Babcock & Brown, QR to buy ARG

THE joint venture partners in the Australian Railroad Group, Wesfarmers and US-based Genesee & Wyoming, yesterday announced a plan to sell ARG to a joint venture between Babcock & Brown Limited and Queensland Rail for $A1.3 billion.
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Staff Reporter

Wesfarmers, a Western Australia-based diversified public company, said it expected its share of the sale proceeds to be approximately $425 million, with the remainder going to Genesee & Wyoming.

B&B said today the transaction was expected to be completed on June 30, 2006.

After the sale is completed, B&B will own and operate ARG's "below rail" business (being the track and associated infrastructure) in WA, while QR will own and operate the "above rail" business (rail haulage) and associated infrastructure.

"Rail infrastructure and equipment are asset classes that require increasing levels of private sector participation, both in Australia and offshore," B&B spokesperson Berry Talintyre said. "This acquisition positions us well to participate in new opportunities in the sector."

According to Wesfarmers managing director Richard Goyer, the sale will create a second major national rail freight player.

"The increased capacity to be delivered by this transaction, bringing together as it does the second and third biggest participants in the Australian rail freight sector, will provide the scale needed to be competitive in the national market," he said.

The sale of ARG comes as Australia's biggest rail operator, Pacific National, remains caught in the middle of a bitter dispute between its joint venture partners, Patrick Corporation and Toll Holdings.

Toll's hostile $4.6 billion takeover bid for Patrick has seen relations between the two companies deteriorate to the point where Patrick has labelled PN "dysfunctional".

Meanwhile, the Australian Competition and Consumer Commission has blocked Toll's bid for Patrick, and the matter is now before the Federal Court.

B&B said QR's acquisition of the above rail business was also subject to a number of regulatory approvals, including those from the ACCC and the Foreign Investment Review Board.

B&B also said it intended to onsell ARG's rail network infrastructure to Babcock & Brown Infrastructure Group, a listed investment fund that includes Queensland's Dalrymple Bay Coal Terminal among its assets.

ARG's South Australian freight business, representing about 15% of the existing business, will be separated from ARG as part of the transaction. On completion, Wesfarmers will transfer its interest in the SA business to G&W for $20 million.

This SA network was originally acquired by G&W in 1997 and combined with the Western Australian assets three years later to form ARG.

Transport.Industry-News.net

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