The $9 billion takeover battle for ports and rail group, Asciano (AIO), has moved decisively in favour of the group led by Qube (QUB) and its chairman, Chris Corrigan after the competition regulator, the ACCC, dealt another blow to chances of Brookfield Infrastructure’s bid winning the day.
The ACCC yesterday rejected proposals from Brookfield designed to address competition issues arising from a merger of the rail and port assets of itself and Asciano, especially in Western Australian grain shipments and Queensland coal exports.
The news had little impact on Asciano shares which closed at $8.68, down 0.8%, after being higher for most of the day. But the close is well under the $9 share plus offer from Brookfield and the mooted $9.25 offer from Qube and its two big foreign partners.
The Australian Competition and Consumer Commission said in a statement yesterday that it would not accept the “undertakings” that Brookfield had provided after previously warning in mid-October that it had “red light" concerns with the proposed takeover.
AIO vs QUB 1Y – Qube one step closer to Asciano
"While the ACCC has not yet formed a final view as to whether or not it will oppose the proposed acquisition, after careful consideration of the issues and the nature of the behavioural undertakings proposed, the ACCC has concluded it would be inappropriate to conduct industry consultation on the undertakings," the regulator said.
ACCC chairman Rod Sims said in October the regulator was worried that Brookfield would "favour" Asciano’s Pacific National rail haulage businesses in Western Australia and Queensland if it was allowed to acquire the company.
The ACCC’s rejection of the undertakings means it will be more difficult for Brookfield to get regulatory approval for its proposed takeover, with the Canadian infrastructure potentially needing to sell some of its Australian assets if it wants to proceed.
The Commission continues to review of Brookfield’s takeover proposal and make a final decision on December 17.
It has also started a separate review of Qube proposal. Qube has started due diligence on Asciano’s assets and expects to make a formal bid in mid-December.
The ACCC will rule on the Qube’s consortium’s proposal – which involves breaking up Asciano’s port and rail businesses – on February 11. Qube wants the ports, the two offshore partners will own the rail and some other assets, at this stage.
Brookfield and the Qube consortium each own 19.99% stakes each in Asciano.
ACCC’s chairman said yesterday the regulator did not usually make its decision public on whether or not to consult on proposed undertakings, but considered it important to do so “in light of the recent media reports that Brookfield has proposed long-term behavioural undertakings to the ACCC.”
The proposed undertakings are not yet public.
The ACCC said it had considered whether the proposed undertakings were capable of “addressing the scale and complexity of vertical integration of Brookfield’s monopoly infrastructure assets with Asciano’s above rail operations” and whether they were “clear, comprehensive and rigorous enough".
It also considered whether it was appropriate for the proposed undertakings to rely on Western Australian and Queensland regulatory regimes, which could change and have been “criticised for their lack of effectiveness in dealing with key issues such as vertical integration."
"The ACCC will only consult on proposed undertakings if the ACCC considers that the undertakings are capable of being enforced and have the potential to adequately address competition concerns arising from the acquisition. The ACCC considers that the proposed undertakings offered by Brookfield do not meet these criteria,” the Commission said in its statement yesterday.
Brookfield can make new submissions, but it is clear that without some radical asset sales in the nominated areas, the bid for Asciano is in trouble.
