Battle for Asciano Intensifies as Qube Makes Counteroffer

  • Qube offer values Australian rail, port operator at $6 billion
  • Group says its bid provides more certainty than Brookfield

Qube Holdings Ltd. and its North American backers made a A$9 billion ($6.3 billion) counteroffer for Asciano Ltd., rivaling a bid for the Australian rail and port operator from Canada’s Brookfield Asset Management Inc.

Qube, New York-based Global Infrastructure Partners and Canada Pension Plan Investment Board offered the equivalent of A$9.25 a share, Asciano said Tuesday in a statement. The offer, which would be 75 percent cash and the rest in Qube stock, is 6 percent more than the target’s last closing price and is 3 Australian cents a share higher than the implied value of Brookfield’s bid.

“These are assets that both groups obviously want, and want badly,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne, said by phone. “This could also mean that Brookfield comes back with a higher bid.”

The battle for control of Asciano pits two of Canada’s biggest investors against each other, with Brookfield’s bid representing the biggest foreign takeover proposal in Australia this year. Asciano shares rose 3 percent to A$8.99 at the close on Tuesday, while Sydney-based Qube fell 3.5 percent.

Brookfield Offer

Brookfield, Canada’s largest alternative asset manager, in August agreed to buy Asciano for cash and stock to gain control of the Pacific National rail business and the Patrick stevedoring businesses at ports in Melbourne, Sydney and Brisbane. The offer, which needs approval from the Australian competition regulator, had an implied value of about A$9.15 a share when it was announced, and A$9.22 as of Monday.

CPPIB, the largest Canadian pension fund, and Global Infrastructure Partners teamed up with Qube last month to take a 19.99 percent stake in Asciano. Brookfield, which made the offer through its Brookfield Infrastructure Partners arm, last week bought a 14.9 percent stake in the Australian target and entered into an arrangement giving it a further 4.3 percent interest.

“The consortium’s proposal provides Asciano shareholders with a greater likelihood of actually realizing a premium for their investment,” the Qube group wrote in a Nov. 9 letter to the target. That’s because Australia’s competition regulator has raised concerns over Brookfield’s ownership of Pacific National, Qube said.

Asciano’s board is waiting for legal advice and will meet over the next day or two to decide whether to allow the Qube group access to due diligence, chairman Malcolm Broomhead said Tuesday after the company’s annual shareholder meeting in Melbourne. Asciano executives met representatives of Qube and Global Infrastructure Partners in Melbourne on Monday, according to Broomhead. Qube has indicated it could complete confirmatory due diligence by mid next month, it said in the statement.

Asciano will have to pay Brookfield a so-called break fee of A$88 million if it changes its recommendation to another proposal, Chief Executive Officer John Mullen told reporters Tuesday.

Competition Watchdog

Qube said it has started engaging with the Australian Competition and Consumer Commission to help the watchdog understand its proposal. The ACCC is due to rule on the Brookfield transaction Dec. 17.

Under the proposal, CPPIB and Global Infrastructure Partners would own the bulk, automotive and port services business and the Pacific National rail unit. Qube, which would acquire the Patrick container terminal business, said it may seek to acquire other Asciano assets subject to the ACCC review.

Brookfield said last week it would remain an investor in Asciano Ltd. and oppose a proposal to break up the company if its own plan to take over the Australian rail and port operator fails.

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