The battle for control of the Australian transport industry
is seemingly just beginning, says John Durie in the Financial Review‘s
Chanticleer (not online), with Patrick
Corporation planting its stake in the ground and Toll Holdings perhaps
some redress – after being rebuffed by the competition regulator over
its $4 billion-plus bid for Patrick Corp – by taking legal action
against the ACCC.
But while the latter action is yet to be decided on,
Patrick’s Chris Corrigan has followed up on his recent threats to break up the
two companies’ troubled rail-freight joint venture, Pacific National, by
promising to lodge a motion with the Victorian Supreme Court this week.
Corrigan’s line of attack is to destroy some value by
splitting an asset with the dominant market position on the east-west rail
route with the aim of then creating bundles more value as he expands. And it’s really no surprise, says Bryan Frith in The Australian. Arguably, his
action was foreshadowed last week when the company said it intended to proceed
with the acquisition of the land rail freight forwarder, FCL, as part of a
strategy to compete with Toll in its core business.
But while there’s no doubt relations between Little and
Corrigan and other Toll and Patrick executives are poisonous, that of itself
may not provide sufficient grounds for a wind-up; nor is it as simple as
Patrick saying that it has changed its mind and no longer wants to remain in
the joint venture. Patrick will need to demonstrate that the joint venture is
truly incapable of functioning properly at the operational level.
And arguably, Patrick also should rapidly present a
supplementary target statement for its shareholders to fully detail a break-up
plan and its costs, says The Australian‘s Matthew Stevens.
Meanwhile, there’s been an awful lot of spinning from the
Toll camp to investors as to what went wrong, says Anthony Hughes in the Fin, with some fingers pointing to the
firm’s lawyers, Clayton Utz and the ACCC. The ACCC has shown in this matter that vertical integration
in Australia –
where one person has a stranglehold in a related industry – will face an uphill
battle in gaining clearance, says Durie. Then again, competition is the name of
the game, and if Patrick’s port business is so desirable because it is part of
a cosy duopoly, then a third party entering the game must have a real chance of
making serious money.
Lindsay Fox’s Linfox group has been circling the Patrick
situation ever since Toll began its bid, says Stephen Bartholomeusz in The Smage. It’s reported to have
looked at a counter-bid in partnership with Macquarie Bank, it’s said to have
had discussions with Toll about acquiring Patrick businesses to help it deal
with the ACCC issues and, most recently, it’s said to have had talks with Patrick
about selling itself to Patrick in exchange for a mixture of $800 million in
cash and sufficient shares to emerge with 10% of Patrick.
The prospect of court action, the circling presence of Linfox, the threatened
break-up of PN and potential for Patrick to develop into a direct competitor
and the bleak outlook for Toll’s growth prospects and share price if it can’t
realise its Patrick ambitions make it unlikely the assault on Patrick will be
abandoned until all possibilities have been exhausted, says Bartholomeusz. Or
until Toll’s Little decides that the damage already done to his group will be
compounded by continuing to fight.
In other news, the era of the absurdly cheap domestic airline ticket appears to be over,
reports Scott Rochfort in The Age.
Signs have emerged that Qantas, Virgin Blue and Jetstar have had one of their
best Christmas periods and that airfares could be back on the rise.
And while the Australian sharemarket has fallen sharply, says the SMH, fears of a serious
correction following heavy losses on Wall Street failed to materialise. The
Australian market dropped as much as 1.6% in morning trade as the New York
Stock Exchange’s biggest fall in three years on Friday spooked retail
investors. But analysts say the big end of town was largely unmoved by concerns
in the US over
a rising oil price and corporate earnings.
On Wall Street, US stocks ended higher overnight after a dip in crude-oil
prices and Ford Motor Co’s better-than-expected results offered the market a
modest rebound following a heavy sell-off in the previous session. The Dow Jones ended off a
session high of 10,737 up 21.38 points at 10,688. MarketWatch has the full report here.