ACCC holds up $12 billion Asciano takeover

An Australian regulator has raised antitrust concerns over a proposed $6.5 billion takeover by Canada’s Brookfield Asset Management of local freight firm Asciano Ltd, delaying the country’s biggest inbound M&A deal in four years. The Australian Competition & Consumer Commission said the deal could lessen competition in rail haulage in Queensland and Western Australia states and sought further feedback.

“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 WA and Queensland”, ACCC chairman Rod Sims said, who will announce a final decision on December 17.

However, today the ACCC said Brookfield would end up owning an Asciano’s Pacific National above rail business. This will enable Brookfield to gain control of the Pacific National rail unit and stevedoring businesses at ports of Melbourne, Sydney and Brisbane.

In cases where a company wants to acquire several parts of an industry, the ACCC is typically hesitant to approve the deal, concerned that other players would be shut out, Foster said. The statement reveals the concerns of market participants and expressed the uncertainty whether Brookfield could overcome the regulator’s concerns.

Asciano’s shares fell eight percent to AU$7.88 on Thursday – its lowest in the last three months. On Wednesday, the target’s shares rose 2 cents to A$8.53, below the offer price of A$9.15.

The latest acquisition bid offer will be the group’s largest in Australia, exceeding its previous A$4.8 billion offer made in 2007 for Multiplex Group, the builder of London’s Wembley Stadium.

The deal was first revealed in July with Asciano recommending the cash and stock transaction, which would allow the Canadian asset manager to add Australian container terminals to Brookfield’s hubs in North America and Europe.

Making an interim announcement this morning, the competition watchdog has noted market participants, including the farm sector have “raised strong concerns about Brookfield’s ability and incentive to favour Asciano’s rail freight business Pacific National if was to take ownership”.

While there are state access regimes-frameworks that aim to ensure effective and fair access to the respective state’s rail network-in place for Brookfield Rail and DBCT, they deal mainly with market failure issues inherent for any monopoly infrastructure, Sims said.