The bidding war for Australian freight giant Asciano Ltd heated up on Monday as local rival Qube Holdings Ltd upped its proposal to A$9 billion (US$6.4 billion), trumping Canada’s Brookfield Asset Management Inc.
Asciano said it favoured Qube’s approach, dropping its previous preference for Brookfield’s A$8.9 billion offer first announced in August 2015 in what would be the biggest ever Canadian takeover of an Australian company. It also said it expected Brookfield to raise its offer.
Sydney-based Asciano, operator of Australia’s largest rail freight network, is seen as good value due to its exposure to the resources sector, which is being hit by falling commodities prices. It is seen as doubly appealing because of a recently-finished restructure focusing on automation.
Its switch of preference marks its first departure from an unwavering endorsement of Brookfield’s approach, which was Australia’s biggest inbound takeover offer in four years. For the first time, A$2 billion Sydney-listed Qube is the frontrunner to seize control of Asciano, ahead of $40 billion (US$29 billion) Brookfield.
A sale to Qube would put a major chunk of Australia’s rail freight network under partial Chinese ownership since Qube has taken on sovereign wealth fund China Investment Corp as a co-investor, potentially raising fresh regulatory and political hurdles.
“Following detailed consideration, the Asciano board has determined that the Qube Consortium Proposal is a superior proposal,” Asciano said in a statement to the Australian Securities Exchange, noting Qube raised its indicative offer to A$9.24 per share from A$9.17.
Asciano added that it has given the Canadian firm until February 15 to match the Qube offer. It also published a letter from the Canadian’s Chief Executive Officer Sam Pollock promising to raise its offer to A$9.28 per share from A$9.10 and make it all cash.
However, Asciano said, its board determined that “at this stage there was no certainty that a new Brookfield Infrastructure proposal would be made or the timing of such a proposal”.
In a statement, Qube Managing Director Maurice James said Asciano’s decision was “a welcome development” and a “significant step” towards its goal of cutting costs and boosting productivity.
Both approaches for Asciano depend on getting approval from antitrust regulator the Australian Competition and Consumer Commission, which will give a ruling on March 24. It has raised concerns with both takeover approaches.
Asciano shares were up 2.5 percent at A$9.11, having touched an eight-year high of A$9.14 as investors warmed to the prospect that a takeover will eventuate.
Update: It was previously reported by Reuters that Qube’s other deal partners include Canada Pension Plan Investment Board (CPPIB) and Global Infrastructure Management.
(Reporting by Byron Kaye; Editing by Stephen Coates)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Shipping Advisory