Australia’s sovereign wealth fund offered to buy the assets of the country’s largest listed infrastructure fund for A$2 billion ($2.1 billion), seeking steady earnings from airports across the nation.
The Future Fund, with A$77 billion of assets, will pay the equivalent of A$3.22 for each share of the Australian Infrastructure Fund, which will distribute the proceeds to security holders, according to a statement from the latter to the stock exchange today. That’s 22 percent higher than yesterday’s closing price.
The Australian Infrastructure Fund soared 17 percent in Sydney as the Future Fund extended an investment program that’s already more than doubled its infrastructure assets within three years. Government of Singapore Investment Corp. and Canada Pension Plan Investment Board are among funds plowing money into the industry as Europe’s debt woes roil stock markets.
“Australian infrastructure assets are attractive because of their strong correlation with Australian economic growth, inflation protection and relative high levels of earnings certainty,” David Neal, the Future Fund’s chief investment officer, said in a statement. “We continue to seek opportunities to increase our exposure to quality Australia and international infrastructure asset.”
The Australian Infrastructure Fund (AIX) jumped to A$3.11 at the 4:10 p.m. close in Sydney.
The fund’s assets include stakes in Perth Airport, Melbourne Airport and Queensland Airports. There’s no guarantee a deal will be reached, the company said. Profit in the year ended June 30 fell 8 percent to A$196 million, the company said in a separate statement today.
The proportion of the Future Fund’s assets allocated to infrastructure jumped to 5.6 percent as of March 31 this year from 2.5 percent in 2009, according to the fund’s website.
Australia suffers from a “chronic lack of public infrastructure,” the Business Council of Australia said in a report in June. Funding for projects has dried up and bottlenecks in the major cities of Sydney and Melbourne, which risk undermining the country’s exporting ability, must be addressed, the council said.
Canada Pension Plan Investment Board, the country’s second- biggest public pension manager, had 16.4 percent of its funds in so-called real assets, which include real estate and infrastructure, at the end of June, the fund said this month.
GIC, which manages more than $100 billion, also increased investments in infrastructure in the year ended March, it said last month.
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