Carlyle buys stake as Qube profit jumps

Corrigan coy on Patrick but welcomes private equity move

By Rob McKay | February 25, 2011

The purchase of 15 percent of Qube Logistics by Carlyle Infrastructure Partners (CIP) has sparked instant speculation that Chris Corrigan-advised Qube was preparing for a tilt at Patrick Stevedores.

Though Corrigan points out the remoteness of the possibility and that Qube, which owns P&O Trans Australia (POTA), would not pay silly money if any Asciano assets came up for sale, the romantic notion of his regaining control of Patrick refuses to die.

Indeed, the Qube statement that the "unconditional and conditional placements will raise approximately $116.5 million and will place Qube in a very strong financial position to increase its shareholding in POTA through the call and put options, pursue new acquisitions and undertake development projects across its operating divisions and within the strategic development assets" gave the idea some oxygen.

The logic would be that new Asciano chief John Mullen would be unable to increase Patrick’s return on investment to double figures and sell it to concentrate resources on the better-performing Pacific National coal rail business.

The two-part Qube stake sale process will see CIP spend $46.3 million initially and $70.3 million, subject to regulatory and shareholder agreement, subsequently.

This would gain CIP a place on the Qube board.

"The management of CIP shares Qube’s vision of investing on a long-term basis in strategic logistics businesses," Chris Corrigan, Chairman of Qube’s investment advisory committee (IAC), says.

"We look forward to working together with CIP to grow Qube over the medium-long term."

Meanwhile, Qube has seen a 207 percent leap in first half net profit to $36.7 million from $12 million in the previous first half.

Its Landside Logistics arm saw gross earning rise 36.8 percent to $9.2 million while Auto, Bulk and General rose 54.2 percent to $18 million.

Its Queensland and Western Australian operations had been affected by weather events but not the bottom line, Qube management firm Managing Director Sam Kaplan says.

Qube says it has an option since January 1 to buy 50 percent of DP World’s stake in POTA following DP World’s sale of the majority of its Australian arm.

When exercised, this would take Qube’s ownership to 75 percent and Qube was in negotiations with DP World for the remaining 25 percent, with an outcome expected next month.

Qube says it will continue to focus long-term on building an Australian import and export logistics supply chain for goods and commodities.

On the management front and with the corporatisation of Qube in mind, IAC Deputy Chairman Maurice James will become Qube Managing Director, while Corrigan and Kaplan become non-executive Chairman and Deputy Chairman respectively.

James was previously an executive Director of Patrick Corporation, where he was head of its ports group until Patrick’s sale to Toll in 2006.

James is also a non-executive Director of Coates Group.

Carlyle Group, CIP’s owner, came to Australia in 2005 as a private equity buyout specialist and has been busy in various transport-related sectors.

Its Carlyle Asia Partners II investment vehicle bought Coates Hire in 2008 with National Hire Group.

In 2008, its portfolio firm AxleTech International signed a long-term deal with Thales to supply axles for the Bushmaster armoured truck.

More recently, last Monday, it bought South Melbourne headquartered traffic camera firm Reflex from Macquarie Bank for $300 million.

In the US, it bought Allison Transmission from General Motors in 2007 for US$5.6 billion.

The firm is known to be well-connected, sometimes controversially so, in global conservative political circles having employed at various stages former Presidents George Bush senior and junior, former Secretary of State James Baker, former UK Prime Minister John Major, former Philippines President Fidel Ramos and former Thailand Prime Minister Thaksin Shinawatra.

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