Aurizon today announced it had signed an agreement with Macquarie Asset Management, on behalf of its managed funds and client, to acquire One Rail Australia (ORA) for $2.35 billion.
ORA comprises bulk rail haulage and general freight assets in South Australia (SA) and the Northern Territory (NT); the 2,200km Tarcoola-to-Darwin railway line; and a haulage business in New South Wales (NSW) and Queensland (Qld).
Aurizon will divest ORA’s NSW and Qld business (“East Coast Rail or ECR”) through a demerger or a trade sale, whichever creates greater value for Aurizon shareholders.
Aurizon will retain and integrate the ORA bulk and general freight assets into the Aurizon business. These include the Tarcoola-to-Darwin rail infrastructure, South Australian regional infrastructure, five rail yards, 68 active locomotives, over 1000 active wagons and approximately 400 employees. Further details are available in the full presentation lodged by Aurizon with the Australian Securities Exchange. An overview slide is included at the end of this announcement showing the ORA business and the proposed integration and divestment of assets by Aurizon.
The purchase is subject to several customary conditions precedent and regulatory and consent conditions, including clearance from the Australian Competition and Consumer Commission (ACCC).
The acquisition is fully funded from a combination of Aurizon’s existing debt facilities and underwritten by new committed debt facilities.
One Rail Australia is a strong, profitable business with an aggregate estimated Earnings Before Interest Tax, Depreciation and Amortisation (EBITDA) of $220 million for CY2021 (ORA’s Bulk ~$80 million; ECR ~$140 million).
Managing Director & CEO Andrew Harding said the transaction offered a unique opportunity to grow Aurizon’s business and create value for shareholders.
“The One Rail acquisition is highly strategic and transformative for Aurizon. It is fully aligned with Aurizon’s strategy to grow our Bulk freight business into new markets and new geographies in Australia,” Mr Harding said.
“At our Investor Strategy Day in June, we detailed our aspiration to double our earnings in the Bulk business over the coming decade. The One Rail acquisition delivers a step change for Aurizon Bulk as a new entrant in the SA and NT region, and supports the ongoing growth of non-coal revenue in the Aurizon portfolio.
“Upon completion of the transaction, with the integration of One Rail bulk and divestment of ECR, the Bulk share of Aurizon’s haulage revenue will represent around 40%.
“The ORA bulk infrastructure and operations in SA and NT provide customers with a safe, efficient and effective pathway to market for numerous existing commodities and growth opportunities in base metals, agriculture, iron ore and for new- economy metals such as manganese and copper.”
“Aurizon will be committing to an enforceable undertaking with the ACCC to divest ECR following the completion of the ORA transaction. Until that time, ECR will be operated independently of the Aurizon Group with a separate CEO and management team,” Mr Harding said in the statement.
“The ECR divestment commitment is to address potential competition concerns from the ACCC arising from the transaction, and a final decision on the form of divestment will be based on delivering the best value outcome for Aurizon shareholders.”