AusRAIL, Market Sectors

Game on again as ACCC decides against court fight

<p>Patrick Corp could progress mergers with FCL Interstate Transport Services and Linfox, or seek an overseas suitor as it digs in once again to fend off Toll Holdings after the Australian Competition and Consumer Commission’s stunning weekend reversal of its veto on Toll’s hostile bid. </p> <p>Sources said that Patrick could be looking to develop "two competing options for shareholders" to look at.</p> <p>ACCC chairman Graeme Samuel said Toll’s offer to sell 50% of Pacific National "was the fundamental turning point" in the ACCC’s backflip. </p> <p>Mr Samuel also said Toll had given signed undertakings that it would not use control of port operations to discriminate in favour of its own land forwarding "on service or price". </p> <p>In January, the ACCC rejected the Toll bid in a statement of broad concern over vertical integration in transport, and stressed it wanted to see a two-player market.</p> <p>Mr Samuel said on January 18: "The ACCC believes that the industry is moving towards a more integrated transport model, however the ACCC is concerned that this acquisition will prevent Toll and Patrick from developing their own separate integrated systems in strong competition with each other."</p> <p>Until the weekend, it looked as though the ACCC was going to take its concerns to a full trial in the Federal Court. </p> <p>Mr Samuel told the ABC’s <em>Business Sunday</em> yesterday (Sunday, March 12): "In terms of the integrated logistics issue, while we had concerns, it was difficult to substantiate those concerns with some serious evidence that showed there was a difficulty, particularly having regard to the existence of a serious competitor in P&#38O". </p> <p>An analyst who asked not to be named said: "The way that the ACCC played the integrated logistics market &#8211 which is longhand for the port activity &#8211 was always the weakest part of its case in the Federal Court. </p> <p>"Once the ACCC thought it could no longer win on the east-west rail route because of the new undertakings, then it did not believe it could win on the other issues.</p> <p>"It would have difficulty proving its arguments and bringing evidence, so it has decided to take what it can and cut its losses."</p> <p>However, it is still considered unusual for the ACCC to accept behavioural, rather than structural undertakings as it has now done on ports. </p> <p>Toll’s detailed undertaking is due to be posted on the ACCC website today.</p> <p>It will include giving up five train paths on the east-west rail route, offering 12 locos &#8211 enough to run a daily service &#8211 and access to terminals in Sydney and Melbourne. </p> <p>It also includes an undertaking not to exercise Patrick’s option to buy FCL, which Patrick itself is due to discuss with the ACCC tomorrow and which could become part of Patrick’s defence.</p> <p>Toll is to put up a revised offer in the next two weeks. </p> <p>Analysts said Toll would have to offer in the region of $8 per share &#8211 still mostly in scrip, and with strong reliance on a promised increase earnings per share, while maintaining the status quo of half-ownership of Pacific National. </p> <p>A major stumbling block to Toll getting 90% control of Patrick will be the 11% held by Patrick directors. They could take legal action to prevent the asset sales needed to keep the ACCC happy. </p> <p>Toll has, however, agreed with the ACCC to compensate Patrick’s minority shareholders for any losses they suffer on the sale.</p> <p>In this morning’s trading, Toll was up $1.30 to $14.25 a share, and Patrick up 92 cents to $7.90. </p> <br />