91X missed opportunity

“They said they wanted to sell. We said we were interested in buying. We were there with a big pot of money, and they weren’t even interested in talking to us. I don’t think they are very serious people. Look what ill-will they have now created. I don’t think we’d be interested at the moment. It might be fundamentally a sound business. But you’d be buying all those political liabilities they (CPTC) have generated along with the business. No thanks.”

So speaks a large international toll operator for whom the acquisition of 91X Lanes would have been, a year ago, “just a matter of writing the check.” He said the cheapest money in the world for financing toll roads is not tax-exempt bonds, but equity.

“These people live in a parochial little Wall St bond market world, where they and their friends compare taxable bonds and non-taxable bonds. They don’t seem to have heard of serious equity, which can be raised internationally competitively with non-taxable bonds.”

Equity has the advantage, too, over bonds that it doesn’t require the profile of earnings of the toll road to conform closely to a business plan devised around a traffic and revenue study, or some huge reserve fund to be created to support any shortfalls in revenue.

“If revenue is below business plan, the shareholders just have to wait for dividends. There’s no crisis of defaults on debt service. Toll roads just don’t need to be financed with all this fixed interest debt.”

And why not go to the open market with your property, if you’re a genuine seller?

Dennis Roberts, chairman of the McLean Group, Tysons Corner VA, is a leading company valuer and a broker of businesses. He says that many businesses looking to sell think they know who the likely buyers are, and what price they will get. But they are usually wrong on both counts, and often way off. Roberts says in his group’s experience 80% of the time the best buyer of a business is someone quite unknown to the seller beforehand.

“The only way to determine what a business is worth is to get the property in front of as many buyers as possible, more or less simultaneously, and let them bid against each other.” (WASHINGTON POST BUSINESS 2/21/00 p10)

So serious sellers – unlike CPTC – put their business on the open market. They don’t find a friend, like Gary Hausdorfer, and try and set the friend up in business. That’s kids stuff.