Aurizon’s (ASX:AZJ) A$2.35B One Rail acquisition under ACCC scanner

Highlights

  • Australian Competition and Consumer Commission (ACCC) seeks answer to a list of 21 questions concerning the AU$2.35 billion acquisition of One Rail Australia (ORA) by rail freight giant Aurizon.
  • The competition regulator asks whether the proposed divestment of ORA’s NSW and Qld business (East Coast Rail or ECR) was necessary (and sufficient) to resolve any competition concerns.
  • One Rail Australia is a robust business with an estimated EBITDA of AU$220 million for CY2021.

Australia’s Competition watchdog Australian Competition and Consumer Commission has posed a list of 21 questions concerning the AU$2.35 billion acquisition of One Rail Australia (ORA) by rail freight giant Aurizon Holdings Limited (ASX:AZJ) from Macquarie’s MIRA and Dutch pension fund PGGM.

In an announcement dated 22 October 2021, Aurizon shared that it has entered into an agreement with Macquarie Asset Management, to acquire One Rail Australia (ORA) for AU$2.35 billion. The Company stated that Aurizon will divest ORA’s NSW and Qld business via a demerger or a trade sale, whichever creates greater value for the Company’s shareholders.

Today, in its public informal review, the competition regulator wanted to know whether the proposed divestment of ORA’s NSW and Qld business (East Coast Rail or ECR) was necessary (and sufficient) to resolve any competition concerns. Besides, the two other areas that ACCC laid stress on were: if Aurizon’s acquisition would affect competition for bulk coal including the bulk rail haulage services, and the impact of this purchase on prices, services and/or access.

It is to be noted that ASX-listed Australia-based rail freight operator offers rail haulage and transport services in NSW, Western Australia and Queensland. ORA comprises bulk rail haulage and general freight assets in South Australia (SA) and the Northern Territory (NT); and a haulage business in New South Wales (NSW) and Queensland (Qld).

Aurizon’s proposed solution to divest ORA’s NSW and Queensland business is to give the competition regulator a court enforceable undertaking.

Nonetheless, the Company is planning to do this by selling One Rail east coast to either an independent purchaser or an ASX-listed company to convey that the divested business would be separate from Aurizon.

Today, the stock AZJ closed 0.903% higher at AU$3.350 per share on ASX.

Meanwhile, the ACCC has sought response to its questions by 5 PM, 21 January 2022.

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