Asset joint venture monetizations: unlocking capital while keeping control Asset joint venture monetizations: unlocking capital while keeping control

Companies are increasingly turning to alternative strategies to reconcile two competing imperatives: the need for large amounts of third-party capital to fund large, long-dated capital programs in a higher‑rate environment and the desire to retain operational control over business-critical infrastructure. Recently, a number of organizations have pursued asset joint ventures (JVs) to satisfy these competing objectives. Properly structured, these strategies can surface hidden value, bring in aligned partner capital and achieve risk sharing without the finality of an outright sale. Improperly structured, they can entangle core assets in governance deadlock and constrain future strategic choices.

Canadian companies seeking capital must consider a number of critical factors when assessing the potential benefits and drawbacks of asset JV monetizations.

Structuring an asset JV monetization transaction

At its core, an asset JV monetization is a repackaging of certain core infrastructure or operating assets of a business into a standalone entity. This is coupled with a sale of equity interests in that entity to a third party and the formation of a JV. The minority interest varies but is often between 30% and 49.9%.

Typically, as part of the repackaging, the business will enter into a long‑term commercial agreement with the new entity that both preserves access to those assets for the business and underpins the JV with a long-term, stable source of revenue. The commercial arrangements often take the form of an offtake, a capacity lease or service contracts featuring inflation indexation or cost pass‑throughs. These structures typically differ from a sale‑leaseback transaction, where there is no continuing equity interest. They can also be contrasted with a simple minority stake sale, where there are no bespoke contractual arrangements. They are also different from a full carve‑out IPO, where there is a public minority and there are different disclosure requirements and governance burdens.

The profile of assets best suited to a potential JV monetization transaction is consistent across sectors. Such transactions are best for capital‑intensive, cash‑generative assets that are “infrastructure‑like” in their cash flow stability. Ideal assets include wireless towers and related infrastructure, data centres, manufacturing plants with captive demand and utility‑style energy or renewables portfolios.

Why companies are pursuing these transactions now

Businesses may consider an asset JV monetization for multiple reasons. First, these transactions offer the possibility for a valuation increase. Segregated infrastructure‑like assets frequently command higher EV/EBITDA multiples than the consolidated enterprise because of their predictable, stable and long-term cash flows. Monetizing a minority stake at an “infrastructure multiple” can unlock and crystallize immediate value.

Second, asset JV monetizations provide cash proceeds that can accelerate corporate deleveraging without enterprise-level equity dilution. Where the enterprise chooses not to retain control of the JV and deconsolidates the assets, asset‑level non‑recourse debt can further optimize the capital stack while insulating the parent’s balance sheet.

Third, these transactions offer the opportunity for risk mitigation or sharing. Risks associated with greenfield development, technology obsolescence, commodity or input volatility and long construction cycles can be partially transferred to or backstopped by the JV. Commercial contract design can incorporate a variety of features, such as cost‑plus pricing and CPI escalators, to calibrate the yield profile of the investment.

Fourth, separating the assets in question from the business can clarify accountabilities, focus governance and permit dedicated capital allocation at the asset level. This facilitates the parent’s continued focus on the customer‑facing business.

Finally, asset monetization can also enable future asset growth. In some instances, the JV may be able to realize synergies and economies of scale by serving as a platform into which similar businesses may choose to vend-in their comparable assets.

The telecom sector has supplied two recent high-profile Canadian case studies. Wireless towers and backhaul platforms have been placed into dedicated vehicles and capitalized with large minority investments from infrastructure sponsors and domestic pension funds. The structures have allowed the telecoms to lock in commercial arrangements for significant periods, as well as pay down debt and free up capital for future investment in next-generation services and infrastructure.

Beyond telecom, global precedents involving semiconductors, data centres and industrial manufacturing underscore the breadth of the model. Examples include co‑investment vehicles tied to wafer output under cost‑plus frameworks and vehicles that package assets supported by exclusive supply agreements. Such cases demonstrate possible structures to engineer stable JV cash flows around a single anchor customer while leaving operational control with the parent. By way of further example, hyperscale data centre partnerships illustrate a greenfield variant of the structure that provides for a majority of external capital, long‑term leases with renewal constructs and parent guarantees that de‑risk the project for lenders and investors.

