The Public Sector Pension Investment Board (PSP) has agreed to acquire a 7.51% minority stake in the 407 Express Toll Route (407 ETR) from the Canada Pension Plan Investment Board for approximately $2.4 billion.

The transaction includes an upfront payment and a deferred portion payable within 18 months.

PSP joins CPPIB and Ferrovial in the ownership group of 407 ETR, a 108-kilometre, all-electronic toll highway serving the Greater Toronto Area. The acquisition aligns with PSP Investments’ strategy of holding high-quality infrastructure assets, said the Toronto-based fund manager.

“Our investment in 407 ETR represents our largest infrastructure commitment in Canada to date and exemplifies our broader infrastructure strategy, which is focused on investing in high-quality, essential global infrastructure assets in transportation, communications, and energy, enabling us to deliver on our mission and mandate,” said Sandiren Curthan, managing director and global head of infrastructure investments at PSP.

Simultaneously, engineering and nuclear services company AtkinsRéalis (formerly SNC-Lavalin) has agreed to sell its remaining 6.76% stake in 407 ETR, with CPPIB acquiring a 1.70% interest and Ferrovial purchasing the remainder. Following these transactions, 407 ETR’s ownership structure will consist of Ferrovial holding 48.29%, CPP Investments and other institutional investors at 44.20%, and PSP at 7.51%, with AtkinsRéalis ceasing to be a shareholder.

“This transaction enables CPP Investments to optimize returns for CPP contributors and beneficiaries while building stronger ties with two valued partners and continuing to own a significant stake in a high-quality business,” said James Bryce, managing director and head of infrastructure at CPPIB.

“We look forward to partnering with PSP Investments, Ferrovial, and the management team as the 407 ETR continues to deliver excellent service to the millions of individual and business customers who use the highway.”

Ferrovial’s CEO Ignacio Madridejos said the partners share a long-term commitment to the toll highway.

“We will continue to serve the citizens of the Greater Toronto Area and improve mobility and growth in the region,” he said.

AtkinsRéalis said it will receive total gross proceeds of about $2.8 billion. The sale of the remaining 6.76% interest in the highway is slated to be concluded through a share-purchase deal and a put-and-call option agreement.

“As we indicated at our June 2024 investor day, while Highway 407 ETR is a truly unique and exceptional asset – and one that we are proud to have helped construct – our strategy in delivering excellence and driving growth is to build a world-class engineering services and nuclear company,” said Ian Edwards, president and CEO of AtkinsRéalis. “The sale of our stake in Highway 407 ETR will allow us to accelerate on the delivery of our strategy and create further value for our shareholders.”

The transactions are subject to customary closing conditions and adjustments.

Photo: Ferrovial