SYDNEY--Ontario Teachers' Pension Plan is buying a majority
stake in Leighton Holdings Ltd. (LEI.AU)'s telecommunications
assets for 619.5 million Australian dollars (US$647.0 million), in
the latest sign that Canadian pension funds are placing riskier
bets as low interest rates make some traditional investments less
attractive.
The deal with Leighton, Australia's largest construction
company, comes as Ontario Teachers' Pension Plan competes against
other Canadian pension funds for two ports that Australia's New
South Wales state government is selling to raise to around US$3
billion, people familiar with the matter said last month.
Acquiring assets such as telecoms infrastructure and container
ports are helping the Canadian pension funds meet looming funding
deficits stretched by an aging population at home. It also
underscores how the funds, which emerged from the global financial
crisis in a healthier state than many of their U.S. and European
counterparts, are looking at deals that can offset lower returns
from asset classes like bonds and holding cash.
Australia, with its robust economy exposed to fast-growing Asian
neighbors like Indonesia and China, has proven a fertile hunting
ground for overseas investors like pension plans and sovereign
wealth funds. Among assets that Ontario Teachers' Pension Plan is
acquiring from Leighton is Australia's second-largest fiber-optic
network.
Leighton is selling assets it doesn't consider vital to its
business to trim borrowings following a series of writedowns at
major projects including an Australian toll road and heavy losses
in the Middle East.
The company had indicated in February it was in exclusive talks
with the Canadian fund to sell 70% of the telecommunications
infrastructure assets, which include its Nextgen Networks,
Metronode and Infoplex units, at a price that values 100% of the
businesses at A$885 million.
Nextgen is by far the largest of the three assets and operates
the fibre-optic network. The other two businesses provide data
center and cloud services.
"Together they provide solid revenue streams and growth upside,"
Ontario Teachers' Pension Plan senior executive Lee Sienna said in
a statement Thursday. The pension fund had total assets of
US$117.10 billion at Dec. 31.
Ontario Teachers' Pension Plan in May teamed up with a local
asset manager to win a A$2.3 billion lease for a desalination plant
in Sydney, among other recent deals. Another fund, CPP Investment
Board, was behind the largest takeover by a Canadian fund of an
Australian asset in 2010, when it bought toll road company Intoll
for A$3.44 billion.
The deal for its telcommunications assets provides some good
news for Leighton in what's been a tough week for the Sydney-based
company. Investors were shaken Mar. 22 by the resignation of three
members of its board including its chairman over a spat relating to
board independence with majority shareholder Hochtief AG.
Leighton has subsequently appointed Bob Humphris as its new
Chairman, who said Hochtief, in which Spain's Actividades de
Construccion y Servicios SA has a controlling stake, supports an
independent board.
Write to Ross Kelly at ross.kelly@wsj.com
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