Toll offers concessions on Patrick bid

Toll Holdings has offered a range of concessions to the Australian competition regulator in an attempt to win approval for its hostile $4bn takeover bid for Patrick, but its rival is not impressed. Toll has offered to sell assets and businesses to ease concerns that a merger would give it a stranglehold on rail freight between Perth and the eastern states, shipping on the Bass Strait and the delivery of motor vehicles from manufacturers to the car yards. Late last week, Toll received feedback from the Australian Competition and Consumer Commission on the undertakings it offered in response to the watchdog’s statement of issues. As a result of that feedback Toll has proposed revised undertakings. East-west rail Issues &#8226 Toll will increase the number of locomotives it will lease to a third party from six to nine. &#8226 Toll will amend the train path variation mechanism set out in Annexure A to the undertakings, to address issues, which have been raised with it. In its first submission to the ACCC, the Australian Rail Track Corporation raised concerns that it could not vary permanently a Pacific National train path. The amendment gives it that ability and will assist in creating more available paths at preferred times. &#8226 Toll will terminate its lease of the Dynon Terminal, also sometimes known as the North Dynon Terminal. This will mean that control of the terminal reverts to VicTrack, which can now establish a common user terminal or lease the terminal to a third party . &#8226 Toll will cause Pacific National to extend the present hook and pull arrangements, which are in place between Specialised Container Transport and Pacific National until such time as SCT’s newly ordered 11 locomotives are operational and available for service. This will ensure that SCT has an ongoing supply of locomotives to run its services while its new locomotives are being built. Bass Strait Shipping &#8226 Instead of selling purely assets, Toll will cause Patrick to sell its Bass Strait Shipping business excluding the Patrick freight forwarding arrangements. &#8226 To provide greater flexibility to buyers, Toll will offer to sell either the berthing rights of Patrick at Devonport or the berthing rights at Burnie. In addition, the entire area currently occupied by Patrick at Webb Dock East will be included in the sale. Auto-Logistics &#8226 In addition to selling its interest in PrixCar, Toll will cause Patrick to sell all of the assets used by Patrick exclusively in the transport of domestically manufactured vehicles for domestic sale together with the relevant contract rights. But Patrick Corporation has criticised the Toll proposals, saying the latest round of undertakings to the ACCC present its shareholders with "a complicated, confusing scenario", which increases uncertainty about Toll’s ability to meet the conditions of its bid for Patrick. "Toll continues to narrowly confine its undertakings to the regulator, leaving major gaps in their response to the core issue of market dominance resulting from their takeover bid," the company said in a statement. "Significantly, Toll has ignored the issue of freight forwarding in Tasmania, which the ACCC has identified as a barrier to approval. "Toll also continues to largely ignore the competition issues arising from full ownership of the major rail freight terminals in Australia’s capital cities." Patrick managing director Chris Corrigan said the offer of access to North Dynon terminal in Melbourne illustrated "the disingenuous nature of their approach". "The limited size of the North Dynon depot makes it effectively unusable for a complex interstate rail operation without major capital investment," Mr Corrigan said. It was his view that the other undertakings to sell Patrick’s assets could only be delivered in the context of 100% ownership of Patrick. "Given the stated intention of Patrick directors who speak for nearly 10% of the company not to accept the Toll offer, these undertakings are likely to be futile," Mr Corrigan said.

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