Why the Transurban (ASX:TCL) share price is falling today

This toll road operator is close to completing a major acquisition…

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The Transurban Group (ASX: TCL) share price has returned from its trading halt and is falling.

At the time of writing, the toll road operator’s shares are down 2.5% to $13.84.

What’s happening with the Transurban share price?

The Transurban share price was placed into a trading halt earlier this week so that it could undertake an equity raising.

The company is aiming to raise ~$4.2 billion from investors to support its acquisition of the remaining 49% stake in the WestConnex toll road network from the NSW Government for $11.1 billion. This comprises a $3.97 billion entitlement offer and a $250 million placement to AustralianSuper.

Once the acquisition completes, Transurban and its Sydney Transport Partners (STP) consortium will own 100% of WestConnex.

What’s the latest?

This morning the company revealed that it has successfully completed the institutional component of its fully underwritten entitlement offer.

The institutional entitlement offer raised gross proceeds of approximately $2.9 billion at an 8.3% discount of $13.00 per new share. This will result in the issue of approximately 223 million new Transurban shares.

Management advised that the offer attracted strong demand from institutional shareholders, with approximately 93% of eligible entitlements taken up.

In addition, the institutional shortfall bookbuild was well supported by eligible institutional shareholders and new investors. So much so, the entitlements not taken up were sold and cleared in the institutional shortfall bookbuild at $13.90 per new share. This is 90 cents higher than the offer price.

Transurban’s Chief Executive Officer, Scott Charlton, was pleased with the equity raising.

He commented: “The acquisition of the remaining 49% equity stake in WestConnex is a privilege for Transurban and its consortium partners, and we thank our investors for supporting this transaction.”

The company will now push ahead with its retail entitlement offer, which aims to raise the balance on the same terms.

Why acquire WestConnex?

The company believes WesConnex is a key asset to own and expects it to generate significant free cash in the future, supporting its distributions.

Mr Charlton said: “WestConnex is one of the largest road infrastructure projects in the world with an enterprise value of $33 billion based on this transaction. WestConnex is a key component of the NSW Government’s integrated transport plan to ease congestion and connect communities in Sydney.”

“We feel privileged to take Sydney Transport Partners’ holding in this critical asset to 100%. This transaction is expected to support Free Cash growth and distributions for Transurban security holders for the life of the concession,” he added.

The Transurban share price is now up just 1% in 2021.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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