MELBOURNE (Reuters) - Australia's Transurban Group (TCL.AX) rejected a new $3.7 billion buyout offer from its top shareholders on Wednesday saying it undervalued the toll-road operator, a move that may lead its second and third-biggest shareholders to sell their stakes.
Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan, which together own about 28 percent of Transurban, have been courting the firm since November, when their first offer at A$5.25 a share was rejected.
They teamed up with Transurban's top shareholder, Australian infrastructure investor CP2, to raise their offer by 6 percent to A$5.57 a share on Tuesday, a 13 percent premium to Transurban's last trade, after Transurban said it was buying the Lane Cove Tunnel in Sydney and would fund the deal with a share sale.
The three shareholders opposed Transurban's plan to raise A$542 million with the share sale, but in a last ditch bid to win over the board, made another offer early on Wednesday at A$5.42 a share if Transurban wanted to go ahead with the share sale.
Transurban said no to both offers, saying they were cheap and uncertain.
"The board has great confidence in Transurban's outlook and prospects," it said in a statement.
Transurban last traded at A$4.92 a share on Friday before trading was halted in them as it moved ahead with its share sale. The share sale this week was priced at A$4.60.
A source close to the bidders said the Canadian funds may now want to sell their stakes, as Ontario Teachers' Pension Plan did last October when it was unhappy with Macquarie Infrastructure Group's plans to split into two listed groups.
"The bidders are seriously considering their respective positions in Transurban," the source, who did not want to be named because of the sensitivity of the matter, said.
"They certainly have a history of exiting positions in situations in which they believe the best interests of their investments will be better served in an unlisted environment."
CP2, which owns a 14.5 percent stake, was not immediately available to comment.
An investor said that the Canadian funds appeared very keen to buy out Transurban and could still come back with another offer, with Transurban having left the door open to working with its top three shareholders.
"People might speculate that means if Transurban plays their cards right they might get a higher offer out of them," said Will Seddon, an analyst at White Funds Management, which holds some Transurban shares.
"But probably the initial response will be there's a risk that at least one of the parties will walk away and put a bit of an overhang on the shares."
(Editing by Muralikumar Anantharaman)