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It's the takeover you make when you're not allowed to take over. Patrick Corporation has announced an "alliance" with FCL Interstate Transport, the freight fowarder it has unsuccessfully tried to purchase.
In a statement to the Stock Exchange last night, Patrick said the companies had agreed to form an alliance "under which they will work together to improve each other's services".
The competition watchdog blocked an initial bid by Patrick to take control of FCL, though Patrick say it is in "ongoing discussions to preserve Patrick's ability to acquire FCL's assets".
Earlier this week Toll Holdings, which has launched a hostile takeover bid for Patrick, demanded answers on what it said was an exclusivity agreement for Patrick to buy FCL.
Toll last night said the alliance was destined to fail.
The alliance is for an initial term of six months, but can be renewed for two further six-month terms.
It also includes a loan to FCL of up to $32.5 million for a term of 18 months. Patrick say this is for FCL to refinance its existing borrowings and provide further funding for working capital.
The alliance will provide "integrated logistics offerings" for warehousing, international freight forwarding, shipping, wharf services, rail forwarding and domestic line haul services.
It will also develop track and trace interfacing, inter-hire of resources and equipment, combining sourcing of consumables and capital equipment to lower costs, sharing expertise on operational matters and joint marketing initiatives.
"The alliance with FCL is an important step for Patrick in continuing to expand its freight forwarding operations," the statement read.
A spokesperson for Toll says it is a desperate attempt to frustrate Toll's offer for the company.
It says the deal breaches Toll's offer conditions for Patrick. Toll could elect to take the matter to the Takeovers Panel.
"The uncommercial and underwhelming nature of the Patrick proposal is further evidence of Patrick's lack of credible alternatives to the Toll offer," the spokesperson says.
"It simply underscores that Patrick is attempting to mimic Toll's strategy of combining land-based logistics with container stevedoring capabilities — a complete strategy U-turn by Patrick in less than seven weeks since the announcement of Toll's offer, when Patrick criticised Toll's offer as diluting Patrick shareholders' exposure to its ports business."
Toll also criticises Patrick's multi-million dollar investment in FCL, saying it amounts to an interest-free loan. Patrick acknowledges the deal will produce no material financial benefit to shareholders.
"Toll notes that interest free loans are rare outside the charitable sector of the economy, and on the odd occasions they do arise in commercial activity they are usually characterised as equity," the spokesperson says.
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