Canadian Pensions Acquire Stake in Mexican Construction Firm

The Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan have agreed to acquire stakes in Mexican construction engineering company Impulsora del Desarrollo y el Empleo en América Latina (IDEAL).

Under the terms of the deal, CPPIB and Ontario Teachers’ will launch a tender offer on the Mexican stock exchange for shares in IDEAL at 43.96 pesos ($2.25) per share. CPPIB will come away with a 23.7% stake in IDEAL, while Ontario Teachers will own 16.3% of the firm. The current majority owners of IDEAL’s outstanding shares will maintain a majority shareholding in the company.

IDEAL’s portfolio includes 18 infrastructure concessions in Mexico, which are comprised of 13 toll roads, three logistics terminals, and two wastewater treatment plants. There is also an electronic toll collection service business and an operations business. IDEAL, Ontario Teachers’ and CPPIB are already partners in the Arco Norte and Pacifico Sur toll roads.

An infrastructure investment trust called Fideicomiso de Inversión en Energía e Infraestructura (FIBRA-E) will be created as part of the deal by a subsidiary of IDEAL. It will be funded by certain shareholders of IDEAL, CPPIB and Ontario Teachers’. The FIBRA-E will be managed by a subsidiary of IDEAL and will purchase partial stakes in four of IDEAL’s toll roads.

After the FIBRA-E is formed, CPPIB and Ontario Teachers will lead a secondary offering, which they said will reduce their ownership to small minority positions while also introducing other investors.

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“This investment in IDEAL provides CPPIB with the valued opportunity to access a diversified portfolio of assets with stable cash flows, while also providing the opportunity for future growth through development opportunities in Mexico’s infrastructure sector,” Scott Lawrence, CPPIB’s head of infrastructure, said in a statement.

The transaction is subject to customary closing conditions, including by certain competition and regulatory authorities.

CPPIB has been plowing money into infrastructure in recent years, and at a far faster rate than with any of its seven other investment programs. The fund’s investment in asset class has soared by more than 100 times to C$33.3 billion in 2019 from C$300 million in 2006.

Ontario Teachers’, however, has slightly cut back its infrastructure investments down to C$17.1 billion as of June 30 from C$17.8 billion as of the end of 2018, and C$18.7 billion as the end of 2017.

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Tags: Canada Pension Plan Investment Board, IDEAL, Infrastructure, Mexico, Ontario Teachers' Pension Plan

The New York Stock Exchange (NYSE) filed a proposal to the Securities and Exchange Commission (SEC) that would allow companies to simultaneously go public through a direct listing and raise cash from public market investors.

Historically, direct listings let companies go public by selling existing shares rather than issuing new shares. The NYSE’s proposed rule change implements an option to raise capital in a direct listing, opening a new method for companies to access public markets.

“The proposed change would allow a company that has not previously had its common equity securities registered under the [Securities] Act, to list its common equity securities on the Exchange at the time of effectiveness of a registration statement pursuant to which the company will sell shares in the opening auction on the first day of trading on the Exchange,” the NYSE wrote in its proposal.

The NYSE published potential benefits on its website. Private shareholders would be able to monetize their shares on day one, and allow the company to be fairly valued by the public markets in contrast to setting a price based on investor interest during a roadshow.

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Direct listings do not require the issuance of new shares, and allow existing shareholders to trade immediately after listing. Spotify and Slack used the method largely because they had sufficient capital on their balance sheets and wanted to avoid potential dilution of shares.

“The Exchange believes that this heightened standard significantly increases the likelihood that a liquid trading market will develop after a Selling Shareholder Direct Listing or Primary Direct Floor Listing and therefore makes it likely that these companies will meet the initial distribution standards within the Distribution Standard Compliance Period,” the NYSE said.

“The propose amendments would not impose any burden on competition, but would rather increase competition by providing new pathways for companies to access the public markets,” the exchange’s statement continued.

AirBNB intends to go public in 2020 and stated it is considering a direct listing rather than a traditional initial public offering (IPO).

The proposed change is now subject to public comment and the SEC’s review.

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Tags: Direct Listing, exchange, IPO, New York Stock Exchange, NYSE, SEC, Stocks