Rail transport company Aurizon Holdings Limited (ASX: AZJ) plunged in early trade today as the company announced the divestment of its Queensland Intermodal Business (QIB).
In an announcement to Australian Securities Exchange, Aurizon Holdings told that it has inked a sale agreement with a holding of Fox Group, Linfox, to sell Queensland Intermodal business (QIB) for $7.3 million. However, Federal Court lifting the interlocutory injunction remains pending for completion.
Aurizon’s sale to Linfox will include freight forwarding and pick-up-and-delivery assets including Trucks, trailers, rail wagons for intermodal containers and heavy lift assets; the access to freight depots in Queensland, required to conduct Queensland Intermodal business including access to the Acacia Ridge Terminal; the transfer of customer contracts and employment including transfer of approximately 190 existing Aurizon employees.
The intermodal freight business of Aurizon offers end to end rail-based logistics solution for the transportation of containerised products as well as palletised goods. Whereas, its Queensland intermodal business provides for the delivery of various product types via railways to the regional centres north of Brisbane.
ASX listed heavy haul railway freight operator Aurizon Holdings Limited has also informed about the provision of hook and pull services to Linfox. It told that under 10-year take or-pay contract with Linfox, Aurizon Bulk will provide linehaul services and some maintenance and terminal services to Linfox with rights for early termination after five years to both the interested parties. But, Aurizon will reportedly retain the existing Intermodal locomotive fleet which is subject to sale option to Linfox after the end of five years.
The acquisition of Aurizon’s QIB business will enable Linfox to become one of the Australia’s leading logistics providers, making a significant penetration into Queensland intermodal freight market. It has been understood that sell off of QIB comes as a part of Aurizon’s divestment strategy for its Intermodal business which was announced in August 2017.
Aurizon eyes this deal as a way better to earlier Aurizon’s decision to shut down the unit which would have resulted into an estimated $30-40 million closure costs along with the potential loss of over 300 jobs.
The continuity of Queensland Intermodal business did not only benefit Queensland regional customers but also the employees of Aurizon Intermodal. It has been said that 120 of such employees will be transferred to Aurizon Bulk business while remaining ~190 will continue at QIB with new owner Linfox.
Moreover, Aurizon also provided an update on its Acacia Ridge Intermodal Terminal. It told that Aurizon and Pacific National seeks for Federal Court clearance for the sale of Acacia Ridge terminal in exchange of $205 million consideration.
Until the final orders of Federal Court in respect of lifting the interlocutory injunction, Aurizon is forced to operate QIB. The Federal Court Proceedings is due to be held on 19 November 2018 to transact both the orders.
However, the sale of Queensland Intermodal business is expected to be completed by early 2019, subject to pending court orders and ACCC approval.
On the news of QIB sale, Aurizon’s share price fell 0.746% to $3.990 on 12 October 2018 (1:11 PM AEST). The stock has seen a performance change of -17.62% over the past one year. It is currently trading at a PE of 16.760 x with market capitalization of $8 billion.
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