Asciano Talk Fails To Impress

Sydney Morning Herald

Wednesday November 5, 2008

Scott Rochfort

INVESTORS have given a lukewarm reception to speculation that the Asciano Group received a second offer from a private equity consortium led by the Texas Pacific Group.

Shares in the debt-laden rail and ports operator fell 9c to $2.11 yesterday as Asciano's chairman, Tim Poole, played down the significance of a phone call he received from the consortium last Friday. "People come to talk to us about different things from time to time but that's all it is," he said.

Mr Poole, who was enjoying the Melbourne Cup holiday in Victoria, appeared to be unaware of a report in The Australian Financial Review which said TPG had offered to buy $1.25 billion worth of convertible notes in the ports and rail operator. "I actually haven't seen the paper today," Mr Poole told the Herald.

The report said TPG, GE and the Credit Suisse-backed Global Infrastructure Partners (GIP) pitched the offer last Friday in a phone call to Mr Poole.

Mr Poole said Asciano, having already rejected a $4.40 a share takeover bid from TPG and GIP, was committed to seeking an outside investor to invest in one of its businesses. "We are fully committed to our monetisation process and that's the path we're going down," Mr Poole said.

TPG declined to comment on the report. Asciano says it prefers to raise capital from a strategic investor who will be secured against a shareholding in one of its ports or rail businesses.

This would be far more attractive than Asciano having to raise capital through a share issue, given that its shares have already plunged more than 80 per cent since June last year.

Faced with a potential cash shortfall of $1 billion, Asciano would dilute its shares by about two-thirds if it was forced to raise new shares.

Asciano's biggest problem is its $4 billion debt, which is restricting its ability to invest in existing businesses and growth. It spent $600 million expanding its Pacific National rail operations into the Queensland coal sector.

© 2008 Sydney Morning Herald

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