Patrick makes major move on domestic transport with FCL talks

<p>Patrick Corp is negotiating to take control of the Gibbins family’s interstate container operator FCL, in a move that will have a further major impact on domestic rail freight transport. </p> <p>The stevedoring giant told the ASX late yesterday (Tuesday, March 8) that it has entered into an agreement with FCL’s owners to discuss the purchase of 100% of the business, with a final price yet to be agreed. </p> <p>It said that FCL has annual revenues of $170m.</p> <p>FCL’s major business is east-west interstate container transport and the company has consistently kept a market share of 30% since it began 30 years ago.</p> <p>It is viewed in the industry as Australia’s largest domestic container operator.</p> <p>Observers say that the move will now put Patrick into head-to-head competition with its rail operating partner Toll for interstate freight carryings.</p> <p>However, it will also make it more difficult to for Queensland Rail and ARG to find volume with which to expand their own interstate services.</p> <p>Linfox has also become an important user of FCL services in some areas, and along with SCT and K&#38S Freighters is also a rival operator on the east-west routes. </p> <p>FCL managing director Bill Gibbins said that he is "bowing to inevitable commercial pressure" to consolidate the transport and logistics industry to fewer players. </p> <p>He said that the deal "is not yet over the line", and that FCL has plans to continue if the takeover does not go ahead. </p> <p>But margins are "now wafer thin or non-existent", Mr Gibbins said. "Everybody who is enjoying the fruits of reduced supply chain costs has to recognise the result will be fewer supply chain players." </p> <p>Compliance costs in different states, despite attempts to harmonise them, create more overheads which turnover could not absorb, he said. </p> <p>Mr Gibbins predicted that if Patrick enters the domestic transport area, it can only expand and get bigger. </p> <p>"It turns Patrick from a passive investor in Pacific National into an active investor and user of Pacific National," he said. </p> <p>FCL also has two major railside hub facilities in central New South Wales. </p> <p>The Blayney hub is Australia’s largest inland export shipping hub with an estimated 85% of export rail volumes from the central west, now hauled by Patrick Rail after Pacific National pulled out of port-based services last year. </p> <p>The Parkes terminal is used for double-stacking domestic container trains to Perth, and is the focus of major hub plans. </p> <p>However, much of FCL’s other national rail business is handled at common-user rail terminals, operated by Pacific National or by other train operators. </p> <p>It seems likely that a move of this size will be referred to the Australian Competition and Consumer Commission. </p> <p>FCL under Mr Gibbins has developed a reputation for innovation with cargo handling and container equipment, as well as for its Parkes hub development. </p> <p>The company operates about 3,500 domestic containers in 20, 40, and 48 ft dimensions, many of them specialised. </p> <p>It now handles a mix of LCL as well as its original FCL namesake business.</p> <p>Patrick managing director Chris Corrigan said at the company’s AGM last month that Pacific National’s intermodal business would depend on terminal developments. </p> <p>He appears to have taken a major step towards getting the volumes to develop more terminals. </p> <br />