Patrick may have early call on Pacific National capacity

Toll Holdings managing director Paul Little said the company would be seeking to have the Australian Competition and Consumer Commission’s veto on its takeover of Patrick Corp tested "as quickly as possible." The ACCC yesterday (Thursday, February 9) opened proceedings in the Federal Court to legally enforce its blocking of the merger However, the Australian has reported that Clause 5.5 of the Pacific National shareholder agreement effectively gives Patrick an early call on half of Pacific National’s capacity at wholesale rates, even ahead of the legal breakup of the joint venture. The clause was revealed after the ACCC filed the joint venture agreement at the Federal Court as part of its statement of claim against Toll. Patrick is unlikely to start underwriting half of Pacific National’s intermodal capacity anytime soon, and agreement on anything between the two partners has proven all but impossible since last August. However, the clause could hand Patrick easily enough intermodal rail capacity for the FCL Interstate Transport Services business that it wants to acquire, and effectively allow it to start competing head on with Toll on the rails before the lengthy court process of dissolving the rail operator. A Patrick spokesman confirmed the company could make use of the provisions. But Toll managing director Paul Little said this morning that this would not be the case. "This is not our interpretation of the clause," he said. The ACCC has gone to court seeking an injunction against Toll acquiring any further interest in Patrick, or taking any steps to increase its control or influence over Patrick. The ACCC will also seek from the court a declaration that any moves by Toll to increase control over Patrick would be breaking s50 of the Trade Practices Act. A directions hearing is scheduled in the Federal Court in Melbourne for February 27 before Justice Merkel. Toll and the ACCC have been in a stand-off over possible legal action, with Toll extending its offer period to March 13 to bring on a challenge from the commission &#8211 which will now place on the regulator the burden of proving the merger would be anti-competitive. It may also put major players in the takeover drama into the witness box, and examine in some detail, the reasons for the ACCC’s decision on the bid. But a competition law expert said that despite the burden of proof issue, the ACCC is likely to prefer being in control of the proceedings and the timing by starting the action themselves. He noted that during the Loy Yang power station case, one of the few competition cases to go the full distance, the ACCC had "sat back and waited for AGL to seek a declarationafter that, the ACCC is always likely to want to be on the front foot. "To defend this, Toll must show there is no lessening of competition in any one of a large number of activities," he said. One exception could possibly turn the case. A substantial amount of evidence would have to be collected, making the case very lengthy, he said.

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