Shareholders in Asciano Ltd (ASX: AIO) are in for a bittersweet moment after the port and freight operator was forced to reveal that it has received a $9 billion takeover offer from US-listed Brookfield Infrastructure Partners.
Press speculation about behind the scenes wheeling and dealings between the two parties prompted Asciano to announce the bid proposal but the company added that the publicity could have killed any chance of a deal as it could prompt Brookfield to walk away as the stock becomes too expensive.
That's already happening with shares in Asciano surging 21% to $8.07 during lunchtime trade, but this is below Brookfield's indicated offer price and shareholders will face the agony of trying to second guess Brookfield's next move.
Brookfield is offering cash and scrip that implies an offer price that is 36% above Asciano's last closing price of $6.65 and that is probably good enough to convince most shareholders to accept the deal given that the offer puts the stock on a 20x price-earnings multiple and is nearly a 28% premium to the average broker price target on Asciano of $7.08 a share.
This is a good outcome for Asciano shareholders and it will get better if the news draws out any other potential bidders for the company.
That's not totally out of the question as logistics is an industry that is targeted by offshore buyers. Toll Holdings Ltd was bought by Japan Post for $6.5 billion earlier this year and shares in fellow port operator Qube Holdings Ltd (ASX: QUB) jumped 7% to $2.52 in sympathy.
One potential stumbling block to Brookfield's bid is the US scrip investors here have to accept. Many investors, including fund managers, will not want to or cannot own US-listed stocks. If the deal is to succeed, there needs to be a way for local investors to opt out of the scrip component.
Brookfield also cannot afford to take the bid hostile as I don't think it has the firepower to swallow Asciano without the support of its board. Brookfield has a market capitalisation of $US7.2 billion ($9.4 billion) compared with Asciano's $6.3 billion. Asciano also has $3 billion in debt that Brookfield has to take on if it buys the company.
But a straight takeover may not be the only option for Brookfield. The Australian Financial Review reported that the US bidder was trying to buy Asciano's Patrick stevedoring business that could be worth in excess of $1 billion.
It could be too late to buy Asciano as the stock is probably fully valued on fundamentals after today's surge, but as I mentioned in another article today, Qube remains attractively priced after it was sold off 13% in June.
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