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Urban rail news in brief - July 2015
Inland rail a trifecta for Toowoomba region: mayor
Paul Little's share-swap bid for his joint venture partner,
Patrick Corp, faces a crucial test this week.
Two months ago, when the Toll managing director unveiled his
plan to add Patrick's shipping, docks and container-handling
business to Toll's road and rail networks, investors went ga-ga and
boosted the combined value of market capital of Toll and Patrick by
All that value and then some has now been lost. Toll shares
jumped from $13.58 to $14.67 on the day the bid was announced. They
began sliding at the end of last month and lost 25c on Friday to
close at $12.35. Patrick shares went from $6.45 to $7.38 on day one
of the bid and are now back to $6.53.
What's going on? A poultice of events, beginning with the fact
that investors have finally realised that Australian Competition
and Consumer Commission boss Graeme Samuel has a big say in whether
the deal can actually occur.
The ACCC has blocked Patrick's outright acquisition of FCL, a
privately owned transport group that moves containerised freight
between companies and the trunk transport lines, be they road, rail
or sea, mainly because Patrick is joint-owner of Pacific National,
the biggest rail group in Australia. Toll owns the other half of
The competition regulator's big concern was that Pacific
National would favour a Patrick-owned FCL, in doing so squeezing
other freight forwarders. Toll is already a very big freight
forwarder, so that issue is even bigger if Toll takes over Patrick
and moves to full ownership of PN. The ACCC is also concerned that
Toll would dominate the Bass Strait shipping market, but the PN
problem is the big one.
Problem No.2 for Little should also have been predicted but
initially wasn't. Patrick's two big guns - managing director Chris
Corrigan and chairman Peter Scanlon - are furious about Toll's
offer and are counterattacking.
Patrick is aggressively running a claim that PN is being
overcharged by Toll for freight services in Queensland. If pushed
to the limit, the claim could see the $3 billion PN operation
broken up and its pieces sold to the JV partners. And if that
happens, the ACCC will be less concerned about Patrick buying FCL:
Patrick has now advanced a $32.5 million interest-free loan to FCL
and is negotiating an option to buy it if and when PN is broken up,
after which it will dovetail FCL with the PN rail operations it
That would pitch it head-on against Toll in the land transport
market, a prospect Graeme Samuel no doubt finds intriguing.
The bid itself comes back into focus tomorrow, when Patrick
releases its formal response. Patrick will reject the offer, of
course. But will do so in part by attacking Toll, its accounting
methods, and its growth-by-takeover strategy.
Toll isn't giving up. This week an arbitrator will be appointed
to consider Patrick's claim that PN is being overcharged by Toll
for freight services in Queensland. Patrick claims the matter is
worth $510 million over 20 years and Toll says it is a $20 million
problem at worst.
The arbitrator will have about three weeks to decide if the
dispute is material. If it is, there will be a 14-day cooling off
period and Little and Corrigan will then have a month to resolve
it. If they cannot, the PN agreement calls for a "sale facilitator'
to be appointed within 30 days.
Toll believes, however, that it can take legal action
challenging the process that will extend the PN pricing dispute
well past the closing date for the bid.
Paul Little also still believes Toll can satisfy Graeme Samuel
and do a deal that makes commercial sense. That might be the case
even if the ACCC requires Toll to sell down its stake in PN,
because Toll's main target is Patrick's stevedoring business.
Little also believes that when push comes to shove, Patrick's
investors will see that they must choose between the merger of the
groups or an expensive, continuing war for market share, as Patrick
forces a break-up of PN, acquires FCL, and starts competing for
Toll freight forwarding customers.
Perhaps Little is right. But the sharemarket is signalling that
the Toll boss has a big battle on his hands.
■ ■ ■
The Federal Court last week granted three UK-based Multiplex
executives access to internal Australian Securities and Investments
Commission correspondence about its investigation into what
Multiplex said, and when, about losses on its $1 billion Wembley
What may not have been appreciated is that the legal action has
stalled the Multiplex probe.
In his decision granting the executives access to the
correspondence, Judge Peter Graham queried why ASIC had decided to
ask Britain's Department of Trade and Industry to interview them in
England as part of the investigation instead of bringing them here,
where they have protection against legal action based on
The three executives offered to return to Australia. ASIC
rejected that and offered instead to acknowledge in writing that it
would not seek to use information gained in the UK interviews "in a
criminal proceeding or a proceeding for the imposition of a
Interesting, but the real frustration, for Multiplex one can
only assume as well as ASIC, is that the investigation itself is
basically on hold until the underlying action against the decision
to deputise the UK trade and industry department is either decided
or settled. ASIC expected the interviews to occur two months ago.
The case itself is not scheduled to get on until October 26.
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