OTPP and CPP Investments Expand Partnership With Mexico's IDEAL
Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”) and Canada Pension Plan Investment Board (“CPP Investments”) have entered into a definitive agreement to acquire incremental stakes in Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. (BMV:IDEAL B-1, “IDEAL”) at MXN$45.00 per share.
Under the terms of the agreement, Ontario Teachers’ will acquire an additional 8.4% interest in IDEAL, while CPP Investments will increase its investment holding by an additional 1.1%. Following the close of the transaction, Ontario Teachers’ and CPP Investments will each own 24.8% of IDEAL’s outstanding shares. The closing of the transaction is subject to certain conditions, including obtaining the authorization from the Mexican antitrust authorities (Comisión Federal de Competencia).
IDEAL owns, finances and operates a portfolio of brownfield and greenfield toll road concessions, water treatment plants, multimodal transit terminals and Mexico’s largest electronic toll collection systems operator. IDEAL’s primary business is in the toll road sector where it operates a portfolio of roads strategically distributed to interconnect key urban centers, ports and production hubs across Mexico.
“We are excited to further deepen our longstanding investment relationship with IDEAL alongside CPP Investments and significantly increase our exposure to high-quality core infrastructure assets in Mexico,” said Stacey Purcell, Managing Director, Latin America of Ontario Teachers’ Infrastructure & Natural Resources group. “Over the past few years, we have seen firsthand that IDEAL is the premier infrastructure platform in Mexico and believe it is well-placed to continue delivering strong results and growth in the years to come.”
In November 2021, FIBRA IDEAL, the infrastructure investment trust managed by IDEAL, indicated plans for a follow-on public offering which may include both a primary and secondary component. FIBRA IDEAL was established in 2020 when Ontario Teachers’ and CPP Investments’ closed their first direct investment in IDEAL. The FIBRA IDEAL offering, which is anticipated for early 2022, is expected to precede Ontario Teachers’ and CPP Investments increased shareholding in IDEAL.
“Our ongoing investment in IDEAL continues to provide CPP Investments with access to a diversified portfolio of real assets with stable cash flows, while also providing the opportunity for future growth through development opportunities in Mexico’s infrastructure sector,” said Scott Lawrence, Managing Director, Head of Infrastructure, CPP Investments. “We look forward to the ongoing growth of this platform alongside our valued partners.”
ABOUT IDEAL
IDEAL is an independent publicly traded company listed on the Mexican Stock Exchange (IDEALB1.MX). IDEAL engages in the development, promotion, operation and administration of infrastructure projects in Mexico and Latin America. IDEAL is one of the largest infrastructure companies in Latin America, with 18 infrastructure concessions in different sectors, including toll roads, water and logistics terminals.
ABOUT ONTARIO TEACHERS’
Ontario Teachers' Pension Plan Board (Ontario Teachers') is the administrator of Canada's largest single-profession pension plan, with C$227.7 billion in net assets (all figures at June 30, 2021 unless noted). It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.6% since the plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region offices are located in Hong Kong and Singapore, and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded as at January 1, 2021, invests and administers the pensions of the province of Ontario's 331,000 active and retired teachers. For more information, visit otpp.com.
ABOUT CPP INVESTMENTS
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At September 30, 2021, the Fund totalled C$541.5 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
CPP Investments put out he same press release which you can view here.
I discussed CPP Investments and OTPP taking a 40% stake in IDEAL back in April, 2020 here.
I also covered the initial deal in November 2019 here.
Mexican construction company IDEAL (IDEALB1.MX) is part of Carlos Slim's vast conglomerate and he's as good as a trusted partner as any you can have in the region.
Slim is still Mexico’s richest person and remains one of the wealthiest people on the planet.
He owns a majority stake in pan-Latin American wireless telecom firm América Móvil, was the world’s richest person for four years from 2010 to 2013.
The man is widely considered to be one of the best business tycoons in the world.
How he became one of the wealthiest people in the world is a really interesting story which you can read about here.
As far as IDEAL, you can read more about this company here:
Mission
To impel the accelerated development of the physical and human capital in Mexico and the rest of Latin America, by means of infrastructure projects, that are important generators of employment, pillars in economic growth and offer competitiveness in an everyday increasingly and more globalized environment.
Profile
IDEAL has in its roots the search of a cost effective investment mechanism which helps the formation of Physical Capital meaning the development of infrastructure in roads, airports, ports, generation and distribution of energy, distribution of treated water, among others. And Human Capital in developing health and education through different alliances with the purpose of having a faster growth.
