In another example of what some might call the “post Opes Prime reality” of the Australian stockmarket, Asciano Ltd, the Toll Holdings spin-off, has bailed out of its controversial Brambles holding at a minimum loss of $85 million (it’s probably more like $120 million after funding costs are taken into account).
CEO Mark Rowsthorn said in the statement:
It is obviously disappointing to have sold the shares at a loss. However, we believe that the strategic advantages to the Company of divesting the Brambles stake outweigh the one-off impact on our results, particularly in the current market environment.
The sale of our Brambles shares achieves two key objectives for Asciano. It allows us to retire a $406 million debt facility, improving our overall level of gearing and enhancing balance sheet flexibility. Importantly, the sale also allows Asciano to focus on our core businesses and on enhancing security-holder value through continuing to apply our operating expertise and pursuing key growth initiatives within our existing operations.
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At $10.11 per share, Asciano stake was sold at well under market (always a sign of a desperate seller): Brambles shares closed at $10.44 yesterday. Brambles shares fell 15c to $10.29 this morning. Asciano shares jumped 23c to $4.35 as some of the worry about its huge debt was lifted.
Asciano shares and those of its former parent, Toll, have been weighed down by fears that they might bid for Brambles (Toll’s share price has also been hit by investor concerns that it won’t be able to quit its 62% of Virgin Blue).
Asciano was swept up in the credit concerns when it couldn’t meet its debts after Centro Properties hit the wall in mid-December. As the problems intensified in January and February, Asciano shares plunged and at one stage there were rumours it could follow the likes of Rams and collapse under its own weight. A delay in producing interim results added to the pressure.
These latest losses will be reduced after tax (the company will get a benefit from taxpayers) but shareholders can blame one bloke — Mark Rowsthorn — and a compliant board.