Brookfield's $6.5-bn Asciano bid in regulatory fiasco

By Money Times

Oct 16, 2015 03:18 AM EDT

The $6.5-bn acquisition offer to Asciano Ltd by Brookfield Infrastructure Partners is landed in trouble as the Australian regulator seeks an extensive review following the concern raised by the country's competition watchdog citing the reason that the Canadian firm's deal could lessen competition in rail haulage. The Australian Competition and Consumer Commission has postponed its decision on the acquisition offer made by Brookfield till 17 December.

The deal would give Brookfield more control over the Pacific National rail unit and stevedoring businesses at Australian ports. 

Canada's largest alternative asset manager Brookfield Asset Management Inc in August led a group that agreed to acquire the Australian company Asciano in a cash and stock deal. Australian Competition and Consumer Commission (ACCC) has sought more comments from the market about the A$8.9-bn acquisition deal, according to a statement from the regulator. The market participants expressed their concerns about Brookfield's acquisition offer. 

ACCC chairman Rod Sims said in the statement that "the ACCC is concerned over the vertical integration will lead to a substantial lessening of competition in related markets for the supply of above rail haulage services in Western Australia and Queensland."

Brookfield aims to bring its rail assets along with Asciano's Pacific National rail business. This will enable Brookfield to gain control of the Pacific National rail unit and stevedoring businesses at ports of Melbourne, Sydney and Brisbane. 

However, the ACCC didn't mention its intention to block the deal in total. The statement reveals the concerns of market participants and expressed the uncertainty whether Brookfield could overcome the regulator's concerns. Asciano's stock dropped eight percent to A$7.89 during intraday trading on Thursday. The share price is below the Brookfield's offer of A$9.15.

The latest acquisition bid offer will be the group's largest in Australia, exceeding its previous A$4.8 billion offer made in 2007 for Multiplex Group, the builder of London's Wembley Stadium.

Earlier in August, Asciano Ltd requested for a halt in trading of its shares on Australia Stock Exchange (ASX) after the news broke that Australian rail freight firm would recommend shareholders approving a $6.5bn takeover bid from Brookfield. The deal would be the seventh largest acquisition deal for an Australian firm from a foreign company.

The Canadian company owns Westnet rail business in Western Australia and controls Dalrymple Bay Coal Terminal in Queensland. ACCC further stated in the statement that the market participants have raised "strong concerns about Brookfield's ability and incentive to favor Pacific National through its Brookfield Rail and DBCT."

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