Embattled engineering firm SNC-Lavalin Group Inc. (TSX:SNC) has agreed to sell the majority of its stake in Highway 407 in Toronto to OMERS for $3.25 billion.
Under the terms of the transaction, SNC-Lavalin will cut its stake in the toll highway to 6.76% from 16.77%. It will receive $3.0 billion when the deal closes and $250 million in conditional payments over a 10-year period.
"This is a truly unique and exceptional asset that we believe has been undervalued by the market for many years," said SNC Chief Executive Officer Neil Bruce in a press release. "Through this transaction, we are able to benefit from crystallizing some of this value, while retaining an interest in a successful Canadian infrastructure asset that we are proud to have helped build."
SNC-Lavalin said proceeds of the sale will go toward paying back $600 million owed to the Caisse de dépôt et placement du Québec under a loan agreement from 2017, additional deleveraging, and options for its "capital allocation strategy."
The OMERS agreement with SNC is subject to certain rights of 407’s other shareholders, including rights-of-first refusal. The other owners of the toll highway include a subsidiary of Ferrovial S.A., with a 43.23% stake, and the Canada Pension Plan Investment Board with a 40% interest.
SNC-Lavalin is at the centre of a political storm in Ottawa. The company is under fire amid a fight between Prime Minister Justin Trudeau’s office and former Attorney General Jody Wilson-Raybould over whether SNC-Lavalin should be offered a deferred prosecution agreement and avoid a criminal trial on allegations the company paid millions of dollars in bribes to obtain government contracts in Libya.
