Brookfield-led group to buy Australian container terminal operator Asciano

TORONTO – A consortium led by Brookfield Infrastructure has an agreement to buy Asciano Ltd. in a friendly deal that values the Australian rail and container terminal company at the equivalent of C$11.6 billion.

Asciano’s Patrick subsidiary owns and manages container terminals in Sydney, Melbourne, Brisbane and Perth and its Pacific National subsidiary operates a rail transportation business with 664 locomotives that operate across Australia.

“We are pleased to recommend to our shareholders this compelling transaction with Brookfield Infrastructure,” Asciano chairman Malcolm Broomhead said in a joint statement issued Monday.

The consortium is offering Asciano shareholders the equivalent of C$8.85 per share (A$9.15) — partly in cash and partly in units of Brookfield Infrastructure (TSX:BIP.UN).

The offer is 39 per cent above the 30-day average leading up to July 1, when negotiations between the companies were disclosed, and 12.8 per cent above the closing price of Asciano shares prior to Monday’s announcement.

The Brookfield Infrastructure units, which would be listed in Australia as well as Toronto and New York, had been worth C$54.99 at the close of trading on Friday but were down about two per cent at midday Monday.

In addition to the consortium’s payments, Asciano shareholders would receive a special dividend from the Australian company that could be worth up to 39 Australian cents per share.

Brookfield Infrastructure says the deal gives Asciano a total value of A$12 billion, including A$3.1 billion of assumed debt.

The Bermuda-based affiliate of Brookfield Asset Management (TSX:BAM.A) would own 55 per cent of Asciano with an investment of US$2.8 billion, or about C$3.67 billion at current exchange rates.

A further 23 per cent of Asciano would be owned by Brookfield managed private funds and two unidentified institutional partners would own 11 per cent of the company.

The deal is subject to review by Australia’s merger and competition commission, and foreign investment reviews in Australia and New Zealand. It also requires approval from at least 75 per cent of votes cast by Asciano security holders at a meeting to be held in mid-November.

Brookfield Infrastructure CEO Sam Pollock said the Asciano acquisition provides the basis for growth in two global business segments — container terminals and rail logistics.

“Combining Asciano’s Australian container terminals with our existing assets in North America and Europe provides the foundation for a global container platform,” Pollock said in a statement.

“In addition, Asciano’s (rail freight business), together with our Australian and Brazilian logistics businesses, create a powerful, international rail logistics business.”

In its most recent financial report, Brookfield Infrastructure announced it generated US$394 million of funds from operations in the first six months, including US$208 million in the three months ended June 30. Half of the quarter’s funds from operations were generated from its Transport segment, which includes a Brazilian rail operation acquired in August 2014.