Australian fund walks from talks on Transurban bid

MELBOURNE Tue Mar 23, 2010 11:12pm EDT

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MELBOURNE (Reuters) - The Future Fund, Australia's sovereign wealth fund has ended talks to back a $4.5 billion plan by two Canadian pension funds to buy out toll road operator Transurban (TCL.AX), sending its shares down 6 percent.

Transurban has been courted for months by the Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan, which owns about 28 percent of the group, but the sides have been in a stand-off since Transurban rejected their A$5.25 a share offer in November.

To break the impasse, the Future Fund, which owns less than 1 percent of Transurban, entered the fray in December, saying it would support the Canadian bid and aimed to help overcome some of the conditions that Transurban had said made the bid too uncertain.

One of those conditions was that the Canadian funds wanted to line up existing shareholders to take a 22 percent stake in a privatized Transurban.

Transurban said it held confidential talks with the Canadian funds in the week of March 15 but it had received no new proposal from them.

It gave no further comment and a spokesman was not immediately available to comment. A spokeswoman for the Canadian pension funds declined to comment.

Fund managers said since the Canadians had not said anything alongside the Future Fund's announcement, the pension funds must be still weighing up their options.

"The ball's in their court," said Jason Teh, a portfolio manager at Investors Mutual, which owns Transurban shares.

"The shareholder with the most clout would be CP2 with a significant stake. If they (the Canadians) convince CP2, that's a substantial level of votes that they control," he said.

CP2, which owns more than 14 percent of Transurban, declined to comment on its position.

After the Future Fund's announcement, Transurban shares fell as much as 6 percent to a low of A$4.84, its lowest level since the Canadians made their offer in November, and last traded down 4.3 percent at A$4.93 while the broader market was up 0.7 percent.

(Editing by Balazs Koranyi)

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