Asciano mulls takeover, break-up proposals

Having previously turned down a takeover bid from TPG and Global Infrastructure Partners that valued it at A$2.9bn, the Australian port and railroad operator is considering a number of proposals that could lead to asset sales or a change of control. Concerns over leverage have reduced its market value to A$500m.

Asciano Group, Australia’s largest private port and freight railroad operator, is considering a variety of potential transactions that could lead to a break-up or sale of the company.

The company said its asset sale program will expand beyond the sale of 100 percent of its coal transport and container ports business to proposals for other asset and businesses as well as proposals that would result in a change of its ownership.

Asciano said the expansion was a response to “multiple expressions of interest/proposals from a range of industry and financial parties”. All proposals are being considered concurrently. Asciano’s board will asses them and announce a transaction before its fiscal year ends in June. Investment banks ABN AMRO and Lazard Carnegie Wylie will advise Asciano.

Slowing demands for its services in the face of deteriorating economic conditions and an A$5.3 billion (€2.7 billion; $3.5 billion) debt burden led Asciano to a cash crunch that forced it to consider the asset sales and begin negotiations with its bankers to renew its working capital facilities.

In December, Asciano shortlisted bidding parties for the coal transport business of its Pacific National rail line in an effort to raise A$1 billion in sale proceeds to pay down debt. The outcome of that sale is expected to conclude before the end of June.

Even before then, the company’s asset portfolio and depressed stock price attracted significant interest from potential suitors.

In August, a consortium composed of TPG and Global Infrastructure Partners (GIP) made a non-binding proposal to acquire Asciano for A$4.40 per share. Asciano turned down the proposal, which valued it at A$2.9 billion, as too low.

In November, the Australian Financial Review reported that TPG and GIP were attempting to buy more than A$1 billion worth of convertible notes in Asciano. The parties to the transaction declined to comment on the report.

GIP continues to remain interested in Asciano’s assets, according to a person familiar with the firm, while TPG’s intentions remain unclear. 

A TPG spokesperson did not return a call seeking comment before press time.

Asciano listed on the Sydney Stock Exchange in June 2008 when former parent Toll Holdings decided to offload its infrastructure assets – Pacific National and port operator Patrick – into a separate entity.

The move left Toll as a logistics specialist with a total market value of $8.42 billion and turned Asciano into an infrastructure manager worth $6.83 billion.

Asciano shares, which last month hit a 52-month low of A$.40, ended Monday up 16 percent, closing on A$.72. The company’s market capitalisation at that price was about A$500 million – about a third of the book value of its equity at the end of 2008.