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Clear blue water

10 November 2015 By Quentin Webb

Asciano could demand more. The Australian ports and rail group is now fielding competing, A$9 billion ($6.4 billion) takeover proposals from Canadian investor Brookfield and a break-up consortium led by local interloper Qube. Previous bouts of aggressive stake-building by both sides, which have each snatched nearly a fifth of the company, highlights the target’s attractiveness. So Asciano’s board, which has already blessed Brookfield’s bid, may demand a clearer gulf in value before hitching itself to Qube’s wagon.

Qube and partners Global Infrastructure Partners and Canada Pension Plan Investment Board are ready to pay A$9.25 a share for Asciano, based on closing prices on Nov. 9. The gatecrasher says this compares to a Brookfield offer of about A$9.10, based on average prices for the latter’s securities, which have fluctuated. Both sides are offering similar proportions of cash and stock, with about three-quarters of the consideration in cash.

Qube reckons its shares are more attractive than the securities Brookfield is offering, which it says are riskier and less liquid. The company led by chairman Chris Corrigan also says its consortium poses less antitrust risk than a Brookfield tie-up, which Australia’s watchdog worries could produce “substantial lessening” of competition in rail haulage in two states. There’s some merit to both claims. Then again, Asciano’s board was clearly comfortable with Brookfield stock, and cannot assume the antitrust problems are insurmountable.

The biggest argument against the Qube group’s bid, however, is that even by the suitor’s own calculations it is worth only AS0.15 a share, or 1.6 percent, more than Brookfield would pay. As an outsider trying to disrupt an agreed deal, Qube is also insisting on a quick run-through of the Asciano books – “confirmatory due diligence” – before making a binding offer. Given the competitive tension, Asciano’s directors could signal that the price of that access is a marked improvement in value.



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