Brookfield Willing to Keep Asciano Public, Won't Support Breakup

  • CEO points to Canary Wharf-type stake as a potential scenario
  • Firm plans to remain shareholder even if takeover bid fails

Brookfield Asset Management Inc., Canada’s largest alternative asset manager, said 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.

Should the firm’s offer to buy Asciano for A$8.9 billion ($6.3 billion) fail, “we will ensure that the company operates with the highest degree of corporate governance and we will not support any breakup,” Chief Executive Officer Bruce Flatt said Friday on a conference call in which he outlined possible outcomes from the bid.

Alternatively, if Brookfield meets the minimum threshold of its tender offer without acquiring enough shares to take it private, Flatt said Asciano “will be maintained as public company for some time, albeit with significantly reduced liquidity.”

The money manager had agreed in August to buy Asciano for cash and stock through its publicly traded subsidiary, Brookfield Infrastructure Partners. A rival plan is being led by Australian logistics firm Qube Holdings Ltd., which is seeking to carve up the company.

The Qube effort has the backing of Canada Pension Plan Investment Board, Canada’s largest pension plan, and New York-based investor Global Infrastructure Partners. The partners acquired a 19.99 percent stake in Asciano last month and are opposing Brookfield’s offer.

New Terms

On Thursday, Brookfield said it bought 14.9 percent of Asciano and reached an arrangement giving it a further 4.3 percent interest for $1.2 billion in considerations, a move that could help salvage its bid. It also changed the terms of the takeover offer so that it only needs 50.1 percent of investors to accept, as opposed to the 75 percent threshold in the original arrangement proposed in August.

Three likely scenarios could arise, Flatt said, including the company’s successful takeover and privatization by Brookfield. Failing that, Brookfield could meet the minimum threshold of its tender offer without acquiring enough shares to force it private.

It’s also possible that Brookfield will be unsuccessful in its bid but retain its stake in a publicly listed Asciano entity that may or may not be controlled by others.

Flatt pointed to Brookfield’s 20 percent position in London’s Canary Wharf Group, which it held for close to 15 years prior to eventually taking the company private earlier this year in partnership with the Qatar Investment Authority.

“In that situation, another group actually had a control position until we ultimately took the business private,” Flatt said. “We believe in long-term investing and we will take advantage of the lessons learned at Canary Wharf for this investment as well.”

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