The Atlas Arteria Group (ASX: ALX) share price won’t be going anywhere on Thursday.
This morning the toll road operator requested a trading halt whilst it undertakes a capital raising.
What did Atlas Arteria announce?
Atlas Arteria announced that it has executed agreements to acquire a further 6.14% indirect interest in APRR and ADELAC. This will lift its indirect interest in APRR to 31.14% and in ADELAC to 31.17%.
APRR is a high quality toll road group in France which management notes is performing well and has access to growth opportunities. It is the largest existing business in Atlas Arteria’s portfolio, meaning the acquisition has limited due diligence risk.
ADELAC is a smaller business which connects to APRR in southeast France. Combined, the two businesses comprise a 2,318 kilometre motorway network located in the East and South East of France.
Management expects the transaction to be immediately cash flow and value accretive.
It believes it creates value for shareholders by increasing its interest in the businesses at an attractive valuation, delivers better governance and genuine operational influence for Atlas Arteria, and will support higher distributions.
In respect to the latter, management provided upgraded distribution guidance of 17 cents per share for the next two distributions. This is a 6% increase on its previous guidance.
The release explains that the transaction will be funded via a fully underwritten $1,350 million equity raising. This comprises a $452 million institutional placement and a 4 for 21 accelerated pro-rata non-renounceable entitlement offer to raise $898 million.
These funds will be raised at $6.90 per share, which represents a discount of 9.7% to its last close price.
Some of these funds ($100 million) will also be paid to Macquarie Group Ltd (ASX: MQG) in order to terminate all remaining management agreements. If it did not terminate this agreement, it would have to pay Macquarie $15.1 million a year in management fees if the transaction goes through.
The transaction remains subject to anti-trust clearance and foreign investment committee clearance from the French Ministry of the Economy. However, management is optimistic that completion will occur by the end of Q1 2020.