EVERBRIGHT Overseas Infrastructure Investment Fund announced on April 9 that it has agreed to acquire Norwegian public transport operator Boreal from Luxembourg-based Cube Infrastructure Managers. The fund is sponsored and managed by Hong Kong-listed China Everbright Limited. The existing management team will remain with Boreal.

The Nordic countries (Sweden, Denmark and Finland inside the European Union, and Norway which is not an EU member but which has a close relationship with the Single Market) still tend to have a laissez faire attitude towards foreign investment. However, countries such as France and Germany are now taking a tougher line – particularly with China – and there are some signs that the Nordics are reconsidering their open-door policies.

The Norwegian Parliament is currently working on the passage of a new Act on National Security, which could be used to block deals of vital importance, including in the banking, telecoms and transport sectors. But the government is generally welcoming to foreign direct investment.

Infrastructure & transport sector acquisitions are expected to be a major area of focus for Chinese companies in 2018 and 2019, and during April there was a deal involving Spanish gas distributor Redexis Gas as well as the Boreal takeover. Another planned transaction, involving German electricity distribution network 50Hertz Transmission, fell through in late March when the majority shareholder exercised its right of first refusal for a stake put up for sale.

With more M&A deals likely to be announced in the coming months, Chinese interest in European transport and infrastructure is likely to be a source of friction between Beijing and European governments.

Boreal is one of the largest players in the Norwegian public transport market, operating tenders granted by local Norwegian Public Transport Authorities in four segments: bus, car ferry, fast ferry and light rail. The group enjoys strong infrastructure characteristics, since it operates index-linked, mid to long-term contracts with public authorities.

Cube Infrastructure Managers acquired Boreal in May 2011, in partnership with its management team, and has since supported the company’s growth through new contract wins, strategic add-on acquisitions and the strengthening of the existing concession contract portfolio. The result has been an increase in Boreal’s revenues by nearly 50%.

“The transaction marks Everbright’s first major buyout transaction in the OECD infrastructure sector,” comments Chen Shuang, chief executive officer of China Everbright Limited. “Boreal has a rich history with outstanding capability in providing quality transportation services to the residents of Norway, and we will strive to bring value to the business through cross-border opportunities and operational improvement.”

“Together with the management team, Cube has developed a company with an outstanding track record of operating essential transport infrastructure assets and serving passengers on behalf of public transport authorities”, adds Jerome Jeauffroy, managing partner at Cube Infrastructure Managers. “After almost seven years of ownership, Boreal is now well positioned to further grow under the new stewardship of China Everbright”.

Closing of the transaction is expected in the second quarter of 2018, subject to customary closing conditions. Morgan Stanley acted as financial advisor to Cube, while DLA Piper was its legal counsel. Everbright’s legal counsel were Clifford Chance and Advokatfirmaet BAHR AS.

Cube is a European infrastructure fund, focusing on investments in regulated, brownfield infrastructure assets, addressing the essential infrastructure needs of the local public authorities and populations, primarily within the European Union, with a buy and grow strategy. Cube focuses mainly on three strategic markets: public transport, energy supply (notably district heating and energy efficiency) and fiber communication.

Everbright Overseas Infrastructure Investment Fund is a fund targeting infrastructure investment opportunities globally with the aim to generate solid cash yield and low risk for its investors, with a target size of US$1 billion. The fund’s key focus sectors include transportation, energy, logistics, social infrastructure and telecommunications. The fund is an associate of CEL and is managed by its indirect wholly-owned subsidiary.

The Boreal deal came soon after the April 4 announcement that two Chinese funds, Hangzhou based Guoxin Guotong Fund (GT Fund) and Hong Kong incorporated CNIC, were together buying a 33.3% stake in Redexis Gas, a leading company specialising in natural gas distribution and transmission, as well as liquefied petroleum gas distribution and supply, in Spain. The stake is being sold by Goldman Sachs Infrastructure Partners.

GT Fund is incorporated in Hangzhou and is a limited partnership with a mandate to invest in infrastructure and renewable energy, advanced manufacturing and/or technologies, medical related industries and consumer products.

CNIC was incorporated in Hong Kong in 2012 with initial capital of US$11 billion, and is an investment company which has a mandate to carry out direct investments as well as co-invest with strategic and industrial partners mainly in infrastructure, resources and advanced manufacturing worldwide.

The investment of GT Fund and CNIC is held through a common vehicle 51%-owned by GT Fund and 49% by CNIC. Hastings Funds Management (UK) will support GT Fund and CNIC, acting as manager of their stake in Redexis Gas. 

A third high profile infrastructure acquisition recently fell through. State Grid Corporation of China had agreed to acquire a stake in German electricity grid operator 50Hertz, but an existing Belgian shareholder exercised its first right of refusal to acquire shares being put up for sale by Australian fund manager IFM Investors.

Elia System Operator (Elia) announced its decision to exercise its pre-emption right to acquire an additional 20% stake in Eurogrid International, the parent company of Eurogrid GmbH, after Global InfraCo (a wholly-owned subsidiary of IFM Global Infrastructure Fund) said that it intended to sell half of its 40% shareholding in Eurogrid International.

Following completion of this transaction, Elia will own 80% of Eurogrid International and IFM will own 20%. Eurogrid International is the entity which owns German electricity transmission system operator 50Hertz Transmission GmbH.

Photo: Boreal