Morgan Stanley wins privatization mandate

Morgan Stanley has won a mandate to privatize the Pennsylvania Turnpike, as its rivals line up for the multi-billion dollar infrastructure assets being sold off by state governments.

Pennsylvania Governor Ed Rendell has hired Morgan Stanley to help sell the Turnpike. Other bits of Pennsylvania real estate have drawn interest from bidders already. Macquarie Infrastructure Group, for instance, is reportedly in talks with the Pennsylvania Turnpike Commission about taking over the Mon-Fayette, a 100-mile extension route in that state.

Banks have been equal parts buyers and advisers on infrastructure privatizations. Last year Royal Bank of Scotland led the $4.1bn (€3bn) privatization of the Indiana toll road, which was the largest deal of its kind at the time. Macquarie Infrastructure Group is also an active bidder for US infrastructure assets, and UBS Investment Bank has started on plans for an infrastructure investing effort.

Macquarie is among the bidders for the $1.5bn privatization of a Virginia toll road. Macquarie already owns toll roads in states including Indiana and New Jersey.

In May, Morgan Stanley joined rival bulge bracket banks in setting up its own infrastructure investment fund. The new fund, whose COO is former Ontario Teachers Pension Plan manager Ron Lepin, is going head-to-head with funds being raised by Goldman Sachs, Macquarie Bank, and JP Morgan. ABN Amro closed its first €500m fund in January and Rreef, the infrastructure and real estate arm of Deutsche Asset Management, has raised €1bn, which sits outside Deutsche’s investment banking business.

Goldman Sachs estimates that transport assets in the US – 98% of which are owned by the government – have an enterprise value of between $300bn to $400bn.

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