Canada’s Brookfield Asset Management shelved a US$6.5 billion buyout agreement with Australian port and rail giant Asciano and said it will launch a formal takeover offer instead, threatening a rival proposal and raising the antitrust regulator’s role in deciding the outcome.
Since Brookfield and Asciano agreed to a buyout in August, local port competitor Qube Holdings Ltd has bought one-fifth of the target and vowed to oppose a Brookfield takeover in favour of its own proposal to split the target’s assets between itself and global investment partners.
Qube’s partners are Global Infrastructure Partners and Canada Pension Plan Investment Board.
The Australian Competition and Consumer Commission (ACCC) has also suggested it might stop Brookfield buying Asciano since the Canadian suitor already owns some of the railways Asciano’s trains run on. It will make a final ruling on Dec. 17.
But on Friday, Brookfield fought back by buying its own one-fifth stake in Asciano. And in a subtle but significant change, it said it would delay the agreed buyout and launch a formal takeover instead, meaning it needs only 50.1 percent shareholder approval, rather than 75 percent.
That effectively kills Qube’s chances of using its stake to help block the deal, leaving the regulator to decide whether to let Brookfield buy all or some of Asciano or block it outright. The latter would leave the target for smaller Australian firm Qube, chaired by the former head of Asciano’s ports unit.
“These are highly strategic assets which are clearly highly sought after, and we believe that the ACCC will need to intervene,” said Chris Stott, chief investment officer at Wilson Asset Management.
Asciano shares rose 8 percent on Friday to A$8.95 (US$6.39), a seven-year high, having struggled to trade at Brookfield’s A$9.20 offer price amid concerns the deal may not clear regulatory hurdles. The broader market was up 0.3 percent.
A Qube spokesman declined comment, while Asciano said it continued to support Brookfield’s bid and that it would agree to defer a shareholder vote for the original proposal.
Brookfield’s move pits one of Canada’s oldest and biggest infrastructure investors against a relatively small and new Australian player, both drawn to the target company’s steady appeal amid tumultuous economic conditions globally.
It also underscores the attraction of Australian companies in a year in which the local currency has fallen 13 percent and shares have fallen 4 percent, cutting valuations of firms seen as well regulated and having growth potential.
Asciano, which has rail in every Australian state and stevedoring in 40 locations, has been seen as especially vulnerable because its earnings have been hit by a resources slowdown, while it is expected to benefit from restructuring aimed at automating ports and cutting costs.
(Reporting by Byron Kaye and Colin Packham; Editing by Christopher Cushing)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
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