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The bid battle heats up between Qube and Brookfield over Asciano

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February 8
5:22 AM 2016

Qube Holdings Ltd. upped their bid offer for Asciano Ltd. by adding a bigger cash component. The bid value now stands at approximately $6.4 billion (A$ 9 billion), surpassing the offer made by competition, Canada's Brookfield Asset Management Inc., who was already enjoying a favorable position as a potential buyer.

Chairman Chris Corrigan has swooped in with an extremely tempting proposal, comprising $7.04 cash and 1 Qube share - an implied value of $9.24, as per Business Insider. This resulted in Asciano's value touching almost $9 billion. This has definitely overshadowed Brookfield's bid of $6.94 in cash and 0.0387 of its listed units, which almost comes to $8.85 per Asciano share - an offer that had already been accepted by the Asciano board. It is now unclear whether the outbid company will come back with revised offer given the regulatory hurdles.

In its bid for Asciano, Brookfield had formed alliance with British Columbia Investment Management Corporation and Singapore sovereign wealth fund GIC, according to The Sydney Morning Herald. The plan was each of the investors would get an 11% stake in the selling company. However, now there's "no certainty that a new Brookfield Infrastructure proposal would be made or the timing of such a proposal," as Asciano succinctly mentioned in its statement.

Qube is now leading a strong consortium comprising Canada Pension Plan Investment Board, Global Infrastructure Partners and China Investment Corporation. These members are looking at acquiring the rail business of Asciano. Qube is also ready to part with $2.65 billion to take over Asciano's Patrick container terminal business and a 50% stake in the ports business, Australian Amalgamated Terminals. The remaining portion - mainly the auto and ports services businesses and the rest of ACFS Port Logistics Pty Ltd - will be sold off.

Their chairman is hugely optimistic about the acquisition plans. He believes that synergies and business improvement strategies for a couple of years would reap big benefits in the form of $30 million to $50 million a year.

Following all the deal chatter, Asciano's shares went up by 2.3%, as reported by Bloomberg.  The company seems to be inclined towards the superior Qube offer, but on the flip side switching from Brookfield would entitle the company to a break fee amount of A$88 million from Asciano.

Currently, both the offers are being reviewed by the Australian Competition and Consumer Commission. The regulatory establishment plans to invite public comments on Brookfield and Asciano offers, and is likely to announce the decision by February 18.

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