Cooper Investors, the Melbourne-based boutique equities shop, is having a run-in with IFM Investors, the industry fund-owned infrastructure manager, over a bid for a Mexican toll road company. Australian investors are flexing their muscles around the world.
A joint bid involving IFM Investors for a 42 per cent stake in the Mexican toll road company OHL Mexico has been strongly rejected as “totally inadequate” by one of the institutional shareholders, Cooper Investors.
Peter Cooper, the fund manager’s founder and CIO said over the weekend: “The offer price of 27 Mexican pesos (A$1.97) a share is highly opportunistic and does not reflect the value of OHL Mexico, nor its long-term development potential. We are not accepting this tender offer unless there is a material increase in the offer price.”
IFM, via its US-based Global Infrastructure Fund, has made a cash bid for a 42 per cent stake in partnership with OHL Concesiones, a fully owned subsidiary of Obrascón Huarte.
The tender offer, which is conditional on getting 85 per cent acceptance, was made on June 14 and closes on July 26. Cooper says the offer is “a steal”.
He says: “The company, which is the Transurban of Mexico, has a book value of 41 Mexican pesos. OHL Mexico has a highly attractive portfolio of toll roads concentrated in the heavily congested Mexico City. These assets benefit from growing demand, a strong toll culture and a guaranteed return framework on five of seven roads.
“In addition to the current portfolio, OHL Mexico can leverage its experience, expertise and strong position in the network to develop additional projects in the decades ahead, similar to Transurban’s experience on the East Coast of Australia.”
Cooper Investors believes about 15 per cent of OHL Mexico’s shareholders are international institutional investors, and as such the bidding consortium will need to convince these investors that the offer price is fair for the tender offer to be approved.
Other institutional shareholders, include Eastspring Investments, RARE Infrastructure, Maple-Brown Abbott, Cohen & Steers, Fidelity, Macquarie and APG Asset Management.
Cooper says: “Given the material discount of the offer price to our assessment of intrinsic value, the bidding consortium and OHL Mexico have, in our opinion, resorted to questionable behaviour.”
“This has included the failure of independent directors to adequately represent the interests of minority investors; an inadequate independent expert’s report that has not made material assumptions available to investors; a lack of genuine dialogue between the bidding consortium and minority investors; and repeated attempts by the bidding consortium’s advisers to create a sense of fear among minority investors who do not accept the offer.”
He expects the transaction will fail to achieve the minimum threshold of 85 per cent. However, if the threshold is met, it is unlikely Magenta will achieve a result anywhere near 95 per cent, providing no immediate path to delisting, he says.