Brookfield Infrastructure Partners' $8.9 billion takeover of rail and port operator Asciano Ltd (ASX: AIO) has run into a road block in the form of Qube Holdings Ltd (ASX: QUB).
Following Qube's decision to amass a 19.99% blocking stake in Asciano and a subsequent announcement last week, Asciano's Chairman Malcolm Broomhead today said his company was considering its options.
"The Asciano board is considering the implications of the Qube acquisition," Mr Broomhead wrote to shareholders.
Qube is a port, logistics and infrastructure business that is likely taking a stance on one of the biggest foreign infrastructure deals in Australian history because it wants to control some of the Asciano businesses.
"Asciano shareholders should consider the further details regarding the Qube acquisition, including Qube's stated intentions and rationale for the acquisition, which are contained in the announcement Asciano released to the ASX on 30 October 2015," Mr Broomhead said.
In the ASX announcement on 30 October, Qube said it had gathered a total interest in Asciano shares of nearly 20% because it believed a combination of Qube and Asciano's Patrick Containers and Terminals businesses are strategically appealing.
"Qube has entered into this transaction to participate in deciding the ownership of Asciano's first class Australian terminal assets," Qube's ASX announcement read. "It believes a strategic combination of Qube with the Patrick Containers Terminals business as well as a small number of assets in the bulk, automotive and general stevedoring ("BAPS") businesses currently owned by Asciano (the "Patrick Businesses") has the potential to create significant value."
In its 2015 financial year, Asciano's Terminals & Logistics and Bulk & Auto Port Services businesses generated a combined $240.2 million in profit (before finance, tax and material items) — equivalent to roughly 30% of the group total. "Qube has no present interest in acquiring any of Asciano's businesses beyond the Patrick Businesses," Qube stated in its ASX announcement.
Shareholders will now be considering the benefits of the $9.05 per share Brookfield bid, as well as any potential regulatory concerns, versus the benefits of possible developments in the proposals of Qube. In the meantime, Mr Broomhead said, "The Asciano Board continues to unanimously recommend that you vote in favour of the Brookfield Scheme in the absence of a superior proposal."
Foolish Takeaway
It is almost always promising if you're a shareholder in a business, and a bidding war breaks out. However, Qube's intention is to own just part of the Asciano group, which has complicated the proposed Brookfield takeover and likely caused shareholders to second-guess their investment.
Overlaid with regulatory uncertainty I am not a buyer of Asciano shares for takeover arbitrage, at today's prices. However, that's not to say a better proposal couldn't eventuate.
