Bidding war for Australia's Asciano heats up as Qube trumps Brookfield

Mon Feb 8, 2016 8:25am EST
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By Byron Kaye

SYDNEY (Reuters) - The bidding war for Australian freight giant Asciano Ltd AIO.AX heated up on Monday as local rival Qube Holdings Ltd (QUB.AX: Quote) upped its proposal to A$9 billion ($6.4 billion), trumping Canada's Brookfield Asset Management Inc (BAMa.TO: Quote).

Asciano said it favored Qube's approach, dropping its previous preference for Brookfield's $8.9 billion offer first announced in August 2015 in what would be the biggest ever Canadian takeover of an Australian company. It also said it expected Brookfield to raise its offer.

Sydney-based Asciano, operator of Australia's largest rail freight network, is seen as good value due to its exposure to the resources sector, which is being hit by falling commodities prices. It is seen as doubly appealing because of a recently-finished restructure focusing on automation.

Its switch of preference marks its first departure from an unwavering endorsement of Brookfield's approach, which was Australia's biggest inbound takeover offer in four years. For the first time, A$2 billion Sydney-listed Qube is the frontrunner to seize control of Asciano, ahead of CAD$40 billion ($29 billion) Brookfield.

A sale to Qube would put a major chunk of Australia's rail freight network under partial Chinese ownership since Qube has taken on sovereign fund China Investment Corp [CIC.UL] as a co-investor, potentially raising fresh regulatory and political hurdles.

"Following detailed consideration, the Asciano board has determined that the Qube Consortium Proposal is a superior proposal," Asciano said in a statement to the Australian Securities Exchange, noting Qube raised its indicative offer to A$9.24 per share from A$9.17.

Asciano added that it has given the Canadian firm until Feb. 15 to match the Qube offer. It also published a letter from the Canadian's Chief Executive Officer Sam Pollock promising to raise its offer to A$9.28 per share from A$9.10 and make it all cash.

However, Asciano said, its board determined that "at this stage there was no certainty that a new Brookfield Infrastructure proposal would be made or the timing of such a proposal".   Continued...

File photo of Brookfield Infrastructure Chief Executive Sam Pollock (R) shaking hands with Asciano Ltd Chief Executive Officer (CEO) John Mullen after a media conference in Sydney, Australia, August 18, 2015.  REUTERS/David Gray