November 26, 2015 / 12:21 AM / 3 years ago

Brookfield bid for Australian rail, port assets hits regulatory red light

People walk to Brookfield Place off Bay Street on the day of the annual general meeting for Brookfield Asset Management shareholders in Toronto, in this May 7, 2014 file photo. REUTERS/Mark Blinch

SYDNEY (Reuters) - Australia’s competition watchdog on Thursday rejected proposals by Canadian infrastructure giant Brookfield Asset Management Inc (BAMa.TO) to address concerns over its A$9 billion ($6.53 billion) bid for port and rail firm Asciano Ltd AIO.AX.

The decision is a blow to a takeover proposal backed by Asciano and boosts the prospects of a rival bid from smaller Australian logistics firm Qube Holdings Ltd (QUB.AX). The regulator said it would make a final ruling on Australia’s biggest inbound takeover in four years - and its biggest buyout by a Canadian firm - on Dec. 17.

The Australian Competition and Consumer Commission dismissed Brookfield’s “long-term behavioral undertakings” to address worries that the deal would give it both the railways and freight trains in some locations.

“After detailed consideration, the ACCC has concluded that the undertakings are not acceptable,” ACCC Chairman Rod Sims said in a statement, without specifying the undertakings.

The ACCC said it made its decision partly on the basis of industry feedback which had raised doubts that Brookfield’s promises would be enforceable or effective.

Since Asciano agreed to Brookfield’s offer in August, the ACCC has raised what it called “red light” concerns that the Canadian firm would control too much of the freight supply chain.

The regulator’s rejection of Brookfield’s assurances is a win for Qube, which in October made a slightly higher indicative for Asciano. Asciano shares were down 0.3 percent and Qube shares were up 4 percent in a higher overall market.

In a statement on Thursday, Asciano continued to recommend the Brookfield offer and said the Canadian firm “intends to continue actively exploring solutions with the ACCC”.

Earlier this week Qube Chairman Chris Corrigan revealed that Qube had been in talks with Asciano about the possibility of buying its port business when Brookfield made an offer for the entire company.

Reporting by Byron Kaye; Editing by Stephen Coates

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