Infratil up 112pc as pension funds circle by Elouise Fowler,...

Infratil up 112pc as pension funds circle
by Elouise Fowler, December 20, 2020 07:00 AM

If you'd bought Infratil stock at the start of January for $4.94 apiece, by Friday's close of $6.70 you'd be up 30 per cent, or 112 per cent since the COVID-19 induced crash in late March.While Infratil management rejected AusSuper's unsolicited bid in mid-December because it had "significant deficiencies" and undervalued the company, sources on both sides do not consider the matter will end there.
AusSuper spent 12 months assessing the takeover so isn't about to abandon it, and a Canadian super fund is also rumoured to be in the bidding picture – keeping Infratil and by extension Tilt's share price up.There's a pretty simple base case for a pension fund takeover of Infratil, says Green Energy Markets director Tristan Edis."These funds have a heap of cash, need to make returns in a low interest rate environment and have an eye to the energy transition," said Mr Edis, pointing out Infratil's 65 per cent stake in Tilt is attractive because the company has growth potential as the energy transition speeds up and AusSuper has recently pledged to reach a net zero portfolio by 2050.The super fund also has a different risk profile, he said, so may be willing to inject more money into developing Tilt's portfolio of proposed projects than current investors.Infratil's biggest shareholder, New Zealand's national accident compensation insurance scheme ACC, has said it wants Infratil to open its books to the superannuation giant, but others have been less enthusiastic. Its second-biggest shareholder, Fisher Funds Management, told The New Zealand Herald AustralianSuper's offer undervalued the company.
AusSuper argues the offer as it stands is good value, with a 30 per cent premium on the average 90-day share price. Analysts have by and large questioned this. UBS analyst Phil Campbell said the 22 per cent premium on the December 10 closing price – the day of AusSuper's offer – was lower than the average premiums for a successful takeover bid in New Zealand over the past 15 years, which stood at 35 per cent. Analysts at Craigs Investment Partners said the bid undervalued the firm." [Infratil's] portfolio of premium, largely green, growth infrastructure assets are representative of the most sought-after asset class on the globe that are achieving eye-watering valuations ... AusSuper clearly sees the value in [Infratil's] exposure as it looks to put its $180 billion of funds under management to work," it said in a note.Intimately connectedBut Infratil's enormous management fees paid to a related party are a massive drawback.Infratil does not manage the assets it owns, but outsources management to fund manager Morrison & Co. Morrison & Co is intimately connected to Infratil, having founded the company in 1994.Infratil chief executive Marko Bogoievski is also the CEO of Morrison & Co, and sits on the boards of both companies. Infratil has no employees, meaning it is essentially a listed infrastructure investment vehicle.In the 2020 financial year, Infratil paid Morrison & Co $NZ167 million ($156.4 million) in management and related fees. Infratil's assets under management are valued at just under $NZ5 billion, meaning it accounts for almost a third of Morrison & Co's $NZ15 billion funds under management.Losing Infratil as a customer would therefore likely result in a loss of around a third of its income. On December 11, just after the takeover bid was rejected, AusSuper declined to comment on whether it would keep Morrison & Co on if it acquired the company, but sources close to the parties said the high management fees were a sticking point. Unless there are any Christmas Eve surprises, we will have to wait for the New Year to see if those fees are simply too sticky.