Australia’s antitrust watchdog on Thursday raised fresh concerns about a planned A$9.1 billion (US$6.5 billion) takeover of rail and port giant Asciano Ltd (ASX.AX), potentially forcing the Canadian-led buyout consortium to restructure the deal.
The Australian Competition and Consumer Commission (ACCC) had been due to give a final decision but instead warned the deal may give Asciano’s new owners too much control of the freight chain, and said it needed two more months to consult with industry players before it could make a ruling.
The buyout group, led by Canada’s Brookfield Asset Management (BAMa.TO) and including investors from China, the Middle East and Australia, may have to appease the regulator by offering to sell some assets, Lonsec Stockbroking General Manager, Equities and Research, Bill Keenan said.
“It’s going to need some more adjustment to get it through,” he said.
Brookfield agreed to modify its initial solitary bid for Asciano in January after the regulator expressed concern that it would have freight trains and tracks in Western Australia state.
A month later, it offered to end a bidding war with Australian stevedoring company Qube Holdings Ltd (QUB.AX) and make a joint offer for Asciano’s port assets only, leaving the rest to China Investment Corp (CIC) [CIC.UL] and others. That move was also partly aimed at easing anti-trust concerns.
The deal would cement Sydney-based Qube’s position as Australia’s biggest stand-alone ports company, and give Beijing’s sovereign wealth fund CIC a slice of the railways business in one of China’s biggest trading partners.
But the regulator on Thursday said that as Qube already had nationwide cargo handling operations, taking ownership of Asciano’s ports could give it unfair access to services contracts.
Asciano’s port business “may provide preferential access to Qube … and raise rivals’ costs”, ACCC Chairman Rod Sims said in a statement.
“There are also concerns regarding foreclosure of rival stevedores,” Sims added.
The ACCC said it would take industry submissions and give its final decision on July 21.
In a statement, Qube said it was confident it could overcome the regulator’s concerns. Asciano said it still recommended the takeover, due to be voted on by shareholders on June 3.
Asciano shares were flat, in line with the broader market. Qube shares were up 0.6 percent in mid-session trading.
Update: The proposed Asciano takeover, announced in March, includes Canadian Pension Plan Investment Board, which is partnering with Qube and CIC. British Columbia Investment Management Corp is investing alongside Brookfield.
(Reporting by Byron Kaye; Editing by Stephen Coates)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters