GIP rivals Brookfield with $6.3bn Asciano bid

A dramatic head-to-head is taking place Down Under as the world's two largest infrastructure fund managers sharpen their bids for one of Australia's largest rail and port operators.

A consortium comprising New York-based Global Infrastructure Partners (GIP) submitted a $6.3 billion offer for Asciano in November, turning up the heat on what is shaping into a bidding war for the Sydney-based company since Brookfield Infrastructure Partners (Brookfield) showed similar intentions in August.

GIP is part of a group led by Australian logistics firm Qube Holdings (Qube) that also includes the Canada Pension Plan Investment Board (CPPIB), while Brookfield is partnering with the British Columbia Investment Management Corporation and Singapore's GIC to bid for the business.

With an implied value of A$9.25 ($6.65; €6.25) per Asciano share, Qube's non-binding offer is only slightly higher than the A$9.22 per share offer made by Brookfield, which Asciano's board has approved and continues to unanimously favour.

The Qube-led consortium, however, could enjoy a strong advantage in its quest to buy the asset as it faces less of a regulatory hurdle.

In October, the Australian Competition and Consumer Commission (ACCC) raised concerns about Brookfield's offer over competition issues, since the deal would give the firm ownership of Asciano's Pacific National above-rail business.

Brookfield already operates Pacific National's rail network in Western Australia (Brookfield Rail) which is used to transport coal to Darlymple Bay Coal Terminal, another asset Brookfield operates under a long-term agreement.

“The ACCC is concerned that 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,” the Commission's chairman, Rod Sims, said in a statement.

The Commission was due to issue a final decision on December 17.

This has so far failed to dampen Asciano's support for Brookfield's offer. “The Asciano Board is considering this proposal,” the Sydney-based company said in a statement referring to Qube's offer. “In the absence of any superior proposal capable of acceptance, the board continues to unanimously recommend the Brookfield proposal announced on 9 November 2015.”

Asciano would have to pay Brookfield a break fee of $88 million should it back another proposal, according to Asciano’s chief executive John Mullen.

Qube's informal offer is just one of a series of countermoves Brookfield and Qube have engaged in since August. In October, Qube joined forces with GIP and CPPIB to acquire a 19.99 percent stake in Asciano, which industry observers at the time rightly interpreted as a move to block Brookfield's offer. The following month, Brookfield built up its position in the company, acquiring a 19.2 percent stake for a total of $1.2 billion.

Asciano's port and rail assets in Australia include container terminal operations in cities including Sydney, Melbourne, Brisbane and Perth, with a capacity of approximately 4.9 million TEUs (twenty foot equivalent units) as well as port, terminal and supply chain services supporting shipping lines, importers, exporters, freight forwarders and customs brokers.

It also oversees nationwide rail haulage operations comprising 664 locomotives and over 14,000 wagons with the capacity to haul 180 million tons of freight diversified across mineral and bulk haulage, steel and intermodal.

In addition to their rival bids for Asciano, Brookfield and GIP are also competing in the market as they seek to raise new infrastructure funds.

GIP, which in October 2012 set the record by raising the largest-ever infrastructure fund, is targeting $12.5 billion for GIP III – roughly 25 percent higher than its previous fund which closed on $8.25 billion.

Brookfield, in turn, has begun fundraising for Brookfield Infrastructure Fund III, aiming for $10 billion and a hard cap of $12 billion. The Canadian alternative investment firm raised the asset class's second-largest fund at $7 billion in October 2013.