Brookfield Infrastructure, based in Canada, and Qube, an Australian logistics group, announced on Feb. 23 they were considering joining their rival bids for the Australian-based rail company, Asciano Limited.
The discussions remained preliminary, indicative and non-binding and there was no agreement, arrangement or understanding between the parties at that stage, however, under the new proposal, Asciano shareholders would receive all cash consideration of A$9.28 ($6.71) per share for a deal valued at A$9 billion ($6.5 billion).
This is the latest in the ongoing eight-month takeover battle for the Australian port and rail operator. Brookfield first approached Asciano in July 2015, offering A$9.05 per share in cash and stock. Qube made a rival bid in November 2015, offering A$9.25 per share.
The ACCC’s investigation focused on the import-export supply chain for containerized freight through Australian ports of Botany, Brisbane, Fremantle and Melbourne. Specifically, it closely considered the vertical integration of Asciano’s Patrick container terminals with Qube’s road and rail container transport services and empty container parks.
“The ACCC conducted extensive inquiries with a large number of industry participants,” said Rod Sims, ACCC chairman. “A broad range of issues were raised across different aspects of the supply chain. After careful consideration, the ACCC has concluded there is not likely to be a substantial lessening of competition in any market.”
The ACCC expressed some competition concerns in a statement of issues it released in May, but the parties have since restructured the proposed acquisition so that ACFS will no longer be vertically aligned with Patrick.
“This restructure resolved a number of the ACCC’s concerns,” Sims said. “It means that the effect of the proposed acquisition is a substitution of Qube for ACFS as the downstream container logistics provider linked to Patrick.”
The ACCC also closely considered whether the vertical integration of the Patrick container terminal at Port Botany with Qube’s NSW rail operations would result in discrimination against Qube’s competitors. A key issue was whether this would reduce competition in the market for rail-based container transport services from regional NSW to Port Botany, with particular regard to Qube’s interest in the Moorebank intermodal terminal.
The ACCC conducted in-depth inquiries with a broad range of Port Botany stakeholders and identified several constraints on the ability and incentive of Patrick to discriminate in favor of Qube trains at Port Botany.
These constraints include the potential loss of business to rival stevedores, Brookfield and others having a 50% interest in Patrick, and the regulation of rail services. The ACCC also considered the role of NSW Ports as the lessor of the Patrick Container Terminal site, particularly given it is also the landlord of intermodal terminals at Enfield and Cooks River. The ACCC considered NSW Ports has an incentive to limit any discrimination by Patrick Container Terminals in favor of Qube’s interests.
“The combined strength of these constraints has led us to conclude that the acquisition would not cause an increase in prices or a reduction in the quality of regional rail container export services to Port Botany,” Sims said.
Brookfield and Asciano released a joint statement in reaction to ACCC’s decision stating the transaction remains subject to certain conditions including FIRB approval, and approval from the Supreme Court of New South Wales at the Second Court Hearing which is expected to be held on July 28.
