AUS
NZ
UK
CA
USA
IND
Highlights
- Aurizon has signed a binding sale agreement to acquire East Coast Rail.
- Following the news, shares of Aurizon were trading over 3% on the ASX today.
- The company anticipates receiving AU$425 million in cash proceeds from this deal.
Today morning (16 December 2022), Australian rail freight operator Aurizon Holdings Limited (ASX:AZJ) announced via an ASX filing that the company has entered into a binding sale agreement with Magnetic Rail Group Pty Ltd (Magnetic). Aurizon has signed this binding agreement to acquire the East Coast Rail (ECR) business.
Following anticipated completion adjustments, Aurizon will receive cash proceeds totalling about AU$425 million, equivalent to the equity value of ECR.
After the news surfaced, shares of Aurizon were spotted trading 3.360% higher on the ASX, priced at AU$3.845 apiece as of 2:35 PM AEDT. Including today’s rise, the share price of Aurizon has increased by 1.86% in the last five trading sessions and 4.63% in a month. On the contrary, Aurizon’s shares dropped by 1.54% in the previous six months.
Additionally, on a year-to-date (YTD) basis, Aurizon’s share price has improved by 6.96% and 13.95% in a year around the same time.
Details of Aurizon and East Coast Rail sale agreement
As per the binding sale agreement between Aurizon and Magnetic to acquire ECR, the company will take over ECR's current financing facilities, initially worth AU$500 million. The agreement is expected to be completed in early 2023 with no capital gains tax. Additionally, both parties will postpone AU$125 million of the proceeds for a year.
Magnetic is a wholly owned subsidiary of Magnetic Infrastructure Group Pty Ltd. ECR, on the other hand, is the coal transport division of One Rail Australia, with operations in Queensland and New South Wales. As part of its acquisition of One Rail Australia, Aurizon has signed a compliance undertaking to the Australian Competition and Consumer Commission (ACCC). The ACCC must approve the sale of ECR before it can go through.
Following the ECR sale, Aurizon will utilise the profits to pay down its debt before reinvesting them as part of its available capital following its capital allocation strategy. Aurizon indicated disclosing the expected growth capital for FY23 as well as the interim dividend at the announcement of the FY23 interim results in February 2023.
Commenting on Aurizon and ECR deal, Andrew Harding, CEO and managing director of Aurizon said:
Image Source: © 2022 Kalkine Media ®
Data Source: Company announcement dated 16 December 2022
