OTTAWA (dpa-AFX) - SNC-Lavalin (SNC.TO, SNCAF.PK) said Friday that it has reached an agreement to sell 10.01 percent of the shares of 407 International Inc., or Highway 407 ETR, to OMERS for up to $3.25 billion. Highway 407 ETR is the world's first all-electronic, barrier-free toll highway located in the Greater Toronto Area or GTA in Canada.
Founded in 1962, OMERS is one of Canada's largest defined benefit pension plans, with $97 billion in net assets as at December 31, 2018.
As of today, Cintra Global S.E., a wholly owned subsidiary of Ferrovial S.A., owned 43.23 percent in Highway 407 ETR, while indirectly owned subsidiaries of Canada Pension Plan Investment Board or CPPIB owned 40 percent, and SNC-Lavalin owned 16.77 percent.
Based on the terms of the agreement, gross proceeds to SNC-Lavalin from the sale could reach $3.25 billion in aggregate. Of this, $3.0 billion is payable at the closing date and $250 million over a period of 10 years, conditional to certain financial thresholds related to the ongoing performance of Highway 407 ETR.
The deal is expected to be completed within about two months. The sale is subject to certain shareholders' rights, including rights-of-first refusal.
SNC-Lavalin will retain a 6.76 percent ownership of Highway 407 ETR following the transaction.
'This is a truly unique and exceptional asset that we believe has been undervalued by the market for many years. Through this transaction, we are able to benefit from crystallizing some of this value, while retaining an interest in a successful Canadian infrastructure asset that we are proud to have helped build,' said Neil Bruce, President and Chief Executive Officer of SNC-Lavalin Group.
Concurrently to this, SNC-Lavalin and CDPQ have re-negotiated the terms of the $1 billion CDPQ loan agreement entered into 2017, which is supported by Highway 407 ETR shares.
SNC-Lavalin said it will use net proceeds from this transaction for the payment of about $600 million under the CDPQ loan agreement, which has been recently amended; and for the execution of the company's deleveraging plans.
As for the remainder of the proceeds, the company will continuously evaluate which capital allocation strategy, including buy-backs, would be the most accretive to shareholder value.
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