The local private markets team of Canada’s Ontario Public Services Employees’ Pension Trust (OPTrust) will achieve a strong, though undisclosed, return from the sale of its 50% stake in international public transit systems operator Kinetic.
TPG Rise Climate, the global climate investing platform of global private capital firm TPG (NASDAQ: TPG), is to acquire 70% of the Australia-founded business, including OPTrust’s stake, in a deal that values Kinetic at more than $4 billion.
TPG Rise Climate is part of TPG’s $29 billion global impact investing platform.
The Kinetic deal, which remains subject to regulatory approvals, was announced on 4 November ending a sale process that began early last year.
OPTrust will exit Kinetic completely, five years after selling a half-stake in the business to Infrastructure Capital Group (since acquired by UK-based Foresight Group). Foresight is retaining a 30% stake.
OPTrust invested in what is now Kinetic in 2014 when it joined, as the majority investor, with Trent Peterson’s Catalyst Direct Capital Management, to back the acquisition of Melbourne’s SkyBus business, then solely a provider of bus services from Southern Cross Station to Tullamarine Airport. The investors backed the expansion vision of − now Kinetic chief executive − Michael Sewards and former co-chief executive Adam Begg. The value of the initial transaction was not disclosed but is believed to have been more than $50 million.
SkyBus later added services to Avalon Airport and launched a similar operation in Auckland. Through acquisitions, the core business, then known as AATS, began to develop the contract provision of wider mass transit services with a focus on transitioning to zero emissions operations. The Kinetic name was adopted in 2019.
Kinetic is now the largest bus operator in Australia and New Zealand and has grown the number of electric buses it operates in the two countries to more than 300. Through its majority-owned subsidiary Go-Ahead, which it co-owns with Spanish company Globalvia, Kinetic operates one of the UK’s largest zero emissions bus fleets with 1,500 electric buses currently in service and more on order.
Go-Ahead has contracts to provide bus and rail services in the UK, rail services in Norway and Germany and bus services in Sweden, Ireland and Singapore.
Sydney-based OPTrust senior managing director, and Kinetic chairman, Stan Kolenc said: “We are proud to have founded Kinetic and supported its transformation from a single Melbourne concession with 40 buses in 2014 to a global leader in mass transit.
“Today, Kinetic operates across seven countries with a fleet of more than 12,000 buses and 400 trains, and over 36,000 employees globally.
“Kinetic is at the forefront of the decarbonisation of the transport sector and is well placed to continue driving the transition to zero-emission public transport globally.”
Locally, earlier this year Kinetic expanded its partnership with the Victorian government signing a new 10-year public transport contract, launched a new Eastern Express service in Melbourne under the SkyBus brand and committed to an $80 million investment to fully convert the SkyBus fleet to electric vehicles by 2034. SkyBus has also secured contracts with Sydney Airport and Perth Airport to provide ground transportation services with a focus on electrification.
Through Go-Ahead, Kinetic is continuing international expansion. The company has announced plans to almost double its operations in Singapore under a new $600 million contract. Go-Ahead took over the operation of London’s Elizabeth line underground rail service in May and has just begun operating Stockholm’s extensive Metro network.
TPG Rise Climate head of infrastructure, managing partner Scott Lebovitz, said: “Kinetic and its customers benefit from the company’s innovation and early mover advantage in the electrification of public transport. Municipalities are continuing to pursue electrification to improve reliability and sustainability of their public transit systems. Kinetic has established itself as the trusted partner of choice for cities around the world.”
Foresight’s head of Australia, Edward Lloyd, said his firm was pleased to welcome TPG Climate as a “like-minded partner” as Foresight continued to back Kinetic’s mission to create cleaner, more resilient, transport networks.
OPTrust’s Investment Division launched its Private Markets Group in 2006 to invest in private equity and infrastructure with a long-term plan to allocate 15% of its funds under management to each of these asset classes.
OPTrust has been investing in Australia since 2010 and opened a Sydney office in 2013 when Kolenc and a portfolio manager relocated from the firms’ London office.
Image: A Kinetic electric bus in Melbourne.