The proposed $8.9 billion cash and paper takeover of rail and ports group Asciano (AIO) by US-Canadian funds management group, Brookfield Infrastructure is in some trouble with the competition watchdog claiming it could lead to a “substantial lessening of competition” for rail haulage services in Western Australia and Queensland.
The Australian Competition and Consumer Commission (ACCC) yesterday released a "statement of issues" on the proposed deal, and invited further submissions by November 4. It expects to make a final decision on December 17.
The regulator’s concerns will delay the acquisition. Asciano shareholders were to vote on the deal on November 10 and Brookfield had been planning to finalise the takeover on December 8.
That timetable now can’t be met following the ACCC’s direct intervention.
Investors sold Asciano shares down almost 8% to $7.88 yesterday.
AIO YTD – Watchdog red flags Asciano takeover
Brookfield’s bid for the port and rail operator behind Patrick stevedores and Pacific Rail was approved by shareholders in August, but Asciano said yesterday the earliest it can now be completed is next January.
The ACCC said that while there were regimes in place in WA and Queensland to encourage access to rail services, they did not address the competition issues created by vertical integration (that is someone controlling the various stages of a process).
The concerns centre on Asciano’s Pacific National rail group, the largest rail operator in WA (especially grain), and a major player in Queensland, especially in coal.
"The ACCC’s general view is that competition is to be preferred to regulation whenever possible," ACCC chairman Rod Sims said in a statement on Thursday. "Whether access regulation can provide appropriate outcomes in a situation of vertical integration depends on the extent of any competition concerns."
"Competition concerns can be particularly acute in cases involving key infrastructure assets of a technical nature, which require many operational decisions to be made on a daily and longer-term basis."
Asciano’s Pacific National group will become part of Brookfield’s operations rather than a customer if the takeover goes ahead. Brookfield operates a 5500-kilometre freight rail network in WA.
Brookfield also operates the Dalrymple Bay coal export terminal in Queensland. Pacific National transports coal to the terminal for its Queensland coal mining customers.
The WA Farmers group, and users of the coal terminal have raised concerns over the proposed takeover, with the nation’s biggest grain exporter, CBH Group, claiming Brookfield is “ruthlessly driven by the extraction of infrastructure profits”.
The ACCC has received a large number of submissions expressing significant concerns about the impact that the proposed acquisition will have on market structures in Western Australia and Queensland as a result of the vertical integration that will arise between Brookfield and Asciano.
"Many interested parties are concerned that the proposed acquisition is likely to lead to a substantial lessening of competition," the Commission said yesterday.
Mr Sims said “We have had concerns by people who have expressed issues with vertical integration. That’s obviously the main issue that we’ll be dealing with."
