BHP-Led Mining Group Scraps $4.7 Billion Offer for Queensland Rail Assets
BHP Billiton Ltd. and a group of mining companies in Australia scrapped a proposed A$5.1 billion ($4.7 billion) offer for a state coal freight network, which the Queensland government plans to sell to the public this year.
The Queensland Coal Industry Rail Group won’t lodge an offer because it isn’t able to meet its own, or the government’s, requirements for the bid, the group said today in a statement. The group didn’t elaborate on the reasons.
The 11 company group, also including Xstrata Plc and Anglo American Plc, had sought control of the rail network as demand from Asian steelmakers expands and congestion crimps their exports from the world’s biggest coal exporter. The government is planning an initial public offering of its QR National assets, including the coal tracks, in the fourth quarter.
“It’s not a have-to-have for the mining companies,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “It’s more a case of making sure that management of the entity, if it goes down the listing route, is aligned with their interests. It may in fact be a good thing for them in terms of not tying up equity in an infrastructure business.”
BHP rose 0.7 percent to close at A$38.18 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The statement was made after the close of trading.
“The government has maintained its preparations to float QR National,” Queensland Treasurer Andrew Fraser said today on the government’s website. “The state is confident of a successful float in the final quarter of the year.”
Anglo said this month the group was looking to lodge a formal bid this week after making a revised initial proposal last month. The group, which accounts for 98 percent of Queensland’s export coal industry, made its first initial bid of A$4.85 billion in May.
BHP was “disappointed” not to be able to meet the state government’s requirements for the offer, the Melbourne- based company said in an e-mailed statement today. It will continue to consider its commercial rail options for its coal assets in Queensland, the company said. Citigroup Inc. advised the producer’s group.
“Taking a multi-user asset away from a coordinated central owner, like the Queensland government, and putting it into the hands of a joint venture party, this was always going to be very, very tricky,” Mark Pervan, senior commodity analyst at Australia & New Zealand Banking Group Ltd., said by phone from Melbourne.
Prices for coking coal, a steelmaking raw material, will peak in eight years after which a market deficit will be plugged, Metal Bulletin Ltd. said in June. China and India, the world’s most populous nations, will account for 70 percent of coking coal demand by 2020, Metal Bulletin said in a report.
The government had said it would study the mining company’s bid as well as maintain work on an IPO. Treasurer Fraser said last month preparations for the sale continued in line with the state’s original timetable. Queensland Rail had met with about 60 potential initial sale investors in the U.S., Canada and Asia, the company said last month.
State-run rail provider QR Ltd., with assets worth A$12 billion, in July split into Queensland Rail, comprising passenger trains and services, and QR National, the nation’s largest transport and logistics business, including coal and freight train services, ahead of the planned IPO. The sale of the non-passenger assets may fetch A$7 billion, Queensland state Premier Anna Bligh said in June last year.
The government will initially retain 25 percent to 40 percent of the floated entity, it said. The government in March appointed Credit Suisse Group AG, Goldman Sachs & Partners Goldman Sachs Australia Pty, Bank of America Corp.’s Merrill Lynch unit, Royal Bank of Scotland Plc and UBS AG to manage the sale.
Commonwealth Bank of Australia Ltd. and Wilson HTM Investment Group were named in July as co-lead managers and Ord Minnett Group Ltd. and Patersons Securities Ltd. were appointed co-managers.
Aston Resources Ltd., an Australian coal developer, had to cut the price of its IPO last month as markets tumbled. The cut in Aston’s offer price follows a 5.9 percent drop this year in Australia’s benchmark S&P/ASX 200 index of stocks. Bilfinger Berger AG, Germany’s second-largest building company, pulled the IPO of Australian unit Valemus Ltd. after investors balked at the price.