Regulator scuttles Toll bid for Patrick

SYDNEY - Australia's anti-trust watchdog says it will oppose Toll Holdings' A$4.6 billion ($5 billion) hostile bid for ports group Patrick Corp, knocking both firms' shares down more than 9 per cent.

The regulator said yesterday the takeover would probably substantially lessen competition in several markets in the transport sector, stunning investors who believed the deal would be approved after Toll made new concessions this month to try to address regulatory concerns.

"The losers are obviously Patrick and Toll shareholders today," said ABN Amro Asset Management portfolio manager George Clapham.

"The winner is anyone interested in buying a ports business, and there's obviously a lot of interest in ports. You see that with the very aggressive bidding for the P&O business."

Toll said it was considering its options and had no further comment on the decision by the regulator, which said it would take Toll to court if the company did not drop its bid to create the country's largest transport group.

"The ACCC will be seeking an undertaking from Toll that it will not proceed with the acquisition," said Australian Competition and Consumer Commission chairman Graeme Samuel. "If the undertaking is not given, the ACCC will take appropriate action in the Federal Court."

Shares in Patrick, Australia's largest ports operator, fell as much as 10.6 per cent to a three-month low of A$6.50, closing down 7 per cent at A$6.75.

Toll shares fell 10.3 per cent to A$12.70, also a three-month low.

Toll managing director Paul Little has said if the bid failed, Toll might be interested in any Australian assets put up for sale by the eventual owner of British ports and ferries group P&O, the target of a £3.5 billion ($8.9 billion) bidding war between Dubai Ports World and Singapore's PSA.

Analysts have also speculated that the losing bidder for P&O could turn its sights on Patrick.

Morgan Stanley estimated port deals over the past 12 months were struck at a range of 20 to 33 times historical price/earnings ratios, with PSA's approach to P&O at the top end, more than double the current valuation of listed port companies in Asia.

The Australian regulator said yesterday it would not oppose Dubai Port's proposed takeover of P&O Ports.

Patrick said Toll would press the regulator to approve its planned A$142 million takeover of FCL Interstate Transport Services.

Goldman Sachs JBWere this week said Toll's share price could fall to around A$12.35 if the watchdog rejected the bid and any appeal would probably take six months.

Toll, Australia's largest land transport company, launched its share-and-cash takeover bid in August for Patrick, which also owns 62.4 per cent of airline Virgin Blue Holdings.

The offer was the second-largest takeover bid in Australia last year, behind the A$9.2 billion acquisition of WMC Resources by BHP Billiton, the world's largest mining company.

Toll promised to sell assets and increase access to the rail freight market in an effort to smooth over the commission's concerns.

But the watchdog said its concerns remained, including those relating to Toll obtaining a 100 per cent interest in Pacific National, Australia's largest private rail freight operator.

Patrick has filed a lawsuit against Toll concerning the operation of Pacific National, a 50:50 joint venture.

- REUTERS, BLOOMBERG