Design choices that drive value

Governance and control sit at the centre of the JV design and are key elements that drive value. Under applicable accounting rules, whether the parent consolidates or equity‑accounts for the JV will typically turn on ownership levels and control of the relevant activities and substantive rights. In practice, companies strive to maintain majority equity or super‑voting control and limit minority rights to fundamental protective matters. These measures can include budget deviations, leverage caps, material M&A and changes to the distribution policy so that consolidation is preserved. Where off‑balance sheet treatment is a priority, a true joint control framework can be implemented.

There are a number of other JV structuring elements that participants may consider. In particular, contributing companies may be able to structure their investment to achieve equity treatment or debt treatment from ratings agencies. The partner’s equity interest in the JV can take many forms, from conventional common equity entitled to pro rata returns to more bespoke structured equity with preferred or priority return entitlements. The latter typically yields higher valuations. Where the JV remains controlled by, and consolidated with, the parent business, structured equity partners can lead auditors and rating agencies to view all or a portion of the partner’s equity as debt.

In negotiating equity arrangements, businesses can negotiate buy-back rights and call options to preserve their ability to re-acquire the assets or the partner’s equity interest on pre-agreed economics in certain circumstances. This may be based on the achievement of specific milestones or following a material degradation of service levels.

Businesses also have flexibility, subject to negotiation, to address the economics of the long-term commercial agreement framework. These arrangements are typically structured to anchor the JV’s revenue with duration and certainty commensurate with investor return hurdles. They offer a pass-through for key cost drivers, including commodity indices in supply JVs or CPI escalators in capacity leases. Investors will seek to define minimum volumes to protect base‑case coverage. These arrangements will also allocate capital expenditure funding obligations for upgrades and expansions, including pre‑agreed contribution mechanics and rights if one party declines to fund.

Key to successful asset JV monetizations is the allocation of risk to the party best able to manage it. The parent should be responsible for operational delivery risk and technology roadmap decisions. The investor should take on financial risk to the extent cash flows are clearly contracted and insulated by indexation, minimums and priority distributions. Deadlock and dispute mechanisms, such as escalation, expert determination and, as a last resort, buy‑sell or put or call constructs, provide pressure release valves without inviting litigation.

Regulatory and Canadian law considerations

Transaction planning in Canada must account for foreign investment, competition and sector‑specific approvals.

With respect to regulated communications infrastructure, complying with Canadian ownership and control requirements can be managed with careful voting structures and by keeping spectrum licences and active network operations outside the JV.

For JVs involving foreign investors or sensitive assets, the Investment Canada Act’s net benefit and national security regimes can be engaged even for minority investments. Early scoping and mitigation can help reduce execution risk. This may include a need to limit access to sensitive data, ring‑fence operating control or emphasize Canadian pension participation.

Where assets are subject to sector regulation, such as utilities, pipelines and renewables, transfers to JV entities may require commission approvals. Commissions may scrutinize ratepayer impacts if the offtake price underwrites the JV valuation. Environmental permits and legacy liabilities need careful allocation in the contribution agreements, with appropriate indemnities and financial assurance.

Outlook for asset JV monetization transactions

An asset JV monetization is compelling when the asset is core to operations but financeable on an infrastructure basis, when deleveraging or capex funding needs are acute and when the parent values a path back to full ownership. It is less compelling when the asset is truly non‑core and where a clean sale may be simpler and faster, and provide higher value. It may also be of less interest when the operating complexity of a partner is unwelcome or when the only way to clear investor return hurdles is to offer guarantees so robust they negate genuine risk transfer.

Businesses considering a JV monetization should always consider alternatives. For example, a carve‑out sale or IPO may unlock more value. Securitizations or project finance can offer cheaper sources of capital where cash flows are highly predictable and the balance sheet can absorb additional debt.

Nonetheless, these transactions have proven to be compelling in the right circumstances to unlock significant value. With strong success for these types of transactions in 2025, we are anticipating that we will see more asset JV monetization transactions in 2026 and beyond.