RRJ Capital: There’s Gold In Those Eastern Roads

The deal would give RRJ another big score in Asia

RRJ Capital isn’t a household name to most Western investors.

But the Asian private equity firm is tapping into an asset class that often goes ignored: Toll roads.

RRJ Capital has proposed a deal to purchase PLUS Malaysia Bhd, the country’s biggest expressway toll firm, for $716 million, according to Reuters. In their proposal, RRJ has reportedly offered to cut tolls by as much as 20% immediately upon taking possession of the properties.

Background RRJ Capital

Richard and Charles Ong founded RRJ Capital and opened offices in Hong Kong and Singapore. The firm now has $11 billion under management.

The firm’s previous acquisitions include Jubao Internet Technology, an Internet financial services platform and Chinese infrastructure firm Shanghai Yupei Group. In addition, the company purchased Lai Sun Development, a mid-sized developer in  Hong Kong.

The company sees an opportunity now in the troubled Malaysian economy. Heavily in debt, the government wants the private sector to be more engaged. Privatization has emerged as a solution.

Turning Back to the Roads

Meanwhile, PLUS Malaysia is owned by a state pension fund EPPf. The pension fund holds 49% of the property.

However, UEM Group Bhd, a subsidiary of Khazanah, owns the majority 51% of the road.

A Khazanah spokesperson commented on the proposed deal. “There have been several proposals on toll highways,” the spokesperson said. “Khazanah itself has submitted its own proposal to the government. Ultimately, it is up to the government to consider these proposals and decide what is best for the country and the people.”

That said, RRJ will continue to tap into long-term investments across Southeast Asia. “Our focus will be large companies and major infrastructure investments such as airports, container ports, water treatment plants, and toll roads,” the firm said in an email to Reuters.

The deal must meet additional conditions including an extension of the toll concessions period for an additional 20 years by the government.

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November 20, 2019

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