Bus line fits with Infratil strategy

It does not quite count as a privatisation, but the sale of the formerly local government-owned Stagecoach bus and ferry company is exactly the kind of investment Infratil was set up in the mid-1990s to pursue.

In August, company founder and chief Lloyd Morrison said there seemed to be little scope left for new Infratil investments here, since further infrastructure privatisations were off the political agenda of both major parties. "Although I believe strongly the country would be better off with a change of ownership structures across a lot of areas of infrastructure, I just don't think it will happen," he said.

Infratil yesterday entered into a conditional agreement to buy Stagecoach's New Zealand bus and ferry business for an undisclosed sum.

The philosophy behind the Infratil business is to buy infrastructure assets when they are good value, then turn them around, waiting until the investment matures before deciding whether to sell out - which can be a long time.

Infratil has no staff and its assets are managed by executives at founder Morrison's investment bank Morrison & Co. It takes a strong, active interest in the management and operations of the companies it buys into.

The strategy has generally paid off well. A subscriber to the Infratil shares in its float in March 1994 has received a return of 20 per cent per annum return after tax over the 11 years to March 2005. This includes dividends.

The Stagecoach purchase is the latest in a string of acquisitions by Infratil, which so far this year has bought Kent International Airport for $47 million, completed a conditional acquisition of 90 percent of Lubeck Airport in Germany and bought an 11 percent stake in oil and gas explorer Austral Pacific for $9 million. Other investments include a 66 percent stake in Wellington Airport, full ownership of the Glasgow Prestwick Airport and an 88 percent stake in Victoria Electricity.