HICL Infrastructure PLC (LON:HICL) has agreed to acquire a further 3.1% interest in the A63 Motorway concession in France for c. £20m from a co-shareholder. Completion is expected in early 2024, subject to customary third-party consents.
The asset is a 40-year toll-road concession to design, upgrade, finance, operate and maintain a 104km section of the existing A63 between Salles and Saint-Geours-de-Maremne, in southwest France. The A63 benefits from its strategic positioning as an important trans-European transport corridor, which has resulted in historically resilient traffic performance. HICL Infrastructure first invested in the A63 in 2017, and InfraRed’s management of the asset dates back to 2011. Following this incremental investment, HICL will hold a 24% interest in the asset.
In line with the Board’s disciplined approach to capital allocation, this acquisition was carefully evaluated against alternative uses of capital, including the repurchase of the Company’s shares. The Board is satisfied that the expected return and yield from this incremental investment are significantly in excess of the relevant hurdles and presents a unique opportunity to increase HICL’s investment in a high-performing quality asset.
The acquisition will be funded from the proceeds of the recently announced disposals. Once the announced disposals have completed, the revolving credit facility is forecast to be c. £135m drawn. The Company continues to benefit from live disposal activity as part of HICL’s active approach to enhancing portfolio composition through asset rotation.
Mike Bane, Chair of HICL Infrastructure, said:
“This attractive incremental investment for HICL aligns with the Board’s strict capital allocation framework. It provides greater accretion than alternative uses of capital and the investment has a well-understood risk profile. Highly disciplined balance sheet management remains a priority for the Board, including the reduction of RCF drawings over time.”
Edward Hunt, Head of Core Income Funds at InfraRed, said:
“We are pleased to have increased HICL’s stake in this high-quality European transport link, which InfraRed has successfully managed for over ten years. While the bar for acquisitions remains high, incremental investments such as this demonstrate the attractive risk and reward dynamic that can be captured by nimble investors in the current market in specific circumstances.”
