Brookfield makes $8.8bn takeover offer for Asciano

Early stages and hurdles to jump but Australian T&L giant looks exclusively at proposal

Brookfield makes $8.8bn takeover offer for Asciano
Asciano CEO John Mullen has a bigger offer on his hands than just for Patrick.


Asciano has revealed that Canadian private equity firm Brookfield has made an $8.8 billion takeover offer that its board believes is worth examining fully.

The move is much bigger than the partnership with ports and logistics arm Patrick that Asciano managing director John Mullen confirmed to earlier this year his firm was looking to gain from international players.

Brookfield’s assets arm, Brookfield Infrastructure Partners (BIP), already owns Brookfield Rail and any possible regulatory hurdle, though unlikely, may relate to its business as Asciano also owns Pacific National.

BIP also has 71 per cent of Dalrymple Bay Coal Terminal and its Australian investments make up 32 per cent of its global footprint.

Asciano describes the offer, received on Friday, as "confidential, indicative, non-binding and conditional", with an implied value of $9.05 a share, which is 36 per cent up on its current price of $6.65.

Share values jumped 20 per cent to nearly $8 once a stock exchange trading halt ended.

Despite the caveats, Asciano underlined the seriousness of the proposal, saying the company board and its advisors "concluded it was in the interests of its shareholders to engage further with Brookfield on an exclusive basis to progress the proposal" to the "formal" stage.

Steps needed to do that include:

  • comprehensive due diligence
  • final approval of the BIP part owner Brookfield Asset Management and BIP’s board
  • agreed documentation for the transaction.

Asciano emphasised the lack of certainty surrounding the deal given its early stage of negotiations.

An apparent indication of the sensitive nature of the talks was that today’s announcement in itself "may result in Brookfield withdrawing its proposal".

If it goes ahead, BIP may have to need to for divestments or capital raisings, having told investors in March that it has US$3 billion in total liquidity.   

It would also be expected to sweat Asciano’s assets more thoroughly given its stated strategy to "opportunistically acquire high quality assets that we can actively manage to achieve total returns of 12% to 15% per annum".

 A successful deal in the next six months would mean that Australia’s two biggest publically listed transport and logistics firms will be in foreign hands for a similar amount, following Japan Post’s $8 billion takeover of Toll at $8.04 per share.

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