AusRAIL, Market Sectors

ACCC points in detail, with a slap for Toll’s negotiating

<p>The Australian Competition and Consumer Commission has comprehensively knocked back Toll’s $4bn takeover offer for Patrick.</p> <p>The ACCC said the undertakings offered by Toll were not considered "nearly sufficient" to deal with the competition issues concerned. </p> <p>This was despite Toll’s apparent confidence that it would persuade the ACCC after 17 earlier merger approvals.</p> <p>Toll chief executive Paul Little had opened the bid in August by saying that there was minimal overlap between the companies and that he was confident of approvals within weeks, even without asset sales.</p> <p>But the commission yesterday made a point by point rejection of all the undertakings eventually given by Toll on east-west rail rolling stock disposals and train paths, and on asset sales on the Bass Strait and auto logistics. </p> <p>The ACCC also made it clear it had broad concerns over wider vertical integration issues in terminals and inland transport and terminals. </p> <p>The ACCC said that it while the transport industry was moving towards greater integration, "the ACCC is concerned that this acquisition will prevent Toll and Patrick from developing their own separate integrated systems in strong competition".</p> <p>It said the combined group would control significant rail and wharf "bottleneck" infrastructure to shut out rival transport and forwarding operators. </p> <p>The ACCC said Toll had offered no undertakings to address these concerns. This was despite a number of questions on vertical integration and the waterfront raised by the ACCC in its issues paper last November.</p> <p>Significantly, given Mr Little’s confidence in getting approval, the ACCC also criticised Toll’s strategy with the regulator of offering repeated small increments in its undertakings, saying the process was "undesirable and inefficient".</p> <p>In some of the ACCC’s comments on Toll’s undertakings:</p> <p>- The commission said undertakings on east-west rail amounted to only "a disparate collection", rather than anything that would improve the prospect of competion. The nine locos offered would not be enough to start a new service.</p> <p>The commission said the undertakings on train paths would be difficult to enforce, and that SCT did not create direct competition because it was not a containerised operation and did not deal with the forwarder market.</p> <p>The commission said the North Dynon yard, which Toll had offered to give up, was ineffective for competing east-west operations.</p> <p>The commission said rival forwarders could be left "untenable" by even very small variations in timetable by Pacific National.</p> <p>The commission said offering to lease the siding at the Minto terminal in Sydney to Macarthur Intermodal Shipping Terminal did not give enough certainty for capital investment. </p> <p>The commission said that even if Toll sold the Patrick ships on the Bass Strait, there was a high chance that a new operator could quit because of its "inabilility to funnel volume" and remove a major competitor on the sea leg. </p> <p>The commission said the divestment of Patrick’s auto logistics assets offered would not be enough to allow existing or new players "to constrain Toll’s pricing to a significant degree", although it said the offer to divest the stake in Prix Car did address a specific concern. </p> <p>Patrick managing director Chris Corrigan said the Toll bid "has been a failure of strategy and execution".</p> <p>Toll put out a three-line statement saying that "it is considering its options" in light of the ACCC’s decision.</p> <br />