Transurban Group expands to Canada with toll road and bridge

Transurban Group (ASX: TCL) is one of the world’s largest toll road operators. Before today, Transurban operated major toll roads in Brisbane, Melbourne, Sydney and Washington.

This morning, Transurban announced that it would be acquiring the A25 toll road and bridge in Montreal, Canada.

Transurban has reached an agreement with Macquarie Infrastructure Partners to acquire 100% of the equity of A25, which is located in the Montreal metropolitan area for CAD$840 million plus the transaction costs of CAD$18 million.

The A25 is a 7.2 kilometre toll road and bridge connecting Northern Montreal across the Riviere Des Prairies to commercial residential areas. It opened in 2011 with a concession to 2042.

Transurban will hopefully take over the road by the fourth quarter of FY18, assuming it gets Investment Canada Act approval.

Scott Charlton, Transurban’s CEO, said “Montreal is an attractive second market for Transurban in North America as a developed economy with a growing population and a government that embraces innovative transportation solutions to tackle the region’s congestion problems.

“The A25 is located in the fastest growing part of Montreal. In operation for almost seven years, the asset provides opportunities to leverage Transurban’s expertise in operations, technology and customer management.”

The average daily traffic for the road was 44,616 in FY16 and 46,535 in FY17. The toll escalation is measured by the Canadian Consumer Price Index annually and there is also traffic volume triggered increases.

Foolish takeaway

I think this seems like a clever move by Transurban. There are more toll roads around the world than just Australia and the US. Canada seems like the next logical step and should provide a good hunting ground for future acquisitions. Transurban’s share price is down 0.45% today, but it could have been worse without this news.

If you’re worried about Transurban’s future due to interest rate rises, these growth stocks could be better options.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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