The takeover battle for Asciano (AIO) continued at glacial pace yesterday with the company’s board, as expected changing recomendations from the US-Canadian investment group Brookfield to the consortium led by local group Qube Logistics (QUB).
The Asciano board declared the improved takeover bid from the Qube group to be better than the earlier rival offer from Brookfield Infrastructure.
Qube last week increased its bid by 7 cents a share to offer $7.04 in cash plus one Qube share for every Asciano share.
Based on Qube’s share price ($2.20) the bid values Asciano at $9.24 a share or around $9.05 billion. AIO closed at $9.10 yesterday.
Qube’s group includes the Canada Pension Investment Board CIC Capital Corporation of China and Global Infrastructure Partners.
Brookfield now has five days to match the Qube offer under its original agreement with Asciano. "If Brookfield does not submit a matching or superior proposal within the required time frame, the Asciano board will be able to change its recommendation and execute the Qube consortium agreements," Asciano said yesterday.
The Canadian group said in a letter to the board on February 7 that it is working on a revised proposal to offer $9.28 a share in cash. Its original bid included Brookfield stock, which is listed in Toronto and New York.
“We are working diligently to bring forward a revised transaction that is fully executable under the terms of the undertakings that we have filed with the Australian Competition and Consumer Commission,” Brookfield Infrastructure chief executive Sam Pollock said in the letter to Asciano chairman Malcolm Broomhead.
"Our revised transaction will be on an all cash basis at a value of $9.28 per share less any dividends declared by the board,” he said.
Brookfield reportedly plans to bring in two additional members to its consortium, which already includes British Columbia Investment Management Corporation and Singapore government sovereign wealth fund GIC, to buy the intermodal business and help fund a higher offer.
Fairfax Media says the two new members are the Qatar Investment Authority and a large (but unnamed) international pension fund.
But analysts point out that, according to Fairfax, Brookfield now had a major problem in that because some shareholders have accepted its offer, this has taken Brookfield’s stake in Asciano over 20%.
And under takeover laws, a bidder cannot change its consortium while owning more than 20%. So it will have to come up with a new bid structure before the five days runs out (next Monday), and find a way of making its new, higher, all cash offer. Or it can wait until February 18, when its offer expires and return with a new consortium and a higher offer. That seems to most logical way to go.
The trouble with an all cash offer in Australia is that it doesn’t offer existing shareholders the chance of capital gains tax rollover relief (which the original offer did with the Brookfield securities and the Qube offer does with its shares).
And these days, cash is useless to many investors – there is so much of it around, it attracts low rates of interest and in the present nervy stockmarket, no one is eager to reinvest and are holding large amounts of cash (but receiving low returns, or negative rates of interest in some countries).
Qube and Brookfield’s proposals require approval from the ACCC before they can proceed. The competition regulator has moved its final decision date to March 24 from February 18 for both bids, saying it needs more time to analyse them.
