PSP Investments buys stake in Ontario’s 407 highway, the pension fund’s largest Canadian investment

Public Sector Pension Investment Board is making its largest-ever investment in Canada with a multibillion-dollar deal to acquire a piece of Ontario’s 407 ETR toll road.

In a series of transactions announced Thursday morning, Montreal-based engineering giant AtkinsRéalis Group Inc. ATRL-T said it was divesting its 6.76-per-cent stake in the toll road for nearly $2.8-billion. Spanish construction giant Ferrovial will buy most of that stake – 5.06 per cent – for $2.1-billion and Canada Pension Plan Investment Board will acquire AtkinsRéalis’s remaining stake for $700-million.

In a parallel deal, PSP Investments will acquire 7.51 per cent of the 108-kilometre toll road, which runs from Burlington to Oshawa, from CPPIB for an up-front payment of nearly $2.4-billion plus an undisclosed deferred payment to be made up to 18 months after the deal closes.

AtkinsRéalis first put its stake in the 407 up for sale in June, 2024. At the time, it was estimated to be worth $1.7-billion.

“As we think about opportunities in Canada, with the appetite we have, it is not often that we see opportunities of this size and so when something like this came about that was certainly very interesting,” said Michael Rosenfeld, managing director of infrastructure investments at PSP.

“This is, for us, the largest acquisition we have ever made in Canada.”

The investment is being made amid mounting pressure on Canada’s largest pension funds to make more of their investments inside Canada. The federal government has openly called on major pension funds – often referred to as the Maple 8 – to boost their domestic investments.

Of the roughly $265-billion that PSP Investments holds in total assets under management, roughly one-fifth, or about $56-billion, was in Canada as of March 31, 2024 when the fund last disclosed its holdings.

Part of the difficulty pension funds would face in trying to grow their proportion of Canadian holdings, Mr. Rosenfeld said, is that domestic assets large enough to attract their interest are very rarely up to sale.

“We have had a long history of looking very closely in Canada, but we don’t often see opportunities of this kind of scale, which can make it challenging for a pension fund like PSP that has significant assets under management and very large, multibillion-dollar deployment targets on individual transactions,” he said. “To put it into context I have been at PSP for about 18 years and this is the first time we’ve seen something of this size in Canada.”