Freight Rail

Aurizon cancels sale of Queensland Intermodal to PN, Acacia Ridge deal still on

Aurizon train on Queensland Rain Network. Photo: Aurizon

Aurizon has cancelled one of its two intermodal business sales with competitor Pacific National, after the competition watchdog rejected both moves in July.

PN and Aurizon announced a pair of deals worth $225 million in 2017.

A partnership of Pacific National and Linfox were to buy Aurizon’s Queensland Intermodal business, while Pacific National was set to buy Aurizon’s Acacia Ridge terminal.

The Australian Competition and Consumer Commission rejected both deals on competition grounds in July.

Aurizon will persevere with the Acacia Ridge deal, but said on August 13 it had cancelled the sale of Queensland Intermodal due to the ACCC’s objection, and plans to close the business.

The Supreme Court, however, has approved the ACCC’s bid for an interlocutory injunction to stop Aurizon from closing Queensland Intermodal.

The court’s decision, handed down on August 13, means Aurizon must continue operating its Queensland Intermodal business while the ACCC’s objection to the sale is heard.

Aurizon has refunded a $10 million payment to Pacific National as a result of the cancellation, but said a $35 million payment made ahead of the Acacia Ridge sale remains non-refundable.

“On 12 August 2018 Aurizon provided PN with a notice to terminate the Business Sale Agreement for the Queensland Intermodal business, with effect from 13 August 2018,” Aurizon said in its Annual Report for FY18.

“It is Aurizon’s intention to not contest clearance of the transaction through the Federal Court and to exit the business.

“The Business Sale Agreement for the Acacia Ridge Terminal remains in place while Aurizon seeks clearance of that transaction, and the remainder of the consideration received for the transactions to date ($35m) is not refundable.”

The ACCC in July not only rejected both sales on competition grounds, but launched Federal Court action against Aurizon and Pacific National “for allegedly reaching an understanding… that had the purpose and/or would be likely to have the effect of substantially lessening competition in the supply of intermodal and steel rail linehaul services throughout Australia”.

The crux of the competition watchdog’s claim is that early in the sale process, Aurizon allegedly agreed to make Pacific National the only candidate to buy the businesses, in a mutual effort to eliminate potential new competition in the Australian rail market.

“At all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive,” ACCC chairman Rod Sims said. “The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business.

“However, the evidence makes it clear that it was more lucrative for Aurizon to agree to sell parts of its intermodal business to its closest competitor, and close other parts of that business, than it was to sell the whole intermodal business to a potential new entrant.”

Sims said the proposed sales would make Pacific National the monopoly operator of intermodal rail linehaul on the North Coast Line servicing northern Queensland, and would cut the number of players in Australia’s interstate intermodal market from three to two (with SCT Logistics being the other player).

The ACCC is seeking declarations, pecuniary penalties, costs, and orders from the Federal Court restraining Pacific National from acquiring Acacia Ridge and Aurizon’s Queensland intermodal business.

When the sale was announced last August, Pacific National boss Dean Dalla Valle said the Acacia Ridge site “supports Pacific National’s goal of providing consistent and reliable freight rail services to our customers”.