which Transurban has a 75.1% interest.
This was further confirmed in the announcement to the market regarding the debt purchase, which stated: "Transurban and RBS have agreed during this transitional process to instruct the receivers to continue with the sale process for the asset. Transurban intends to participate in the sale process."
Apart from Transurban, which owns a suite of appealing assets that investors may be interested in taking a closer look at, two other companies, Sydney Airport (ASX: SYD) and Macquarie Atlas Roads (ASX: MQA), also own strategic and desirable assets.
Sydney Airport owns Australia's main international gateway and major domestic airport. While traffic growth is putting pressure of Sydney Airport and leading to calls for a second airport — which could create significant competition if it occurred — that day could be years if not decades away.
Macquarie Atlas, meanwhile, owns assets spanning the USA, France and Germany. The company not only provides shareholders with access to an appealing suite of assets but also geographic diversification and the potential to benefit from a weakening Australian dollar.
Foolish takeaway
With the Cross City Tunnel estimated to have cost $1 billion to finance and construct, if Transurban ultimately secures the asset, shareholders could be looking at a highly attractive asset being added to their company for well below replacement cost.
