Logistics group Qube Holdings (QUB), chaired by former Patricks boss Chris Corrigan, continues to expand and is now eyeing the east coast grain sector.
The company has interests in stevedoring across the country, concentrating on ports, iron ore, coal movements, services, container movements, transport and now grain in Port Kembla in NSW.
The company went into a trading halt yesterday (at $2.23), pending the announcement of the outcome of a planned $200 million share placement to institutional investors.
After the placement, a $30 million share purchase plan will be made available to eligible investors.
The money will be used to fund capex associated with a new joint venture, reduce debt and pay for other planned expenditure.
The new venture intends to take on the dominant GrainCorp (GNC) in grain movements in NSW.
The company will invest $50 million in a joint venture with Hong Kong based agricultural group Noble Group (which has extensive coal interests in Australia, e.g. Yancoal) to build a new grain handling depot at NSW´s Port Kembla.
The depot, which will be known as Quattro Grain, will export up to 1.3 million tonnes of grain a year. Noble will use Qube Logistics´ rail services to transport grain to Quattro Grain on a "take or pay" basis.
Grain traders Emerald and the huge US group Cargill, have also agreed to use Quattro Grain and Qube´s rail services, and other grain groups will be welcome to use the depot, which is expected to start operating early in the 2015-16 financial year.
QUB 1Y – Qube’s $200 million grain play
"This is a significant strategic project which we believe will alter the dynamics of the tightly-controlled grain handling market," Maurice James, Qube´s managing director said yesterday.
He added that the investment would diversify the company´s earnings and create "significant" growth opportunities.
"The investment is consistent with Qube´s strategy to invest in port infrastructure that aligns with Qube´s operations."
Emerald and Cargill have been given call options to invest in Quattro Grain.
If they take up the options, Qube´s and Noble´s interest in the depot will drop to 30% each.
This is a serious competition for GrainCorp which had planned to spend around $250 million on new grain handling facilities, had the takeover by US group Archer Daniels Midland (a rival to Cargill) not been blocked by the Federal Government.
GrainCorp last month reported lower earnings and cut its forecast for the coming year. The big expansion plan is now up in the air.
Qube also said it had recently completed two acquisitions to expand and diversify its bulk haulage capabilities for a total consideration of approximately $40 million (including deferred consideration).
Last month, Qube completed the acquisition of Walmsley Bulk Haulage, a small specialist ore haulage business servicing key Pilbara customers. This acquisition complements Qube´s existing activities in Port Hedland, Western Australia.
And last week, Qube completed the acquisition of Beaumont Transport, a bulk haulage and logistics company operating in Queensland.
"The acquisition provides Qube Ports & Bulk with geographic diversification of its bulk logistics operations into southern and central Queensland with an existing customer base, assets, depots and experienced personnel. It also provides additional diversification into the bulk dry tanker market," the company said yesterday.
These acquisitions were funded from Qube’s existing debt facilities. The fund raising will help refinance those deals.
Qube said it expects to have undrawn debt facilities and cash of around $355 million following completion of the capital raising.
Shares issued in the institutional placement and the issue to eligible shareholders will not be entitled to Qube´s interim dividend to be paid on April 4.
