Infratil shares rose to the highest in more than six years on the prospect of a capital return after the A$605 million sale of its Australian energy operations for A$605 million, which will generate a $44 million fee for manager HRL Morrison and Co.
The Wellington-based company sold Lumo Energy and Direct Connect Australia after reviewing its ownership of the assets in May, and the deal is expected to complete at the end of this month, Infratil said in a statement late on Friday. After adjustments for final working capital, Infratil estimates net proceeds of between $646 million and $664 million, reflecting a gain on sale of between $343 million and $361 million. Sale costs are estimated to be $57 million, including the fee to Morrison & Co.
Shares of Infratil rose as high as $2.66, the highest since January 2008, and were recently up 6.6 per cent to $2.65. The stock has gained some 9.5 per cent since the start of the year, and is rated an average 'buy', according to six analysts surveyed by Reuters, with a median price target of $2.84.
The sale was at the mid-to-upper end of market expectation, although "there had been some eyebrows raised at the very significant fees that go to Morrison & Co," Matthew Goodson, managing director of Salt Funds Management said. Infratil has a history of aggressive on-market share buybacks, but might use the cash for further acquisitions, he said.
"At the moment, particularly in Australia, there do appear to be a vast number of potential infrastructure deals to be done," Goodson said. "Bidding for those assets is extremely aggressive at present, given how interest rates are very low around the world, so it isn't easy to buy these assets."
