Aurizon and Macquarie Asset Management signed a AUD 2.35 billion (USD 1.76 billion) agreement for the purchase of One Rail Australia (ORA). The transaction includes AUD 80 million (USD 60 million) as acquisition and divestment related fees.
The purchase is subject to several customary conditions precedent and regulatory and consent conditions, including clearance from the Australian Competition and Consumer Commission (ACCC).
One Rail Australia comprises bulk rail haulage and general freight assets in South Australia and the Northern Territory, the 2,200 km Tarcoola-to-Darwin railway line and a haulage business in New South Wales and Queensland. Under the transaction, Aurizon will divest ORA’s NSW and Qld business (East Coast Rail-ECR) through a demerger or a trade sale, whichever creates greater value for Aurizon shareholders. The ECR divestment commitment is to address potential competition concerns from the ACCC arising from the transaction, and a final decision on the form of divestment will be based on delivering the best value outcome for Aurizon shareholders.
The ECR business includes a long-term coal haulage contract with Glencore for its mines in the Hunter Valley, NSW offering strong and stable cashflows.
The ORA acquisition is expected to be completed in the first quarter of 2022 and the ECR divestment during the calendar year 2022.
Aurizon will retain and integrate the ORA bulk and general freight assets into the Aurizon business. These include the Tarcoola-to-Darwin rail infrastructure, South Australian regional infrastructure, 5 rail yards, 68 active locomotives, over 1,000 active wagons and approximately 400 employees.
The acquisition is fully funded from a combination of Aurizon’s existing debt facilities and underwritten by new committed debt facilities.
One Rail Australia is a strong, profitable business with an aggregate estimated EBITDA of AUD 220 million (USD 165 million) for calendar year 2021.
“The transaction offers a unique opportunity to grow Aurizon’s business and create value for shareholders. The One Rail Australia acquisition delivers a step change for Aurizon Bulk as a new entrant in the South Australia and Northern Territory region and supports the ongoing growth of non-coal revenue in the Aurizon portfolio,” the CEO of Aurizon Andrew Harding said.
The acquisition is a strategic step of Aurizon which aims at doubling the earnings in the bulk business within the next ten years.
Upon completion of the transaction, with the integration of One Rail bulk and divestment of East Coast Rail, the Bulk share of Aurizon’s haulage revenue will represent around 40%.