Steep multiple of 27This will rerate current TCL...

Steep multiple of 27
This will rerate current TCL assets

"SYDNEY—Australia's Queensland state sold a toll-road operator to a consortium led by Transurban Group TCL.AU -0.14% for a higher-than-expected 7.06 billion Australian dollars ($6.56 billion), adding to a wave of privatization deals in Australia designed to boost flagging public finances.

Queensland Motorways, which operates 70 kilometers (43 miles) of toll roads in the fast-growing state capital, Brisbane, was bought by a consortium led by Transurban that also includes pension fund Australian Super and the Abu Dhabi Investment Authority.

Analysts had expected bids of around A$6 billion, based on deal multiples attached to the recent sale of port assets in Queensland and New South Wales state. The high sale price may encourage Queensland's conservative Liberal-National government to examine the sale of other potential privatization candidates, such as the state's electricity generators and grid.

Queensland Motorways is forecast to generate earnings before interest, tax, depreciation and amortization in the year through June of about A$258 million, indicating the deal was struck at a steep multiple of around 27 times earnings. The acquisition price also included unspecified stamp-duty payments to the Queensland government.

"Clearly this is a portfolio of attractive assets with all the characteristics of our existing networks in Sydney and Melbourne, and the attractive demographics of the Queensland market," Transurban Chief Executive Scott Charlton said in a statement Wednesday. The Australian toll-road company has said previously it would need to conduct an equity raising to help fund any deal. Details of the raising will be provided Thursday, it said.

Transurban has a 62.5% interest in the consortium, while Australian Super has 25% and the Abu Dhabi Investment Authority has 12.5%.

The auction attracted four rival bids, two people familiar with the matter told The Wall Street Journal earlier this week. Hastings Funds Management, the Kuwait Investment Authority, Spain's Abertis and Dutch pension fund APG made up another bidding group.

A third consortium was of comprised Australian pension fund manager IFM Investments, Canada's Borealis and Singapore sovereign wealth fund GIC, while the fourth group was made up of Malaysian bidders, the people said.

The sale comes as low global interest rates, which are capping returns from cash and bonds, increase the appeal of typically reliable returns generated by infrastructure assets. Australian toll roads are often monopoly providers that are permitted by regulators to push through price increases in line with inflation.

Australia has notched up over two decades of uninterrupted economic growth, largely thanks to demand for its vast mineral and energy commodities from China, its biggest trading partner. Slowing growth in China, however, is putting pressure on commodity prices and inspiring some state governments to consider asset sales to fund infrastructure developments such as roads and hospitals.