SBB to divest 49% of social infrastructure portfolio to Brookfield for $890m

Canada’s Brookfield Super-Core Infrastructure Partners has agreed to acquire a stake of 49% in EduCo from Sweden-based Samhällsbyggnadsbolaget i Norden (SBB) for around SEK9.2 billion ($890 million) in cash upfront, plus up to approximately SEK1.2 billion ($116 million) in cash through earn-outs.

SBB is expected to use the proceeds from the transaction to offload debt, lowering the company’s loan-to-value ratio to around 42.4%, from about 46.9% as of third quarter 2022.

The debt of EduCo includes around SEK6.9 billion from existing external bank financing and SEK14.5 billion inter-company financing from SBB.

SBB’s partnership with Brookfield will also enable the former to deliver critical social infrastructure for municipalities within public education, apart from diversifying funding sources.

EduCo is formed by selling SBB’s entire SEK44.9 billion social infrastructure portfolio for public education into the newly formed subsidiary for around SEK43.7 billion.

EduCo will invest in and manage social infrastructure assets within the public-backed education sector in Sweden, Denmark, Norway, and Finland.

Eduardo Salgado, a Managing Partner in Brookfield’s Infrastructure Group and Head of Brookfield Super-Core Infrastructure Partners, said, “This is a unique opportunity to invest in the leading social infrastructure educational portfolio in the Nordic region.

“This partnership is highly attractive for us given SBB’s extensive experience in working with municipalities and publicly funded operators in the Nordics within the educational sector.”

With SEK2.3bn revenue and SEK1.9 billion net operating income in 2023E, the EduCo portfolio will consist of 585 income producing assets spread across the Nordic region — 55% by GAV in Sweden, 38% in Norway, 5% in Finland, and 2% Denmark.

EduCo will also enter into an asset management agreement with SBB, which will receive 1.8% of the net operating income per annum from EduCo.

Ilija Batljan — SBB Founder and CEO said: “We are delighted to join forces with Brookfield, a world-class, highly reputable infrastructure asset investor.

“Establishing EduCo will make us even better placed to continue delivering important infrastructure to the Nordic welfare states.

There will be an increasing need for schools, preschools and university buildings in the Nordics, a market in which we already have a strong foothold.”

The transaction is expected to be completed in two steps — the first closing on 30 December 2022 or latest in early 2023 while the second closing is anticipated to be complete in Q1 or Q2 of 2023.