IDEAL is a company oriented in identifying, feasible analysis, financial structures and implementation and operation of long term projects.
History
The experience all over the World is clear in the sense that the development of human and physical infrastructure has become a need for society and an important factor for the growth of the Gross Domestic Product.
The private investment in infrastructure in Latam, has gone from 0.6% of the GDP during the period 1980 – 1985 to 1.4% during the period 1996 – 2001 and the public investment has gone from 3.1% to 0.8% during the same periods (according to Banco de Mexico)
Infrastructure projects of large dimensions require important resources which governments must complement with private investors.
IDEAL is created with the objective to propel the accelerated development of physical and human capital. It is born in June 2005 through a spin-off from Grupo Financiero Inbursa with a capital of close to $900 million dollars and it is listed in the Mexican Stock Exchange since September 2005, with the purpose of becoming an institutional company and provide information to investors.
From that moment until now, IDEAL has gathered a team of successful and experienced engineers, who have been able to grow in its different sectors such as: Roads, Water Treatment, Energy, Health and Education among others.
Synergies
One of our great advantages is the opportunity to make synergies, leaning on the experience of the different companies within the group.
In search of expanding into Latin America, we have taken advantage of the synergy that arises from the companies in the telecommunication sectors like America Movil and Telmex, who have penetrated these markets with great success.
In the development of infrastructure, one of the biggest synergies comes from the construction arm of the Carso Group, CICSA, which has great experience in the different sectors of construction, like: Civil construction, buildings, oil and gas, housing among others.
In terms of financing, Inbursa Bank participates actively in the financial structuring of the different projects.
Never the less, we are always in search of the best alternatives for the execution and financing like the participation of local companies.
In terms of physical infrastructure, IDEAL invests in toll roads, water treatment plants, and multimodal terminals.
The company takes sustainable development and its social responsibility very seriously.
For OTPP and CPP Investments to acquire a 50% stake in IDEAL, I can assure you they did extensive due diligence and everything had to fit perfectly, especially the ESG factor.
Equally important, the infrastructure investment opportunities in Mexico and Latin America are huge.
As the press release states:
IDEAL owns, finances and operates a portfolio of brownfield and greenfield toll road concessions, water treatment plants, multimodal transit terminals and Mexico’s largest electronic toll collection systems operator. IDEAL’s primary business is in the toll road sector where it operates a portfolio of roads strategically distributed to interconnect key urban centers, ports and production hubs across Mexico.
Toll roads are big business, they are safe, secure cash flows and that's why large Canadian pensions love them.
Recall, I recently discussed how CPP Investments and OTPP will be the anchor investors for recently launched Infrastructure Investment Trust (InvIT) of the National Highways Authority of India (NHAI), acquiring half the units in the NHAI InvIT.
Whether it's in India, Mexico or any other region, the game plan is the same, find trusted world class operating partners and work with them to invest in the growing infrastructure needs on these countries.
Investing in IDEAL is a great long-term investment, one which OTPP and CPP Investments will likely carry for many years to come.
The relationship with IDEAL can also bring about other opportunities in telecommunication infrastructure, a huge area of growth in Mexico and Latin America.
In fact, IDEAL discusses these synergies on its website:
In search of expanding into Latin America, we have taken advantage of the synergy that arises from the companies in the telecommunication sectors like America Movil and Telmex, who have penetrated these markets with great success.
Alright, let me wrap it up there.
Below, "Mexico Mike" gives you some tips on using Mexican tolls roads and "International Living" discusses transport options in Mexico.
Third, more than 15 million people crossed into the United States through its land border with Mexico in 2019 but that came to a stop in March 2020 when non-essential travel was banned because of the COVID-19 pandemic.
Now, after nearly two years, businesses at border towns are hoping for a chance to recover. Al Jazeera's John Holman reports from Tijuana in Mexico.
Fourth, watch Carlos Slim's top ten rules of success (watch this, he gives great advice).
Lastly, on a recent edition of Wall Street Week, David Westin talks inflation and the week in markets with John Graham, CPP Investments Board President & CEO and Catherine Keating, BNY Mellon Wealth Management CEO. Former US Treasury Secretary Lawrence H. Summers warns the Fed needs to be more careful than it has been in recent years; and, Former IBM CEO Sam Palmisano discusses how the US. can make its supply chain more resilient.
Great discussion, John discusses the value of global diversification and opportunities in Latin America, Asia and the US.
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