For the time being, Asciano (AIO) has strengthened its recommendation in favour of the takeover proposal from the consortium led by Qube Holdings (QUB) that values the company at $9.1 billion.
But don’t believe some of the headlines from yesterday and today that this marks the end of the bidding war with Qube and its partners to be the winners. Far from it.
Asciano yesterday formally dumped the $8.9 billion offer from Canada’s Brookfield Asset Management after it failed to match Qube’s offer.
The Canadian infrastructure investor had five days (until Monday) to match Qube’s approach, Brookfield did not increase its offer because it couldn’t under Australian corporate law.
That’s despite Brookfield claiming publicly that it will be mounting a higher offer with new partners.
“The Brookfield bid will now be terminated,” the statement from Asciano said yesterday, adding that it had now signed binding sale documents with Qube and that it will pay Brookfield a break fee of $88 million.
Qube and its consortium partners the Canada Pension Plan Investment Board, Global Infrastructure Partners and China’s CIC Capital said late last month that they were offering $A9 billion in cash and Qube shares for Asciano. The offer was $7.04 cash and one Qube share for every one AIO share. Based on yesterday’s share price for Qube of $2.03, that was worth $9.07.
The Qube and Brookfield groups each already hold a stake of about 20% in Asciano.
Asciano shares were steady on $8.87 yesterday.
Until last month, a group led by Canada’s Brookfield Infrastructure Partners had been Asciano’s preferred bidder given their offer was the only one on the table.
But the Qube group signalled its intention to bid in December, when the competition regulator made it clear it would not approve the Brookfield offer in its present form because of concerns about a lessening of competition in WA grain and central Queensland coal transport and shipping.
But Brookfield Infrastructure is not out of the battle, judging by a previous statement by its CEO Sam Pollock. He told Asciano chairman Malcolm Broomhead in a letter on February 7 that the group was working on a revised proposal to offer $9.28 a share in cash.
Brookfield had previously offered $6.94 in cash and 0.0387 of its units, which are listed in New York and Toronto.
Investors made it clear they didn’t like those units because of limited voting rights and a lack of transparency.
Brookfield has argued that Australian takeover laws stopped it raising its bid within the five days period set by Asciano.
Brookfield wanted to bring in two additional groups to its consortium, which already includes British Columbia Investment Management Corporation and Singapore sovereign wealth fund GIC. The new groups would buy Asciano’s intermodal business (relieving competition pressures) and provide extra finance to boost the offer price.
But that would have meant Brookfield changing its bid structure, something it could not do before February 15 because a small number of investors had already accepted its current takeover offer, pushing its shareholding in Asciano above 20%. Under Australian takeover laws, a bidder cannot change its consortium while owning more than 20%. So once the current bid expires on February 18, Brookfield and its group are expected to return with the higher bid – that will probably be on Friday morning.
Qube’s takeover bid requires approval from the Australian Competition and Consumer Commission, which does not expect to make a final decision until March 24. Any new offer from Brookfield will have to go through the same process as the structure of the nature of the offer and the competition questions will have changed with the new partners. There is a long way to go in this bidding war.
