ARG on board Queensland Rail
THE competition regulator has given the green light to Queensland Rail's takeover of Australian Railroad Group, paving the way for QR to challenge Pacific National's market dominance.
The move came as Patrick Corp's defence against Toll Holdings' takeover bid received another blow. The Takeovers Panel rejected Patrick's application to delay Toll's seventh supplementary Bidder's Statement. Pacific National is a Toll-Patrick joint venture.
The Australian Competition and Consumer Commission said it would not oppose the $1.3 billion acquisition of ARG by QR and Babcock & Brown.
ARG, which operates mainly in Western Australia, is owned by Wesfarmers and US group Genesee & Wyoming. QR will buy the "above rail" business, such as rolling stock and terminals, while B&B will buy the "below rail" assets about 6000 kilometres of rail track and associated infrastructure.
ACCC chairman Graeme Samuel said the competition concerns focused on bulk rail freight. However, QR had never won a bulk rail freight tender in WA and ARG had never won a similar tender in Queensland. "This suggests that, in practice, competition between ARG and QR is very limited, and is likely to remain so in the future," he said.
Mr Samuel said this factor, plus competition from PN and possible new players, meant the deal would not substantially lessen competition. Similarly, B&B does not own a rail business in WA, so buying the track would not affect competition, he said.
With the ARG takeover, QR will obtain 121 locomotives, more than 2000 wagons, depots and 820 staff. It will also inherit user agreements, with B&B setting charges on the lines. The agreements are overseen by state regulators.
The ARG-QR tie-up will create a monster freight business. QR is the largest freight carrier in the country, with coal accounting for 156 million tonnes of its 175-million-tonne freight load last year. ARG will add 50 million tonnes of grain and minerals, but the bulk of its business is state-based.
QR needs a coast-to-coast container capacity to challenge PN. The ARG deal will increase its critical mass to support the terminal and train investments it will need to fulfil that ambition.
The Takeovers Panel said it rejected Patrick's March 22 application because Toll undertook to extend the closing date of its offer by a month to April 28.
The panel said this would give Patrick long enough to consider the revised bid. Patrick should also have the knowledge to evaluate Toll's undertaking to sell 50 per cent of PN and to assess Toll's acquisition of SembCorp Logistics. Patrick in its application argued that Toll's seventh supplementary bid was materially different to its original offer of September 29, and thus required more time to evaluate.
The panel also accepted Toll's undertaking to allow a withdrawal right for all Patrick shareholders who accepted Toll's offer on or before March 22.
Toll's shares closed 28¢ lower yesterday at $13.24 while Patrick's shares were down 3¢ to $8.12.