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ASX-listed Qube Holdings is not one to shy away from a deal in the Australian transport sector - however the coal exposure inside Macquarie’s One Rail Australia has given it pause for thought.
While Macquarie’s MIRA and its bankers at Credit Suisse and Macquarie Capital run around drumming up interest in One Rail, Qube is understood to have had an early look but is waiting for more information on exactly what’s up for grabs, in what form and when before getting too excited.
Qube, like a bunch of infrastructure funds, isn’t jumping out of its skin to buy One Rail’s hefty coal network, which carts coal from Hunter Valley mines to the Port of Newcastle and also operates in Queensland’s coal-rich Bowen Basin.
While carrying coal is lucrative - it makes One Rail about $130 million a year at the EBITDA line - it comes with strings attached, particularly for an ASX-listed company. Shares in Queensland coal carrier Aurizon, for example, are down 22 per cent in the past year even though sell-side analysts have its revenue and EBITDA steady across their five year forecast period.
The question for Qube, and other strategic and infrastructure types keeping an eye on the process, is how exactly it could compete for the other half of One Rail; a valuable rail freight line up that runs north/south through the centre of Australia. That bit would be appealing to the ASX-listed Qube, at the right price.
MIRA and its bankers have offered to split the rail freight and coal transport businesses, however there’s little detail on exactly how that would play out.
While carrying coal is lucrative, it comes with strings attached. George Frey
The deliberations come nearly six weeks after Credit Suisse and MacCap sent a 10-page sale flyer to potential buyers, on behalf of their client Macquarie Infrastructure and Real Assets.
The flyer pitched One Rail group as a “unique platform of critical infrastructure with a diverse growth pipeline”, and a top-three player in Australia’s rail sector.
The flyer said One Rail would record $475 million revenue and $235 million EBITDA this year, owned or leased 2460km of track, had 110 locomotives, 2614 wagons and 650 employees.
It said MIRA, which owns 48 per cent of One Rail and manages the other 52 per cent on behalf of Dutch pension fund PGGM, would consider offers for the business as a whole, or separate bids for the coal and non-coal businesses.
This article first appeared on www.afr.com
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