Brookfield buys Australia freight firm Asciano for $6.6 bn

Canada's Brookfield Asset Management is buying Australian port and rail freight firm Asciano for USD 6.6 billion to form a global logistics player, scooping up an asset that has been made cheaper by a slump in coal prices.

The deal, the largest purchase of an Australian firm by an overseas entity since 2011 and the biggest acquisition by a Canadian firm in that country, underscores the huge international appetite for Australian infrastructure.

It also casts a vote of confidence in the long-term future of the Australian coal industry, which is expected to defy global pressure on high polluting energy sources and grow exports in the years ahead. Coal exports are a key generator of earnings for haulage companies like Asciano.

After slumping to 8-year lows, the coal price will probably stop falling soon and a lower Australian dollar means coal producers "are probably in better condition on Tuesday than they were a year ago", Brookfield's infrastructure chief executive, Sam Pollock, told journalists in Sydney.

Record low interest rates and a shrinking currency have added to the M&A appeal of the Australian logistics sector which is already struggling with lower valuations because of a downturn in commodity prices.

Asciano's former parent company, Toll Holdings, agreed to a AUSD 6.5 billion takeover by Japan Post Holdings earlier this year, while larger rail freight provider Aurizon Holdings has been seen as a potential takeover target.

Adding to Asciano's appeal, the Sydney-listed company also on Tuesday beat analyst expectations with a 19 percent jump in underlying net profit for the year to end-June due to the benefits of a AUSD 3 billion overhaul aimed at automating its equipment.

Asciano's shares have traded below Brookfield's offer price since it first disclosed the Canadian company's approach on July 1. On Tuesday, the shares rose nearly 8 percent to an intra-day peak of AUSD 8.75, their highest since 2008, but still below the offer price of AUSD 9.15.

"You've got currency risk and the risk of where those Brookfield shares will trade," said Morningstar analyst Ross MacMillan, noting that the cash and scrip offer is expected to close in December. The two companies and analysts did not see any significant regulatory hurdles for the deal.

Asciano said that instead of a final dividend it will pay a special dividend which effectively values the shares at AUSD 9.54, and offer a "mix and match" component so shareholders can choose how much cash or scrip to receive. Brookfield will list in Australia following the deal, the companies said.