QRN $6.1B float launched

QUEENSLAND Rail National is expected to reach a market cap of more than $A6.1 billion – making it one of Australia’s top 50 companies.
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Blair Price

In what will be the biggest float since Telstra, the Bligh government expects QRN’s market cap to reach $6.10-7.32 billion.

The state government finally revealed a target price over the weekend as it set an indicative price range of $2.50-3.00 per share, with shares expected to start normal trading on December 7.

But the retail offer is expected to be priced at 10c per share less than the institutional price, and at a maximum price of $2.80 per share.

Between 1.46 and 1.68 billion shares are expected to be listed but another 146.4 million shares might be issued under the over-allocation option.

The retail offer opened yesterday and is set to close on November 12, while the retail, institutional prices will be announced by November 22.

To encourage investment from Queenslanders, the Bligh government is offering

state residents one loyalty bonus share for every 15 allocated under the retail offer and held until December 7, 2011, with this capped to maximum bonus of 675 bonus shares.

“QR National is a proud Queensland business with a strong heritage and more importantly a very bright future,” Premier Anna Bligh said.

“All Queensland residents have an opportunity to invest in one of the 50 largest companies on ASX by market capitalisation, which will be headquartered in Brisbane.

“This is why I am pleased to be able to announce these additional loyalty bonus shares for all Queensland residents.”

Queensland Treasurer Andrew Fraser made the assurance that QRN would remain based in the state.

“Just as the Q in Qantas stands for Queensland, the Q in QR National will always stand for Queensland,” he said.

“QR National is a great Queensland company with a national footprint and will now go on to be a great Australian company.

“This is an important day not just for Queensland, but for our nation. Making sure our export chain expands to meet demand is not just good for the resources sector in the Queensland economy – it’s vital to the growth of the Australian economy.”

While the state government will hold on to 25-40% of QRN’s shares, the government will be able to sell its remaining stake in the company after QRN reports its annual results for the 2012 financial year.

To prevent a takeover, QRN has a legislated shareholder limit of 15%, ensuring that a non-government party cannot hold a stake exceeding this level.

Retail investors can apply for shares online through qrnshareoffer.com.au, and will avoid brokerage fees, while the minimum application size is $2000.

QRN growth forecasts

QRN is already the largest rail transport of coal to ports but also hauls iron ore and other bulk commodities plus general and containerised freight.

The company forecasts global coal import demand to increase by 20%, from 981 million tonnes in 2010 to 1.18 billion tonnes in 2015.

These growth assumptions are especially based on increasing demand from China and India.

QRN is consequently forecasting its pro forma earnings before interest, tax, depreciation and amortisation to increase by 42% from $628 million in the recent financial year to $894 million in the 2011 financial year.

For the 2012 financial year QRN expects to hit $1.1 billion – about 75% higher than its performance in the 2009-2010 year.

QRN has a bag of medium to long-term haulage contracts and serves major miners such as BHP Billiton Mitsubishi Alliance, BHP Billiton, Rio Tinto, Xstrata,

Anglo American Metallurgical Coal and Vale Australia.

The company hauled about 200Mt of coal in the recent financial year.

Government revenue

The state government is expected to earn up to $5.4 billion from QRN’s initial public offering.

Plans to publicly float its coal chain assets were announced last year, as part of a series of public asset sales to reduce debt by up to $15 billion and win back a AAA credit rating for the state.

Queensland’s coal industry failed to halt the forthcoming float.

The Nick Greiner-led Queensland Coal Industry Rail Group recently abandoned its $A5.1 billion bid for QRN’s rail network infrastructure after members of the consortium pulled out of financial commitments before crucial deadlines, causing the bid to collapse.

The unpopularity of the flagged public asset sales in the state led the Queensland government to produce its own “myths and facts” webpage and associated pamphlets, which were quickly criticised by economists and academics.

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