The Bermuda-based group which owns WA’s Brookfield Rail has agreed to terms with Pacific National owner Asciano, and will acquire the ASX-listed business, it was announced on Tuesday.
Asciano announced the terms agreed between the two parties, which are based on a per-share valuation of $9.15 – 10c more than the initial offer announced on July 1.
Under the terms of the deal, which must still go through a number of steps to be finalised, Asciano will be acquired by a consortium led by Brookfield Infrastructure Partners, for an “implied value” of $9.15 a share, valuing the Australian logistics and infrastructure business at approximately $12 billion.
Asciano shareholders will receive $6.94 in cash, and 0.0387 Brookfield Infrastructure shares, for every Asciano share they own. Each 0.0387 Brookfield Infrastructure share has an implied value of $2.21.
Asciano said on Tuesday it expects to pay a fully franked special dividend of up to $0.90 per Asciano share if the transaction proceeds, in which case the cash value of the Brookfield offer will reduce by that amount. This measure, Asciano said, will potentially provide an additional benefit of up to $0.39 per Asciano share “for shareholders who can capture the full benefit of the franking credits”.
The deal also includes a mix and match facility whereby Asciano shareholders can elect to receive more cash or scrip consideration (i.e. Brookfield shares), subject to applicable caps.
Brookfield Infrastructure will seek an ASX listing concurrent with the transaction.
Asciano and Brookfield directors have been in talks since at least July 1, when the initial offer was made to Asciano by Brookfield. Asciano directors have unanimously recommended the transaction, assuming no better offer comes along, and an independent expert concurs.
“We are pleased to recommend to our shareholders this compelling transaction with Brookfield Infrastructure,” Asciano chairman Malcolm Broomhead said on Tuesday morning.
“Asciano’s businesses are unique and highly strategic. Pacific National is one of the largest providers of above rail freight haulage services in Australia. Patrick is a leading business in bulk ports & stevedoring, with a presence in over 40 sites in Australia and New Zealand.”
Broomhead said the board believes the sale – being made at a significant premium to market value – is a fair valuation of the company.
Asciano chief executive John Mullen added: “Brookfield Infrastructure is a highly diversified and global infrastructure group with material scale. They have an impressive track record of delivering unitholder value from their existing asset base.”
Brookfield Infrastructure Partners owns Brookfield Rail in Western Australia. It also owns a majority share in the Dalrymple Bay Coal Terminal in Hay Point, Queensland, as well as Tasmania’s gas network, and other interests around the world.
It is unclear how the deal would impact the businesses at an operational level, but the acquisition could create a powerful combined business between Brookfield Rail and Pacific National in Australia.
Brookfield Rail operates in Western Australia, while Pacific National competes heavily with Queensland-based operator Aurizon on the eastern seaboard. Both operators do most of their business in the bulk sector, by weight, but freight rail (i.e. containers) is a key part of Pacific National’s operations.
Mullen suggested some integration benefit could take place on Tuesday, saying: “This combination will provide Asciano the scope to leverage our industry leading expertise globally, and the financial capacity to take advantage of the myriad of growth opportunities in our sector.”
Brookfield Infrastructure chief executive Sam Pollock said the company believes the transaction is “compelling” for all stakeholders.
“There are logical strategic synergies between our respective businesses in Australia, and we will seek to leverage the management expertise of Asciano for our existing businesses globally,” Pollock said.
“The scrip component and proposed ASX listing will provide Asciano shareholders with a material and liquid interest, which we expect will qualify for inclusion in the ASX100 index, and we intend to use the local listing as a platform to continue expanding our infrastructure business in this region.”