EXCLUSIVE CVC, China’s Road King plan stake selldown and $3 bln toll business-sources

A worker adjusts a temporary electric cable on a nearly completed section of a toll road near the port in North Jakarta, Indonesia December 15, 2015. REUTERS/Garry Lotulung/File Photo

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SINGAPORE, Sept 21 (Reuters) – CVC Capital Partners has decided to sell its 25% stake in the toll road arm of China’s Road King Infrastructure Ltd (1098.HK) as part of a deal that aims to value the unit at up to $3 billion, two sources with direct knowledge of the matter said.

The Europe-based private equity firm’s exit from Road King Expressway International Holdings (RKE) will come alongside a partial sale by the Chinese parent of its 75% stake, they said.

RKE operates five expressways in China and three in Indonesia.

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Its $3 billion valuation partly hinges on the purchase of another toll road asset in the Southeast Asian nation that it is close to finalizing, the sources told Reuters.

One of the sources said the asset purchase is likely to be worth at least $500 million.

The likely purchase of the new asset and the $3 billion valuation of the toll road business has not been reported previously.

CVC declined to comment. Representatives from Road King did not respond to requests for comment.

The sources declined to be identified as they were not authorized to speak to the media.

CVC and Road King’s attempts to monetize the toll road business come at a time of growing global investor interest for infrastructure assets, driven by sovereign, pension and private equity funds chasing long-term returns.

The duo are hoping that potential bidders will be drawn to a business that has strong visibility on cash flows and cash distribution, and is supported by a long remaining concession period, one of the sources said.

“There’s a lot of scarcity value around the toll assets in both these markets and many pension and sovereign funds have publicly said they are interested in Indonesian toll roads,” the source said.

Road King, a Chinese property developer, has operated expressways in the country since nearly three decades.

It diversified into the Indonesian toll road business in 2019 and its expressways in China and Indonesia span over 600 kilometers in total, according to the company’s website.

CVC bought a 25% stake in RKE in August 2018 for about $255 million.

The sources said Dutch pension fund APG and Canadian funds including CDPQ are likely to be among the suitors for the Indonesian assets.

One of them highlighted Korean and Japanese conglomerates and other investors including US-based Global Infrastructure Partners

APG, CDPQ and GIP declined to comment.

The first source said CVC and Road King were open to selling the Indonesian and Chinese assets separately, subject to how the discussions with bidders fared.

The source said that although the parent was keen to retain a controlling stake in RKE, it was keeping options open for a bigger stake sale.

($1 = 7.8494 Hong Kong dollars)

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Reporting by Anshuman Daga and Yantoultra Ngui; Editing by Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

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