Federal Court set to rule on ACCC injunction with Acacia Ridge Terminal in play
Bulk rail giant Aurizon has seen an ‘underlying’ net profit rise of 10 per cent, its annual results show.
The reluctant intermodal freight operator, which has seen the Australian Competition and Consumer Commission (ACCC) hold up its divestment of that arm and closure of its Queensland intermodal operation, recorded a $542.1 million profit on that line, up from $494.7 million last financial year.
The ACCC reports that it has been granted injunctions against Aurizon which require it to continue to operate its Queensland intermodal business.
The ACCC says it also sought orders for injunctions against Pacific National not to solicit employees and the top 10 customers of the business until the court proceedings are finalised, however those orders were not made.
“Given Aurizon’s previous announcements that it would close its Queensland intermodal business if the Pacific National acquisition was opposed by the ACCC, the ACCC sought an urgent interlocutory injunction to prevent Aurizon from closing its Queensland intermodal business until the ACCC’s proceedings involving that business are determined by the Court,” ACCC Chair Rod Sims says.
“It is part of the ACCC’s case that, at all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive.
“The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business.”
The final proceedings have been set down for a two week hearing starting on November 19.
“The ACCC will allege that it was more lucrative for Aurizon to agree to sell parts of the intermodal business to the closest competitor and close parts of that business than it was to sell the whole intermodal business to a new entrant,” Sims says.
Its ‘statutory’ profit, which included on-off items, rose to $560.1 million from a loss of $37.2 million but revenues actually fell 1 per cent to $3.11 billion.
“Despite major regulatory challenges, Aurizon delivered a solid performance in FY2018,” MD and CEO Andrew Harding says.
“Underlying EBIT was up 6 per cent, we achieved the $380 million three-year transformation target, and delivered record coal volumes for customers.”
The company hails as a major achievement the three-year transformation target of $380 million, with $133.6 million in benefits delivered during the financial year, “including the removal of Intermodal’s FY2017 losses”, which principally relate to interstate operations
“Aurizon’s Interstate Intermodal business has been closed with the last operational service occurring on 23 December 2017,” the company states.
“Aurizon signed a binding agreement with Pacific National (PN) to sell its Acacia Ridge terminal.
“Aurizon signed a separate binding agreement to sell its Queensland Intermodal business to a consortium of Linfox and PN. The transactions have been subject to regulatory approval.
“The ACCC decision was announced on 19 July 2018. The ACCC decided to oppose both transactions and commenced proceedings against PN and Aurizon in the Federal Court of Australia.
“The ACCC has sought declarations, pecuniary penalties, orders restraining the existing sale transactions from proceeding and costs.
“The ACCC has also sought an injunction to prevent Aurizon from closing its Queensland Intermodal business while proceedings are on foot.
“Aurizon refutes the ACCC’s allegations and will defend the proceedings, including seeking clearance of the Acacia Ridge transaction.”
Read how the ACCC action threatens to thwart divestment plans here
On Sunday, Aurizon provided PN with a notice to terminate the business sale agreement (BSA) for the Queensland Intermodal business, with effect from today.
“It is Aurizon’s intention to not contest clearance of the transaction through the Federal Court and to exit the business,” the firm says.
“As clearance has not been obtained for the sale of the Queensland Intermodal business, $10m of the consideration received for the transactions to date (recognised as a liability at 30 June 2018) will be refunded to PN.”
The Acacia Ridge Terminal BSA remains in place while Aurizon seeks clearance of that transaction, and the remainder of the consideration received for the transactions to date, of $35 million “is not refundable”.
On Friday, the Federal Court of Australia heard an application from the ACCC for an interlocutory injunction to require Aurizon to continue to operate the Queensland Intermodal business normally, with the judgement on that matter expected today.
“For the year ended 30 June 2018 the Intermodal business is disclosed as discontinued with Acacia Ridge and Queensland Intermodal assets classified as assets held for sale,” Aurizon says.