In a new twist to the saga of a prospective foreign acquisition of Australian ports and rail heavyweight Asciano, competing parties Qube and Brookfield have announced talks to form a joint takeover bid.
Qube, which has held the high ground over Brookfield since Asciano had an $88 million change of heart last week, announced the in-principle talks with Brookfield on Tuesday morning.
“The new proposal would represent a common sense outcome which I believe would deliver the best result for all stakeholders,” Qube managing director Maurice James said.
“Asciano shareholders would receive cash for their company, Qube would add container terminals to its business and partner with a major infrastructure player and the consortia investors would obtain exposure to world class rail and port infrastructure.”
Under the new terms – which are currently only indicative – the Asciano pie would be carved up and handed out to various combinations of Qube, Brookfield, and the international funds which back each of them in their respective consortiums.
A joint venture of Qube (50%), and Brookfield with its consortium partners (50%) would acquire the Patrick Container Terminal business, which manages major terminals at Port Botany, Melbourne, Brisbane and Fremantle.
Brookfield and its consortium partners would acquire Asciano’s Bulk & Automotive Ports Services (BAPS) business, which manages Asciano’s numerous smaller, non-container terminals around the country.
The BAPS acquisition would include Asciano’s 50% share in Australian Amalgamated Terminals, of which Qube is already the other 50% stakeholder. “Qube would have an option to subsequently acquire from Brookfield Infrastructure the 50% interest in AAT, subject to ACCC clearance,” the company said.
In total, the combined Asciano ports businesses would be acquired for a total value of $3.84 billion.
Meanwhile, Pacific National – Asciano’s substantial bulk and freight rail subsidiary – would be acquired by a collection of the financial institutions currently backing Qube in its on-the-table bid for Asciano, and those backing Brookfield in its original bid in July last year.
Qube and Brookfield themselves would not be a part of the new Pacific National, under the proposal.
The talks were detailed to Asciano in a pair of letters from Brookfield Infrastructure CEO Sam Pollock, and Qube managing director Maurice James, both sent to Asciano chairman Malcolm Broomhead on Tuesday, February 23.
Both letters begin: “You have encouraged us for the benefit of all Asciano shareholders to seek to develop a proposal which provides an improved and all-cash consideration, and which reduces ACCC uncertainty associated with a transaction.”
Qube is confident the combined bid could be hugely beneficial to all those involved.
“Qube would be able to realise the substantial benefits associated with a combination with the Patrick Container Terminals Business, while reducing its funding requirements and partnering with a leading global infrastructure investor,” the company said in an ASX release.
“Qube believes that within the 50/50 joint venture, the Patrick Container Terminals Business would be able to generate synergies consistent with the range previously identified by Qube, including synergies within Qube’s existing operations.
“Qube also expects to derive additional benefits from the involvement of Brookfield Infrastructure as a new joint venture partner.
“In particular, Brookfield Infrastructure has a significant existing footprint of ports operations, providing an opportunity for the Patrick Container Terminals Business to benefit from their scale with international clients.
“Based on the above, Qube expects the transaction would remain highly accretive a pro forma basis.
“In addition, the new proposal would de-risk the transaction for Qube shareholders … Qube would not be required to fund the BAPS business pending its sale, and would not be exposed to the variable size of the Qube equity raising as is required under the current Qube Consortium Proposal.”
All cash bid
The proposed bid would hand $9.28 in cash per share to Asciano shareholders.
Qube noted the price is a 39.5% premium to the “undisturbed trading price” of Asciano shares of $6.65 on 30 June 2015 – prior to the original announcement of a takeover bid from Brookfield.
Qube also said the $9.28 per share bid “is at the upper end of the Independent Expert’s valuation range of A$8.42 to A$9.40 per Asciano share as disclosed in the Asciano Scheme Booklet and Asciano Target’s Statement”.
Asciano said the joint bid is an “attractive” option for its shareholders.
The sides will continue talks, and Qube said it would keep the market informed of any material developments.
Asciano said for now it officially is still backing the Qube bid, in absence of a formal, superior offer from the joint bidders, or any other entrant.